Perhaps we should only ask that question after the paperless office arrives! The enduring popularity of cash, the high levels of trust it enjoys on the global stage, its universal ease of use and the inherent difficulty in mimicking, in any one alternative method, all the unique characteristics of cash will preserve its existence for generations to come. Cash is 27 centuries old and still growing in demand; it has survived all attempts to substitute it, including checks/cheques, plastic cards, online payments and, more recently, mobile payments.
Central banks, as a country’s monetary authority, generally have the responsibility of manufacturing coins and banknotes. They determine the demand of the population on an annual basis and produce the currency in circulation required to meet that demand. Central banks earn seigniorage from production of cash, which is income derived from the difference between the face value of coins and notes and their actual production costs.
Coins have been around for thousands of years, since Biblical times. The first known banknote was developed in China in the 7th century (“A brief history of banknotes”, Bank of England http://www.bankofengland.co.uk/banknotes/Pages/about/history.aspx)
Payment choice has increased dramatically in the age of mobile internet which has made possible online payments, mobile payments and digital currencies. However, both year-on-year growth in currency in circulation and cash withdrawal rates at ATMs continue to increase at rates which are more than double average GDP growth rates. In other words, growth in currency easily outstrips the rate of economic growth in today’s world. The role of cash as a store of value has increased in importance in recent years, too. What is happening is that the payments “pie” as a whole continues to expand as more citizens become banked and existing customers use a greater range of payment methods. Cash occupies a highly competitive niche within this wider universe of payments choice. The growth of payments innovations affects card use as well as cash use. During the years in which the MPesa mobile money system grow rapidly to acquire 17 million users in Kenya and become one of the poster boys of payments innovation in the world, currency in circulation in the country grew very robustly – there was no downward pressure on the growth of cash in this time period. It is expected that both the size of the payments universe and the range of choice within it will continue to expand in the years ahead, but that cash will hold its own in its entrenched niche due to the extreme difficulty of substituting all of cash’s unique qualities in any one alternative payment method.
It is universal, highly trusted, simple to use, fee-free for cash users and offers instant settlement – quite a good value proposition!
Highly unlikely. Digital currencies cannot function when the system is offline or communications are interrupted. Not long after bitcoin was invented, the first Bitcoin ATMs made it possible to convert bitcoin into hard cash or to buy bitcoin with cash. There is nothing mutually exclusive about the two types of currency, they can co-exist quite happily. In addition, there are billions of unbanked adults in the world as well as a huge digital divide between haves and have-nots. In that context, it would be unthinkable to deprive the majority of humanity of their access to currency.