Journal of Financial Market Infrastructures

Falling use of cash and population age structure

Tanai Khiaonarong and David Humphrey

  • Cash withdrawn from ATMs is a better indicator of cash use than currency in circulation.
  • Using this measure, the share of cash used in most countries is slowly falling.
  • Differences in cash use by young versus older adults is tied to a falling demand for cash.

We compare three ways to measure the use of cash in a country and argue that one way is perhaps more appropriate than the other two. As shown in three graphs covering 25 countries, using our preferred measure the share of cash fell between 2012 and 2019; this fall was gradual in most countries. Existing payment diary studies indicate that younger adults marginally favor cash substitutes (mainly cards) over cash compared with older adults. This difference in the revealed preference for cash across countries is related to our measure of cash use in a fixed-effects model over the period 2012–19. A negative and significant relationship is found and thus appears to be an important influence on the demand for cash. The decline in the share of cash use across countries is slow since the change in the age structure of populations in these countries is also slow and approximated by the sum of birth rates (new younger adults entering the adult population) and death rates (older adults leaving the population).

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