The New York Times recently published an article indicating that the percentage of people planning to use cash for holiday shopping in 2009 is up 9.2% over 2008. Given the content in the rest of the article, I suspect that figure really reflects the number of people who intend to use cash, checks or debit rather than credit cards but regardless, the jump is a big one.
Of course, this isn’t the first time we’ve heard that cash has made a comeback in 2009. A US News & World Report article earlier this year found the same thing and according to Federal Reserve figures, cash in circulation continues to rise. But will it last? Is this a permanent philosophical and practical change? Or is cash actually experiencing death throes as debit cards, prepaid cards and contactless payments continue their steady rise?
I will be the last person to predict the death of cash. Cash has been “dead” 5 times in the last 30 years and is still going strong. Neither checks nor debit cards have displaced cash. Contactless payments will be the next threat. After all, contactless payments are designed for small purchases and that’s one of the primary reasons for using cash. But wholesale cash replacement? I just don’t see it. Yes, everyone loves their iPhone or Blackberry and wants to use it for everything under the sun. But the pricing model isn’t there yet and people will always like the anonymity of cash.
That said, I do think we’re in a brief love affair with cash right now. Sure, it’s a great budgeting tool – once I run out of cash in my wallet, I know to stop spending. But there are other great budgeting tools out there – mobile alerts and prepaid cards to name a couple. And there is a huge unbanked population (the subject of my next post, I think) but even this cash-based group is turning more and more to prepaid cards. So while cash will not die, I do think that we will see a leveling off in the next couple of years.
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I agree cash has a long and useful life as a payment medium! The large and growing number of unbanked, the underground economy, those uncomfortable with electronic records will all continue to be fans of cash. And by their very nature, these transactions are hard to track and report on. I wonder aloud if drug store issued cashiers checks are reported on. In the Detroit area my unscientfic personal experience seems to be I’m in line behind more and more cashiers check purchasers. And while these don’t report as “retail sales” and it’s one transaction, the number of notes transacted is usually large. As a cash hardware guy, I’m naturally thinking “you need to automate and secure this!!”
As payment methods morph, I think cash will stay as strong as ever and cash will find it’s own home in our world.
I look forward to the posting on “unbanked”.
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