Why Cash Remains Indispensable in the Modern World

Jan 13, 2023


Will cash prove resilient or redundant in the coming years? An article on Deutsche Bank’s news site flow explores developments in payment technologies worldwide and why cash is likely to remain an essential part of the financial landscape for years to come.

Clarissa Dann, a veteran financial editor and journalist, looks first to Sweden as the country that most strongly favours digital transactions, citing a 2021 survey by Orgio Group and the Payments Investigation that found eight percent of Swedes had used cash for their most recent purchase versus 77 percent who had paid with a debit card.

China is also making moves towards a cashless society, with currency in circulation declining from 11 percent of GDP in 2012 to around 8.5 percent in 2022, with data suggesting three in four consumers there prefer digital payments.

These two nations, however, do not represent global trends. These two are among a handful of nations in which circulating cash has declined over the past decade. Elsewhere, there have been marked increases in demand for physical currency as people turn to it as a reliable store of value and a sure way to pay when digital systems fail.

Dann cites a Deutsche Bank Research survey of 3,600 individuals across America, China, France, Germany, Italy and the UK that found one in three Americans and Europeans still rank cash as their number one payment method. More than half of individuals in developed countries also believe cash ‘will always be around’, and that opinion has remained steady from pre- to post-coronavirus.

Currency in circulation as a percentage of GDP for selected countries, Deutsche Bank and Haver Analytics

Ultimately, Dann concludes ‘cash is still essential’ and the reasons for this are as varied as the benefits offered by physical currency itself. First and foremost, it is needed as a payment option not dependent on electricity or internet, since these systems frequently experience short periods of downtime, and longer outages can occur due to incidents such as natural disasters or attacks on infrastructure.

Traditional currency is needed during a natural disaster when online access to digital currency might be unavailable and unlike digital payment systems it is not vulnerable to hacks and cyberattacks.
"Clarissa Dann, flow

Cash is also preferred by many for its immediacy, dependability, and the simplicity that makes it accessible to everyone, regardless of their technical or financial knowledge. For all these reasons, Dann suggests coins and banknotes are likely to continue circulating for the foreseeable future, operating alongside current and coming innovations in payment technologies.

Last Updated: Jan 12, 2024