While the volume of bank notes in circulation may be increasing (already up 14% this year), there is simultaneously a reduction in the use of cash in day-to-day life. We see a sharp contraction in Inflows and Outflows as many high cash user businesses have been the most impacted by lockdowns. As the economy releases from Lockdown we are seeing volumes increase and Vaultex forecasts a return to roughly 80% of pre COVID cash levels. This is compared to a 3% decline in cash transactions before the beginning of the pandemic. It seems that while cash has recovered somewhat, COVID-19 has certainly accelerated the overall decline in cash in the UK.
Here in the UK, the Bank of England estimates that the total value of banknotes in circulation will have increased year on year by 23% by the end of 2021, with analysts keen to understand whether consumers are spending currency or using it as a storage of wealth during uncertain times.
What is certain is that cash, remains vital to the UK economy, with an estimated 2.1 million people still using cash for their day-to day purchases. In order to support these people, and safeguard access to cash, a cost efficient, secure, sustainable and resilient infrastructure for cash remains a UK Government and Bank of England priority, and the rest of the cash industry must also play its part.
When it comes to the international cash landscape, the situation is far from homogenous. Some countries are actively supporting and investing in cash, while others are pushing for a move towards a digital-centric payment infrastructure.
In emerging markets, cash is still holding up better than expected compared with digital payments, and the focus for the cash industry in these countries lies in automation and driving operational efficiencies where volumes remain high. In more mature markets the demise of cash is more extreme, which suggests the need for pooling of assets and consolidation to keep the cost of cash efficient.
Despite the differences in the extent to which cash is being used, it is clear that governments and central banks are not ready to give up on cash just yet. Let’s take a look at some examples of where they are backing cash for the future…