Why cash is still king of the world - TechCentral

Why cash is still king of the world

Everywhere you look, someone is trying to kill off cash.

India eliminated 23bn notes from circulation in an effort to fight tax evasion and corruption. Bitcoin and mobile payments are still hyped as the wave of the future while credit cards offer increasingly aggressive rewards. An influential US economist wants to stop printing denominations of US$20 and above. His goal: help central banks impose negative interest rates as monetary policy.

But try as everyone may, cash registers are still bursting with paper bills and metal coins. Cash is alive and well, according to a new study of the spending habits of more than 18 000 people in seven countries.

“Many have predicted and espoused the view that cash is increasingly disappearing as a payment instrument,” the authors write. “However, to paraphrase Mark Twain, we would say that the reports of the death of cash have been greatly exaggerated.”

The value of dollars and euros in circulation has doubled since 2005, to $1,48 trillion and €1,1 trillion respectively. Some of that growth can be explained by demand for these currencies in foreign countries, but there’s also plenty of evidence that Europeans and Americans are still carrying around wads of cash.

The new research crunches and compares data on payment choices in Australia, Austria, Canada, France, Germany, the Netherlands and the US. The study shows notable differences among these countries: Germans and Austrians carry around and use the most cash; the Dutch love debit cards; and paper cheques are still relatively common in France and the US.

The bottom line, however, is that consumers in all seven countries use cash more often than they use any other payment method. Cash is least popular in the US, where it’s used for 46% of all transactions, versus 26% for debit cards and 19% for credit cards.

Cash’s niche is for small transactions. The typical person makes one or two purchases a day. For the cheapest half of those, consumers in all seven countries prefer cash the vast majority of the time. For more expensive purchases, top payment choices vary significantly from country to country. Austrians and Germans still use cash for big purchases, but most other countries prefer debit, credit or cheques.

Because cash is used so often for small purchases, it ends up taking a smaller share of the total value of transactions, at least outside Austria and Germany.

In five of the seven countries, typical consumers have the equivalent of about $30 on them at any given time. The cash-reliant Austrians and Germans carry a lot more.

There’s no single explanation for why consumers won’t ditch cash. One factor is merchants who don’t accept cards, or who encourage cash for small purchases. Cash may also be a habit that people haven’t gotten around to breaking. Older people are a bit more likely to use cash than the young in every country except the US.

Maybe consumers just prefer cash, especially for small, quick transactions. That’s the conclusion of survey data available for five of the countries studied. Only the Dutch rated debit higher than cash in terms of its acceptance, cost and ease of use. Americans rated debit and cash the same, while Austrians, Canadians and Germans rated cash higher than debit.

Also, it bears noting that cash is anonymous and largely invisible to both tax collectors and debt collectors. It won’t trigger finance charges or overdraft fees. And perhaps its biggest practical advantage is that it offers a tangible way of keeping track of your spending in real time, working even when your phone’s battery is dead. That may be why, in all seven countries, the study found low-income people were far more likely to use cash than high-income consumers.  — (c) 2017 Bloomberg LP

  • Nictron

    Cash is printed liberty. Though the fiat nature of it can quickly destroy that notion as we saw in Zim and currently in Venezuela.

  • Sonic2k

    Cash has a valued attribute in that it can be used to evade tax in the electronic age of Big Brother. Cash can be hidden. Money in a bank account, cannot.

  • Davebee

    Naught, naughty….You have been peeking inside the Gupta Bros. very large bizness class Samsonites.
    Together with a couple of wannabe Finance Ministers I would guess.

  • Sonic2k

    And many other people whom I know, who are pretty rich, but somehow, inexplicably, they are always assessed by SARS and get money back and pay far less tax than I do, in some cases no tax (and the idiots brag about it on Mybroadband too). Meanwhile back in my pleb world my medical aid refuses to pay for PMBs and I get nothing back from SARS.

  • Davebee

    I feel your pain Sonic.
    I note the above and must pass on my own tale of woe: My local copper thieves have hit my UG back to my local exchange TWICE on the same route in the same month and Telkom are still refusing to put fibre/MSAN into my street box despite my pleading for 2 years for this OBVIOUS option.
    I’m starting to think these sods regard this UG as a convenient ATM to be tapped whenever they need a few bob. Still NO police case number to cover the thefts I might add, no wonder they thieve at will. Cable thefts are about the only growth industry we have around here nowadays.
    We are both SAFFARING my friend.

  • Demisemi

    Thank G*d for cash !

    Cash in itself will keep governments in check.

    When they try take cash away, thats when you will be 100% owned by the state.

    Think about it.

    But as they say, ” In G*d we trust, all others pay Cash ! “

  • Cash is a physical object. You can see it disappear as you use it. There is a very real feeling of money going “down the drain”. With electronic transactions, you are far more removed from the reality of how much you actually have and are spending on a daily basis.