Well, the marketing dust has settled. Hopefully the chip on your credit or debit card has cooled off since Black Friday, your keyboard (or Buy Button thumb) didn’t lock up on Cyber Monday, and your fingers didn’t get pinched by the dispenser on “Withdraw Cash Wednesday.”
Wait—hadn’t you heard about that last one?
Withdraw Cash Wednesday, a brainchild of the ATM Industry Association, is a campaign to encourage consumers to keep their wallets stocked with cash and to use it for everyday purchases, touting its budgeting benefits and freedom from interest charges.
Designed as a year-round effort, it got an added push in November coinciding with the holiday shopping season.
Withdraw Cash Wednesday is one of several recent signs of pushback against the “cash is dead” narrative. The UK-based International Currency Association, founded in 2016 by industry players with a dog in the cash fight, also launched cashmatters.org as a consumer-facing site.
Card networks and other electronic payment providers have delivered remarkable growth and continuing upward volume trends. This has led many to surmise that cash is on the verge of extinction—and these firms certainly stand to benefit it that turns out to be the case.
But there’s precious little evidence to support such a conclusion.
The San Francisco Federal Reserve reports that cash in circulation is growing faster than the gross domestic product (GDP) 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.
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.
Nonetheless, it’s hard to square an expanding cash supply with the notion that its transactional use is plummeting.
Besides, 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.
Payment providers generate revenue based on transaction counts as well as dollar values, which are on the rise as well, thanks to a growing economy.
The forces for electronification and for paper each have their own vested interests, and will, of course, offer selective data to advance their respective positions.
The Fed bends over backward to remain impartial. It provides a wonderful fact pattern, but leaves it to us to interpret.
In my view this latest flurry of info nudges the meter a bit back toward the cash side, which makes sense since the drumbeat for electronics had grown so loud.
Meanwhile, I’m the oddball on the high end of the cash and card metrics (and paper check, and Venmo…). Can’t we all just get along?
GLEN SARVADY is managing partner at 154 Advisors and senior payments expert with Best Innovation Group, a CUNA consulting partner. Follow him on Twitter via @154Advisors. His views do not necessarily reflect those of Credit Union National Association.