Steady growth in card payments has been one of the strongest trends in the global financial services industry in recent decades.
It’s something we have seen in many markets around the world. In the US, for example, the number of people who used any credit card over a three-month period increased from 171.9 million in spring 2008 to more than 201.4 million in spring 2017.
In the UK, meanwhile, there were nearly 1.4 billion card payments in June 2017 (a monthly record), while throughout the EU, non-cash payments increased by 8.5 percent year-on-year in 2016, and card payments accounted for 49 percent of all transactions.
However, despite these undeniable trends, cash “still rules”. That’s according to a recent report from the Bank of International Settlements (BIS), which noted that demand for physical currency continues unabated, and few societies are anywhere close to a cashless, or even ‘less-cash’, society.
It’s clear that, regardless of how many alternative options are available to them, people continue to recognize and value the benefits of notes and coins. Cash is still very important alongside card and electronic payments as one of the many payments choices available to consumers.
Cash remains important
The BIS analysis of ‘Red Book’ statistics collected by the Committee on Payments and Market Infrastructures (CPMI) showed that, since 2007, cash in circulation and card payments have actually both increased. The only markets where figures pointed to a trend of ‘substitution’ between cards and cash were Russia and Sweden.
Even in Sweden, which is often used as the example of a society well on its way to a cashless future, nearly seven out of ten consumers want to keep cash as a payment option, according to a survey by Bankomat AB. It has also been suggested that Sweden’s actions to remove cash from the financial system may have been taken too quickly.
Specific findings from the BIS analysis showed that cash in circulation has risen from seven percent to nine percent of GDP, on average, in a sample of CPMI members and 22 other countries. The majority of nations studied saw an increase in cash in circulation, with the biggest rises occurring in Hong Kong and Japan.
What is behind this trend?
There are many factors enabling and supporting this trend of cash remaining in favor, despite the growth of cards, mobile and other payment channels.
Firstly, the channels through which people are able to access cash – primarily the ATM – have steadily evolved and improved over the decades, helping to ensure that consumers continue to have a positive, happy relationship with tangible currency. The number of ATMs globally continues to rise, with over 3.3 million currently installed globally, according to the Retail Banking Research Global ATM Market and Forecasts report.
As BIS noted in its study: “Since their debut in 1967, ATMs have become the key means through which people access cash. Like PoS terminals, ATMs have also evolved; most ATMs now accept cash deposits and some also provide other banking services such as bill payments.”
By continuing to invest in the maintenance and improvement of their ATM networks, financial institutions can ensure users are always able to access the core services they need. Arguably, the ATM is now more relevant than ever. After celebrating its 50th year in 2017, there are a whole range of self-service functions that can be carried out on what is becoming a ‘bank in a box’ device.
As for the seemingly contradictory simultaneous growth in card payments and cash in circulation, one possible explanation is that people are using physical currency as a store of value. Some of the trends highlighted in the BIS report suggested that people in many markets are increasingly using large-denomination notes as a store of value, and small-denomination notes for purchases.
This theory is backed up by the fact that, since the global financial crisis, interest rates have been historically low, meaning there is little incentive for consumers to take their cash and deposit it into an account.
Looking to the future, there are many reasons why cash is likely to remain in public favor, from its practically universal usability to its ability to help people manage their money.
For as long as consumers continue to value and rely on physical currency, financial institutions must prepare to meet demand by aiming for the highest standards of functionality and availability at the ATM.
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