The world appears to be falling out of love with cashMoney in physical form such as banknotes and coins. More, a situation that has apparently accelerated with the advent of the Covid-19 pandemic. So much so, in fact, that a number of governments and central banks are now actively considering switching to all-digital currencies. “With the rapid rise of mobile and electronic payments, the long-term survival of cash seems precarious,” says the media with a collective sigh of inevitability[1].

But are such headlines reflecting what is really going on? Is cash use actually in decline around the world? As a disaster risk manager used to coordinating disaster responses, I have learned from bitter experience that the role played by cash in society is viewed very differently in a Lebanese refugee camp than it is in a London coffee-shop.

Three Paradoxes

There seem to be three main paradoxes at play: first, despite the allure of digital payments, the overall volume and value of cash in circulationThe value (or number of units) of the banknotes and coins in circulation within an economy. Cash in circulation is included in the M1 monetary aggregate and comprises only the banknotes and coins in circulation outside the Monetary Financial Institutions (MFI), as stated in the consolidated balance sheet of the MFIs, which means that the cash issued and held by the MFIs has been subtracted (“cash reserves”). Cash in circulation does not include the balance of the central bank’s own banknot... More around the world is rising, not falling. Second, half the world’s adult population did not make a digital transaction last year; and third, that despite the allure of mobile moneyFrom the Latin word moneta, nickname that was given by Romans to the goddess Juno because there was a minting workshop next to her temple. Money is any item that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular region, country or socio-economic context. Its onset dates back to the origins of humanity and its physical representation has taken on very varied forms until the appearance of metal coins. The banknote, a typical representati... More, those escaping conflict or recovering from disaster rely on the resilience afforded by cash.

As survivors of last month’s super-typhoon Rai in the Philippines know all too well, remittancesMoney sent home from emigrants working abroad. More sent by family members from far away arrive – expensively – along digital rails but are quickly converted to cash. This is because they know what the world’s poor already know: that cash has greater value when circulating in local markets than does its digital equivalents. This is also why cash liquidityDescribes the extent to which assets or rights can be converted into cash without causing a significant decrease in the asset’s price. Accordingly, liquidity is often inversely proportional to the profitability of the asset and involves the trade-off between the selling price and the time needed to convert it to cash. In finance, cash is considered the most liquid asset and cash is sometimes used as a synonym for liquidity (e.g. cash reserves; cash pooling…). More is becoming so critical in Afghanistan where the banking system has all but collapsed following the Taliban’s seizure of power.

The Original Financial Technology

Meanwhile, as Covid-19 forces us to embrace online shopping and technology nudges us towards contactless payments here in the ‘rich’ world, it easy to forget that nearly three-quarters of the world’s adult population doesn’t own a smartphone and that one-third have no reliable Internet connection, far less have access to a reliable electronic payments infrastructure. In other words, despite the inroads made by a policy of ‘financial inclusion’ at least half the world’s adult population still has little option but to rely on cash.

The original financial technology, cash has survived as long as it has because it works. At the dawn of 2022, it is still the only ‘fintech’ that satisfies the ‘double coincidence of wants’ everywhere, every time. It is resilient. It is universal. And it is also not just free to use, but, in its anonymity, it represents freedom from those who either seek to curb civil liberties or extort excessive profit from what is and should remain a public good.

For these reasons and more, we must fight to retain cash as a viable paymentA transfer of funds which discharges an obligation on the part of a payer vis-à-vis a payee. More option, especially for societies facing disaster.

[1] Martin Wolf, Financial Times, 5 June 2017 (https://channels.ft.com/en/transact/death-of-cash/)

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