'Payments are a-changin’ but cash still rules,' concludes BIS Quarterly Review

Mar 12, 2018

The latest quarterly review by The Bank of International Settlements reveals that despite the many headlines eagerly shouting about the so-called death of cash, the growing demand for banknotes and coins persists around the world.

It is true that the news covering innovative payment methods have been sprouting out of the ground like daisies, celebrating that 'verified consumers' can now pay for goods and services with contactless cards, mobile phone, smartphone, bracelets, cryptocurrencies and even smiles (facial recognition technology). But it is also true that the use of cash is on the rise.

The question

Why is the demand for both cash and card payments rising? And, in particular, why has the demand for cash remained so robust? To seek answers to these questions, we look at recent trends in e-payments and demand for cash across countries. - BIS Quarterly Review, March 2018

The review found that on an international scale, cash in circulation has increased from 7% to 9% of GDP over the last 18 years (figures derived from the averaged data of CPMI members and 22 additional countries*), likely as a result of the Great Financial Crisis. Is this yet another case of the collective consciousness turning to cash in response to uncertainty? Yup.

*Data provided at varient dates from central banks of Australia, Belgium, Brazil, Bulgaria, Canada, Chile, China, Colombia, Czech Republic, Denmark, the EU, France, Germany, Hong Kong, Honduras, Hungary, Iceland, India, Indonesia, Israel, Italy, Japan, Kuwait, Malaysia, Mexico, the Netherlands, Nigeria, Norway, Philippines, Poland, Romania, Russia, Saudi Arabia, Singapore, South Africa, South Korea, Sweden, Switzerland, Thailand, Turkey, the UAE, the UK, Ukraine, Uruguay, the USA.

The answer? The increase in cash demand is 'likely driven by store-of-value motives rather than payment need'.

Cash continues to ensure the three most essential functions of money.

  1. Store of value, which means people can save it and use it later—smoothing their purchases over time;
  2. Unit of account, that is, provide a common base for prices; or
  3. Medium of exchange, something that people can use to buy and sell from one another.

And it seems that cash's ability to function as a store of value is a primary reason for why cash has kept its crown. This is particularly evident in advanced economies since the start of the Great Financial Crisis.

Excerpts from the BIS Quarterly Review: Payments are a-changin’ but cash still rules

Retail payment systems continue to become faster and more convenient. Yet, despite increased use of electronic payments around the world, there is scant evidence of a shift away from cash. As the appetite for cash remains unabated, few societies are close to “cashless” or even “less-cash”. In fact, demand for cash has risen in most advanced economies since the start of the Great Financial Crisis. This resurgence appears to be driven by store-of-value motives (reflecting lower opportunity cost of holding cash) rather than by payment needs.

“Money is what money does” (Hicks (1969)). And cash, like other forms of money, is used both as a means of payment and a store of value.

As noted by other studies (eg Jobst and Stix (2017)), cash demand varies considerably across countries (Graph 4, right-hand panel). While one might expect EMEs to have higher cash demand, no such pattern is evident from the data. According to the latest Red Book, for 2016, cash in circulation is below 2% of GDP in Sweden, but 10 times larger in Japan at 20%. Demand even differs among countries that are otherwise similar in terms of economic and social characteristics.

“Despite all the technological improvements in payments in recent years, the use of good old-fashioned cash is still rising in most, though not all, advanced and emerging market economies.”
"Hyun Song ShinBIS economic adviser and head of researchAs quoted by Reuters

One such example is the Nordic region. At the start of the 2000s, Iceland's cash-to-GDP ratio was as low as 1.2%, while Denmark, Norway and Sweden were clustered at around 3-4% (Graph 4, left-hand panel). Since then, cash demand has shown a secular decline in Sweden and Norway, while in Denmark it has remained stable at around 3.5%. However, in Iceland, cash demand has more than doubled since its banking crisis, and now exceeds that of Norway and Sweden...

Payments are currently seeing another period of rapid innovation and transformation. The use of e-payments is booming and technology companies, as well as financial institutions, are investing heavily to be the payment providers of tomorrow.

Yet, despite continuing digitalisation, "reports of the death of cash are greatly exaggerated" (Williams and Wang (2017)).

Cash in circulation is, in fact, not dropping for most countries. The continuing demand for cash has been especially noticeable in advanced economies since the start of the GFC, and is likely driven by store-of-value motives rather than payment needs.

Read the full review here


Asmundson, Irena and Ceyda Oner. 'What Is Money?' International Monetary Fund. Back to Basics. Vol. 49, No. 3 Electronically published September 2012. Accessed March 12, 2018.

Linnemann Bech, Morten, Umar Faruqui, Frederik Ougaard and Cristina Picillo. 'Payments are a-changin’ but cash still rules.' Bank of International Settlements. Quarterly Review. JEL classification: E40, E41, E42. Electronically published March 11, 2018. Accessed March 12, 2018.

Reuters Staff. 'Cash is far from dead and use is rising - BIS.' Thompson Reuters. Electronically published March 11, 2018. Accessed March 12, 2018.

Last Updated: Feb 13, 2020