Why Cash Continues to Matter

calendar iconSep 10, 2021


The demise of physical money has been predicted for decades, and increasingly so in the past couple of years. However, America’s cash demand is higher than ever, says the U.S. Federal Reserve, leading it to make fresh investments in its cash technology and infrastructure.

Roger Replogle is Executive Vice President and Product Manager for the Federal Reserve System’s Cash Product Office, which holds responsibility for America’s Reserve Bank policies, operational guidance and tech strategies surrounding dollar bills and coins used nationally and worldwide. In a recent article, he laid out the reasons cash holds a unique position in the ever-changing payments landscape.

First, he notes, demand for U.S. currency has never been greater. In a trend reflected worldwide, and repeated throughout history in times of crisis and uncertainty, people have been turning to cash. Recent figures from the Federal Reserve’s annual payment study found people are holding significantly more cash than in previous years. Individuals aged 18–24 have almost doubled their daily holdings—from $33 to $60—and the average amount people have stored has reached around $500 compared to just $250 in October 2019.

There remains strong international demand for US dollars, as people around the world seek a safe and stable currency to store their savings. So, keeping cash as a ‘just in case’ means of payment is likely to continue for the foreseeable future.
"Roger ReplogleExecutive VP/Product ManagerFederal Reserve System’s Cash Product Office

Next on Replogle’s list is the fact that demand has increased steadily despite the introduction of many new payment options. He reports his staff conducted research stretching back to the 1930s and found that even as it became possible to pay in new ways, demand for cash kept rising.

This is backed by newly-published Swiss research that also found cashless payment methods made no appreciable difference either to payment choice or cash demand.

As new ways of making payments were introduced, demand for cash only increased. This trend has continued to the present day, even though we have more ways to pay for things than ever before.
"Roger ReplogleExecutive VP/Product ManagerFederal Reserve System’s Cash Product Office

Replogle’s final point is that ‘cash is essential for fostering and maintaining financial inclusion.’ While the ever-increasing choice in the payments landscape is positive for many, cashless options present an immediate barrier to unbanked and underbanked people, of whom there are some 14 million in the United States alone. Replogle points to an assessment by Policy Analyst Raynil Kumar who found that unbanked and underbanked citizens were strongly reliant on cash for anything, from making essential smaller payments for food and daily necessities to paying bigger sums such as their rent or utility bills.

For anyone with limited access to the financial system, cash is the most inclusive payment instrument available.
"Roger ReplogleExecutive VP/Product ManagerFederal Reserve System’s Cash Product Office

These are the reasons the Federal Reserve continues to invest in the cash cycle, and safeguard America’s cash infrastructure.

Last Updated: Sep 10, 2021