The Rumors of Cash’s Demise Have Been At Least Somewhat Exaggerated

November 7, 2016         By: Steven Anderson

There have never been so many ways to pay a bill these days. Whether it’s a bill in the mail or one at the corner store, paying the tab starts with cash and ends with mobile payment systems embedded in a smartphone or even in a chip in your jacket sleeve.

A new report from the Federal Reserve Bank of San Francisco spells out the details, and lets us all know that cash is still king. At least, for now.

Cash represented one in every three consumer payment transactions, the report noted, including for bills. It’s also the most frequently-used payment system around. So not only is cash the most widely-used mobile payment system around—let’s face it, there’s nothing quite so mobile as cash—it’s also the most used payment system period.

There are emerging signs, though, that suggest cash’s primacy may not last forever.

The last study of this kind was taken in 2012, so there are almost five years between studies. In that time, cash went from being most used in 40 percent of cases to being used most in 32 percent.

The missing eight percent, meanwhile, is attributed in part to increased credit and debit card use along with electronic payments. Credit and debt were up six percent, and represented 48 percent of transactions in 2015. Electronic payments were up to 11 percent from seven percent in 2012.

Interestingly, electronic payments proved particularly valuable in two key fronts: big-ticket items and bill payments. With good reason; most bills won’t accept a cash payment, and mailing cash is generally seen as a bad idea anyway thanks to its sheer portability.

Big-ticket purchases, meanwhile, don’t make sense for cash either because it requires the buyer to carry around a large quantity of cash. This is a dangerous activity, so users turn to a cash equivalent like a checkbook or mobile payment system.

This represents a prime opportunity; businesses who frequently deal in big-ticket items should make it easier to accommodate mobile payment users, as these are the most likely users.

In general, it’s a good idea to make more payment options available, but this study makes it clear. There are some clear priorities involved, and cash may not be king for too much longer.