*Financial instability fears and economic downturn are growing for the rich and the poor. These pressures are having a major effect on the cash usage.
Demand for large bank notes
The Financial Times reports today that the bank note presses world-wide - the commercial companies and the central banks - are thriving as the demand for bank notes booms. One reason for the enduring appeal of cold, hard cash is the global economic downturn. “Cash is 100% reliable”, said a Giesecke & Devrient (a major bank note printer) board member said. G&D expects banknote production to rise by 5 per cent a year for the “foreseeable future”, despite projections of double digit increases in the use of cards and other forms of electronic payments. And, not surprisingly, Greece is experiencing massive demand for euro bank notes.
When Lehman Brothers collapsed the demand for large denomination bills, such as €200 and €500 in Europe and the larger notes in the USA, increased dramatically as anxious savers tried to protect their monies.
Decelerating replacement of cash in North America and Europe
Globally cash is being used less and less as the new payment systems - payment cards, ACH and mobile - take over. But two recent studies are reporting that the growth of non-cash payment systems are decelerating, particularly in North America and Europe:
- Globally “non-cash transactions volume growth decelerated in 2012 to 7.7% from 8.6% in 2011 to reach 334.3 billion transactions, primarily due to slower non-cash transaction growth in North America and Europe” (CapGemini’s World Payments Report 2014*:)
- In UK British Retail Consortium reports* that in 2104, “Cash use continues to decline in value, specifically the number of transactions completed and in the average transaction value. However, the decline is not as dramatic as the survey has seen in previous years.”
Cash to make a comeback?
NO: Generally, there is no way cash will make a comeback and start replacing non-cash payment methods. However, in uncertain economic times and with growing financial instability fears, corporate treasurers can expect cash usage to decline less slowly than over the last 2-3 years.
Corporate treasurers need to plan for:
- cash usage growing for the lower income groups
- payment systems directly linked to the current account - such as debit card, mobile and ACH payments - growing much faster than credit/charge card payments.
YES: Cash as a medium for storing savings, particularly using large bank notes.
* World Payment Report 2014, Capgemini - see
** British Retail Consortium: ‘Retail Payment Survey 2014’
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