It seems like every day there’s a new technology that promises to eliminate cash for good. Venmo makes it a snap to split the check at a restaurant. In the UK, you can use the Pennies app to donate your change to charity. In 2012 (when the Federal Reserve conducted its last payments study), 42% of the average American consumer’s transactions were made using a debit or credit card, while 40% of transactions were made with cash. It was the first time in history that card transactions outnumbered cash by volume – in terms of value, cards have been leading the pack for a while. In 2013, MasterCard Advisors estimated that 45% of US consumer transactions were made with non-cash methods (encompassing credit and debit cards, checks, wire transfers, and direct bank debits).
So what does this mean for cash?
Any way you slice it, 40% is still a hefty chunk of our spending — two out of every five U.S. consumer transactions are made with cash. Globally, cash transactions make up about 85% of total consumer spending, although the advent of mobile payment apps like M-Pesa (and other apps which don’t need to be connected to a bank account) are making fast inroads. The U.S. is doing better than average, but we’re not even in the top five. Singapore, where 61% of consumer transactions are conducted using non-cash methods, is currently the world’s most cashless economy. Next on the list is the Netherlands (60%), France and Sweden (59%), Canada (57%), Belgium (56%), the UK (52%), and then it’s the United States in eighth place (at 45% as estimated by MasterCard). The good news is that we’re on the tipping point of going cashless — we have the right combination of widespread access to financial services, a growing cultural preference for non-cash payments, near-ubiquitous merchant acceptance and healthy competition for new ways to pay, and a solid infrastructure for electronic payments.
About one in ten Americans doesn’t carry any cash with them on a daily basis, according to a 2014 Bankrate survey. Four in ten carry less than $20 (you might find yourself in that camp). And the vast majority (eight in ten) carries less than $100 in cash on a daily basis. These findings support the idea that, when consumers do use cash, it’s primarily for small-dollar amounts. The average value of a U.S. consumer’s cash transaction is $21, and two-thirds of transactions worth less than $10 are made with cash. As it becomes more convenient to use new technologies like mobile wallets for these low-dollar transactions, we will likely see consumer behavior shift even further away from cash. The future is cashless — are you ready?