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.
How are new payment innovations and digital banking affecting the use of cash?