Cash may be ageless, but its relationship with consumers has changed tremendously.
In 1967, consumers could only access cash through over-the-counter (OTC) withdrawals. The space changed when Barclays Bank announced the launch of the world's first ATM machine which could dispense up to ten £1 pound notes in exchange for a bank-issued voucher. That was 50 years ago.
Fast track to today and the United Kingdom is home to more than 70,000 ATM machines used by 94 percent of the adult population. More than half of that percentage uses an ATM at least once a week to withdraw cash. In 2016 alone, consumers in the U.K. reportedly used 176 million debit cards to withdraw a whopping £180 billion in cash.
While the use of cash and ATMs has climbed in the U.K. and other countries around the world, there's no denying the age-old payment method is facing growing competition from alternate payment methods. But is it losing significant ground? Not really.
With people spending more money every year, populations getting bigger and economies growing — albeit slowly — more cash is actually being spent.
In Western Europe, cash usage is projected to increase at a compound annual growth rate (CAGR) of 0.7 percent and reach €2.2 trillion by 2020 with Germany and Italy driving the growth, according to the PYMNTS Global Cash Index.
In Eastern Europe, on the other hand, use of cash is projected to increase at a CAGR of 4.2 percent, reaching €1.4 trillion by 2020.
The growth in cash use comes as consumers around the world continue to rely heavily on cash for person-to-person (P2P) and small value transactions, despite growing access to mobile and card-based payment methods.
“In the future, we’re much more likely to see a combination of different payment methods than one clear preference," said Laurent Dhaeyer, managing director of online payment processor Secure Trading. "Consequently, choice and the ability to integrate with these different methods of payment will be paramount for merchants and banks alike."
And rightfully so. Using cash in combination with other payment methods is a quickly growing phenomenon in the North American market.
When it comes to making payments in the U.S., cash continues to be the hands-down choice for most Americans, according to the Global Cash Index. Despite the growth of alternative forms of payment, cash is used for more transactions than any other payment method in the U.S. About 62 percent of transactions valued at $10 or less are paid using cash.
According to the Federal Reserve's 2015 Diary of Consumer Payment Choice, consumers’ preference for using cash for small-value transactions comes of convenience and not merchant-specific pressure, such as acceptance of cards for transactions that are over a certain dollar value.
With consumers continuing to pick cash over cards for a significant chunk of their day-to-day transactions, the responsibility rests on banks and FinTech firms to offer products that truly add value to consumers' payment preferences.
"The real question for financial services firms is not whether cash will or will not be here in years to come, but how they can offer maximum choice to partners and customers to ensure they’re as agile as possible in an increasingly innovative market,” said Dhaeyer .