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The Future of Cash

Author

Listed:
  • Solomon H. Tarlin
Abstract
In many advanced economies around the world, the share of transactions conducted using cash payments has been falling over the past several years. This change has likely been because of a combination of shifting consumer tastes, improvements in payment technology (specifically credit and debit cards), and the rapid growth of online transactions. As the decline in the cash share has led to some businesses choosing not to accept cash payments, many policymakers have discussed interventions to ensure access to the modern economy for consumers who prefer to pay in cash. Despite the reduced use of cash as a means of payment, currency in circulation has continued to increase in many countries, including the United States. This increase suggests that cash is still providing utility as a store of value. This paper surveys literature and data on the use of cash as a means of payment and discusses how and why the cash share is falling in the United States and around the world. Furthermore, it also discusses the opportunities and challenges of a transition away from cash for consumers, businesses, and society.

Suggested Citation

  • Solomon H. Tarlin, 2021. "The Future of Cash," Community Affairs Discussion Paper 21-03, Federal Reserve Bank of Philadelphia.
    • Handle: RePEc:fip:fedpcd:93058
    DOI: 10.21799/frbp.dp.2021.03
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    References listed on IDEAS

    as
    1. Marie-Hélène Felt & Fumiko Hayashi & Joanna Stavins & Angelika Welte, 2020. "Distributional Effects of Payment Card Pricing and Merchant Cost Pass-through in the United States and Canada," Working Papers 20-13, Federal Reserve Bank of Boston.
    2. Jonathan Ashworth & Charles A.E. Goodhart, 2020. "The Surprising Recovery of Currency Usage," International Journal of Central Banking, International Journal of Central Banking, vol. 16(3), pages 239-277, June.
    3. repec:fip:a00001:89583 is not listed on IDEAS
    4. Hiroshi FUJIKI & Kiyotaka Nakashima, 2019. "Cash Usage Trends in Japan: Evidence Using Aggregate and Household Survey Data," Working Papers e131, Tokyo Center for Economic Research.
    5. Carlos Arango & Varya Taylor, 2008. "Merchants' Costs of Accepting Means of Payment: Is Cash the Least Costly?," Bank of Canada Review, Bank of Canada, vol. 2008(Winter), pages 17-25.
    6. Walter Engert & Ben Fung & Björn Segendorf, 2019. "A Tale of Two Countries: Cash Demand in Canada and Sweden," Discussion Papers 2019-7, Bank of Canada.
    7. Kim Huynh & Gradon Nicholls & Oleksandr Shcherbakov, 2019. "Explaining the Interplay Between Merchant Acceptance and Consumer Adoption in Two-Sided Markets for Payment Methods," Staff Working Papers 19-32, Bank of Canada.
    8. Julia S. Cheney & Robert M. Hunt & Katy Jacob & Richard D. Porter & Bruce J. Summers, 2012. "The efficiency and integrity of payment card systems: industry views on the risks posed by data breaches," Economic Perspectives, Federal Reserve Bank of Chicago, vol. 36(Q IV), pages 130-146.
    9. Ashworth, J. & Goodhart, C. A. E., 2020. "The surprising recovery of currency usage," LSE Research Online Documents on Economics 105303, London School of Economics and Political Science, LSE Library.
    10. Hanna Armelius & Carl Andreas Claussen & André Reslow, 2022. "Withering Cash: Is Sweden Ahead of the Curve or Just Special?," International Journal of Central Banking, International Journal of Central Banking, vol. 18(4), pages 1-52, October.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    cashless society; cash payments; electronic payments;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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