How is the role of cash evolving?

Digital banking is on the rise. About 197 million people used it in 2021 and that number increased to 203 million in 2022.
Posted at 8:07 PM, Jan 12, 2023

Celebrities constantly ask in commercials, "whats in your wallet?" 

And if your answer is little to no cash — you’re among a growing number of Americans swiping or clicking to make a purchase. 

Digital banking is on the rise. About 197 million people used it in 2021 and that number increased to 203 million in 2022. But despite the digital dollar dominance, cash is still king among baby boomers: less than half report using digital banking. 

"Physical money or currency is very useful in many ways because you do not need any technological awareness to be able to use it. It gives you privacy and confidentiality in your financial transactions. Everybody has access to it no matter what your income level or network," said Eswar Prasad, author and trade policy professor at Cornell University. 

The age group driving the evolution from cash to digital banking is millennials. Nearly 80% reported using it in 2022. And the evolution of how we pay was further exacerbated by the pandemic — first with contactless payments. 

"What’s interesting is in reality, now there is more cash in circulation than there's ever been ever in history. But cash coins and paper money and bank accounts that are easily accessed. Account for a smaller percentage of the total amount of money that's being used out there than ever before as well," said Douglas Mudd, curator and museum director for the American Numismatic Association.

The evolution is causing some financial experts to question cash’s relevance. 

"Around the world, I think we are beginning to see the end of cash because there are technological developments from basic mobile phones to central bank digital currencies that are clearly paving the way for more efficient forms of transactions," Prasad said. 

COVID-19 Coin Shortage Challenges Cash-Based Businesses

COVID-19 Coin Shortage Challenges Cash-Based Businesses

The Treasury is producing more coins than usual to help replace them, but some small businesses are taking matters into their own hands.


Prasad is the author of the book "The Future of Money: How the Digital Revolution is Transforming Currencies and Finance." He says it’s not hard to imagine the end of cash as consumers and businesses switch from cash to digital payments.  

"There are still people, you know, the poor, those who are technologically unsophisticated, the elderly, those living in rural areas who might still prefer the use of cash. But again, the hassle of dealing with cash means that you need a whole distribution system in order to get cash into the economy and also to allow it to circulate more freely. And as businesses turn away from the use of cash, that distribution system is going to increasingly wither away," he said.   

41% of Americans say none of their purchases in a typical week are made with cash, according to a Pew Research Center survey  — that’s up from 29% in 2018. Countries like China, Canada and Jamaica are already testing digital currency.  

 Meanwhile, the US launched its own digital dollar pilot program with 9 banks including Citibank and Mastercard. 

How that unfolds remains to be seen. But will a cashless economy ever take over the U.S.? Douglas Mudd says it comes down to politics. 

"The company that produces the paper and the ink companies have strong lobbies and convinced Congressmen to vote against it. Yet if we did it, it would save us $500 million a year," Mudd said. 

Ventris Gibson, director of the U.S. Mint, says cash — specifically coins — are here to stay. That’s despite calls to eliminate the penny from some, like former Mint Director Philip Diehl.

"Cash is king. People still use cash. First and foremost it's recognized as currency of the United States, of the banknote and coins. That's the currency of the United States. And while we recognize that people are doing digital payments and digital assets exist, etc. The bottom line is cash is king," Gibson said.  

"There's going to be a demand for something that can be used a in places where you don't have connectivity because you know, there are places that are off the grid, everything else," Mudd said.