In Cash We Trust

Apple Pay may be king in the media, but cash still reigns in circulation–and likely will for some time to come. Several speakers and vendors at last week’s BAI Retail Delivery Conference noted that the use of cash is increasing.

Indeed it is.

Total cash in circulation has been rising dramatically in recent years, especially since the beginning of the financial crisis. As of October 1, 2014, total cash in circulation in the United states stood at about $1.29 trillion, of which $1.25 trillion was in Federal Reserve notes, according to the Federal Reserve Board of Governors.

This chart from John C. Williams, President and CEO, Federal Reserve Bank of San Francisco, gives a visual picture of the cash increase:


“The Fed has infused cash back into the system, and it has found it back into the street,” noted David Austin, vice president-business development at CetoLogic, which helps banks manage their cash levels. “That has been compounded by mishandling of sensitive data on the card side.”

In other words, consumers are putting less trust in their credit and debit cards, given the almost weekly news of another large security breach at a retailer or financial institution.

Whether fears over data safety  have anything to do with the increase in cash, Federal Reserve research shows that consumers ultimately put their trust in cash.

“As fears about the safety of the banking system spread in late 2008, many people became terrified of losing their savings. Instead, they put their trust in cold, hard cash. Not surprisingly, as depositors socked away money to protect themselves against a financial collapse, they often sought $100 bills,” Williams wrote in “Cash is Dead! Long Live Cash!

A more recent study from the Federal Reserve Bank of Boston took an international look at cash use and reached a similar conclusion (and also referenced Mark Twain’s famous quote): “However, to paraphrase Mark Twain, we would say that the reports of the death of cash have been greatly exaggerated. This paper shows that in all seven countries considered, cash is still used extensively — particularly for low-value transactions. In some European countries such as Austria and Germany, cash even dominates consumer payment choices for all transaction values.” (A article in The Guardian newspaper last year suggests that cash is making a comeback in Britain as well.)

At the same time, the number of privately owned ATMs, the top method of getting cash, has been increasing in the United States. “Privately owned ATMs, also known as white label machines, are becoming more popular and appear in more locations such as bars, restaurants, deli’s, gas stations,” writes Kevin Sullivan, an anti-money laundering trainer, in a report.

As long as people are nervous about the economy and the safety of their money, cash will be king. As long as goods and services are traded illegally and money in the transactions needs to get into the legitimate banking system, cash will reign. The late, great humorist Jean Sheperd put it best in the title of his story collection: In God We Trust, All Others Pay Cash.