WASHINGTON—At a time when card networks and other electronic payment providers have delivered record growth and seen ongoing upward volume trends, there’s little evidence to support the conclusion that cash is dying.
That’s the take from Glen Sarvady, managing principal at 154 Advisors, who noted that the San Francisco Federal Reserve reports that cash in circulation is growing faster than the gross domestic product in 40 of the 42 countries it studied—including the U.S., where the ratio of cash in circulation to GDP has roughly doubled since 1990.
“Primary research the San Francisco Fed conducted in 2016 revealed that while the number of Americans carrying no cash had ticked upward (to 17%), the average amount of cash held actually increased,” said Sarvady on CUNA’s Payments Blog.
Sarvady noted that cash use is notoriously difficult to measure, in part because its purpose extends beyond a simple means of transaction. Following the global financial crisis, many took to U.S. currency as a store of value.
“There’s little question that overseas U.S. cash holdings have swelled since 2008. Zimbabwe even adopted the dollar as its official currency,” Sarvady said. “Nonetheless, it’s hard to square an expanding cash supply with the notion that its transactional use is plummeting.”
Besides, said Sarvady, “this isn’t a zero-sum game. A separate study by the Atlanta Fed found that the average household made nearly two times as many transactions per month in 2015 than in 2000. This suggests a change in shopping habits: There are simply more transactions to go around.”