Cash has been around for thousands of years, but the rise of digital payments in recent decades has led many to wonder if physical currency will become obsolete. There are arguments on both sides of this debate. Some predict the end of cash while others believe it will persist well into the future. This article will examine the current state of cash usage, the growth of digital payments, and the factors that may influence whether paper money still has a role to play in 2030.
How widely is cash used today?
Cash remains the most widely used form of payment globally today. According to a 2022 report from the Bank for International Settlements, cash accounted for 69% of all payments by number and 36% by value worldwide in 2021[1]. The use of cash versus electronic payments varies significantly by country and region. Cash usage remains very high in emerging economies. In Latin America, over 90% of consumer transactions are done in cash. In Africa, that figure rises to 95%. Cash is also still dominant in the Middle East and Central Asia[2].
However, cash usage has been declining over the past decade in most advanced economies. The share of cash payments in overall consumer transactions fell from 75% to 45% in the United States from 2010 to 2021. Similar drops occurred in the United Kingdom, Canada, and Australia[3]. Cash is still used for smaller, everyday purchases like coffee and groceries in advanced economies. But digital payments now dominate for higher-value transactions.
The growth of digital payments
Several electronic payment methods have risen to prominence worldwide in the 21st century. Debit and credit card networks such as Visa and Mastercard have been widely adopted. PayPal pioneered online payments in the early 2000s. More recently, mobile payment platforms such as Apple Pay, Google Pay and China’s WeChat Pay have rapidly gained users.
According to McKinsey, digital payments grew at a 12% annual rate from 2015 to 2020, more than double the 5% growth in global GDP[4]. The COVID-19 pandemic further accelerated the adoption of contactless and e-commerce payments.
Debit cards have now overtaken cash as the most used payment method in many countries. Credit cards are also widely used for higher-value purchases and online transactions. Mobile proximity payments, while still a small share of overall transactions, are predicted to grow in usage over the next decade. The convenience and rewards associated with digital payments make them an attractive alternative to cash for consumers.
Why has cash usage declined?
There are several reasons for the decline in cash usage in recent decades:
Cost of handling cash – There are considerable costs involved in storing, transporting, handling, counting and tracking physical currency. These costs are borne by banks, retailers and consumers. It’s estimated that cash costs retail businesses 0.5 – 1.5% of turnover[5].
Risk of theft/counterfeiting – Physical currency can be lost or stolen. Forged notes remain a problem in some countries. These risks are minimized with digital payments.
Convenience of electronic payments – Debit/credit cards and mobile wallets allow quick, easy payments without having to carry cash. Purchases can be made online as well as in-person.
Rewards/incentives – Many credit cards and digital wallets offer cashback, airline miles and other incentives that are not available when paying by cash.
Hygiene concerns – COVID-19 increased worries about virus transmission via cash and use of contactless payments.
As electronic payments provide advantages in cost, convenience and safety over physical currency, consumers have shifted away from cash for many transactions.
Factors that may influence future cash usage
Whether cash remains in common use by 2030 will depend on a few key factors:
Government policy – Some governments are taking active steps to reduce cash usage due to the above costs and concerns. This includes setting limits on large cash purchases, requiring retailers to accept digital payments, or discontinuing large denomination bills. Such policies could accelerate the decline of cash.
Financial inclusion – 1.7 billion adults globally still lack access to banking services[6]. Expanding access via mobile money platforms could enable digital payments to displace cash usage in emerging economies.
Privacy concerns – Cash provides anonymity that some consumers prefer over digital payments which can be tracked. Stricter privacy regulations could make cash more appealing if electronic payments are seen as overly intrusive.
Power outages/technical issues – Over-reliance on electronic payments leaves consumers vulnerable if networks go down. The need for a backup could sustain cash usage at some level.
Costs of digital transactions – Banks and payment providers charge fees for card payments and digital transfers. If these fees rise substantially, it could make cash more cost-competitive again.
New payment technologies – Emerging technologies like cryptocurrency, stablecoins, or central bank digital currencies could provide new digital alternatives to physical cash.
Will cash disappear completely?
It is unlikely that cash will disappear entirely by 2030, but its usage may continue to drop significantly in advanced economies if current trends hold. Here are some scenarios we could see:
Limited role – Cash persists but is rarely used for day-to-day transactions. Reserved mainly for small informal purchases or as a backup when electronic payments are unavailable.
Specific segments – Cash remains more common among certain demographics like the elderly who are less comfortable with digital payments. Also remains popular for certain activities such as tipping.
Geographic differences – Cash usage drops sharply in advanced economies but remains high in the developing world where digital infrastructure is more limited.
Black market – Cash endures for illegal transactions since it provides anonymity. But becomes rare in the formal legal economy.
Nostalgia – Cash becomes a novelty used in small amounts for fun or tradition. Similar to using physical film in the digital camera age.
A future without any paper currency is unlikely. But for most legal and official transactions, digital payments already dominate and will likely continue displacing cash over the next decade.
Conclusion
Cash has been the primary payment method for consumers worldwide for centuries but has fallen in usage over the past decade with the rise of cards, mobile payments and other electronic alternatives. While cash is still widely used today, especially in emerging economies, digital payments now dominate in most advanced countries for larger purchases. Given the ongoing improvements in speed, convenience and security of electronic payments, cash seems poised for further declines in usage by 2030. But governments would likely step in before cash disappeared completely, given its importance as a backup payment method if networks fail. In the future, we may carry digital wallets instead of leather ones. But that paper and coin money we call ‘cash’ will likely still be with us in some capacity.
| Payment method | Global transaction share by number in 2021 |
|---|---|
| Cash | 69% |
| Debit cards | 19% |
| Credit cards | 8% |
| E-money payments | 4% |
| Country | Cash transaction share in 2020 | Cash transaction share in 2010 |
|---|---|---|
| United States | 45% | 75% |
| United Kingdom | 47% | 73% |
| Canada | 43% | 70% |
| Australia | 37% | 69% |
| Region | Cash transaction share |
|---|---|
| Latin America | Over 90% |
| Africa | Over 95% |