The Paradoxical Development of the Usage of Cash: a Global Update

June 2021

By Antti Heinonen, Chairman of the Banknote Ethics Initiative and Former Director, Banknotes of the European Central Bank

The lockdowns and travel restrictions caused by the pandemic have had a great influence on retail shopping and payment habits. Besides the increase in online shopping, the growing use of contactless and mobile payments media have decreased the use of cash in transactions. Several recent payment studies confirm these developments.

At the same time and opposite to the transactional demand for cash, the precautionary demand has grown as is typical in times of uncertainty. This paradoxical development of the two motives to use cash has been evident already during a number of years, but the ongoing pandemic has accelerated the trend.

During the pandemic the use of cash as a store of value has reached record growth rates not seen since the financial crisis in 2008. This phenomenon has already been addressed in some articles but referring only to the development of some main currencies.

In order to illustrate the exceptional situation more broadly, the annual update on banknote developments at the global level in its fifth year (see Currency News September 2017, 2018, 2019 and 2020) will this time be published in two parts.

The current article will focus on the development of banknote circulation in value terms in 2020, comparing it with the past and drawing some tentative conclusions regarding the cash infrastructure in relation to the growing interest of central banks in digital currency.

Another article will be published in a later issue of Currency News, when more extensive information is available in volume terms, which will also allow us to consider denominational demand. That article will further elaborate the developments and consider their potential implications for the future of cash.

Banknote circulation in value terms in 2020

When addressing banknote demand globally, the most widely publicly available information is the value of banknotes in circulation. Besides ‘banknotes in circulation’, the only available figure in some cases is ‘cash in circulation’, ie. the figure includes also coins, which are generally just a few percentages of the total cash in circulation or ‘currency outside banks’.

The latter figure excludes the banks´ vault cash. After central banks have introduced negative interest rates, vault cash has increased exponentially in the case of some currencies. So not including it would give a wrong impression on the demand for banknotes.

However, only very few central banks use negative interest rates, and these central banks typically also publish the banknotes in circulation figure. Therefore, using slightly differing concepts will have only a minor if any impact on the results of this study.

Using statistics and various publications available on central bank websites, a slightly varying number currencies (between 136 and 142) has been addressed in the following charts. The figures refer in most cases to the end of the year (in some cases the financial year is not the calendar year and the figures may refer to the end of the financial year).

Let us look first at the annual growth rates by the value of banknotes in circulation in 2020, described in the Figure 1.

The distribution of currencies between various brackets of growth rates in 2020 is very untypical in comparison to earlier years. It is quite skewed to the right, and only three currencies (besides the usual suspects of the Swedish krona and Norwegian krone, and the dollar of Trinidad and Tobago) had a negative growth rate in 2020. In the case of the last-mentioned, the surprise demonetisation of the highest denomination, the $100 note, in early December 2019 probably had a bearing.

All in all, only a very small number of currencies had a growth rate less than 5%. It is, indeed, surprising how universal the run for cash has been during the pandemic, with almost 75% of the currencies having a double-digit growth rate. The difference between the pandemic year and the still ‘normal’ year 2019 can be clearly seen in Figure 2.

The distribution in 2019 is remarkably centred, resembling the normal distribution, and only 36% of the currencies had a double-digit annual growth rate. The median growth rates describe similarly the difference between the two years. It was more than double in 2020 and was 16.5%.

The exceptionality of 2020 can be further highlighted by comparing it with several other years in the last decade in Figure 3. The distributions in the years 2012, 2014, 2016 and 2018 are quite similar to each other, but deviate fundamentally from that in 2020. It is therefore not surprising that 43% of the 140 currencies had in 2020 their highest annual growth rate of the value of banknotes in circulation during the last ten years.

Given that the distributions have been similar during the ‘normal’ years in the 2010’s, it is interesting to compare the pandemic year of 2020 with another crisis year, namely 2008, characterised by the financial crisis. This is addressed in Figure 4.

There are indeed some similarities between the distributions in the two crisis years. However, high growth rates of the value of banknotes in circulation were not as universal in 2008 as they have been in 2020. Close to 23% of the currencies had a growth rate less than 5% in 2008, when the same figure in 2020 was only 7%. This notwithstanding that in the 2000’s the annual median growth rates were generally a few percentage points higher than during the latter part of the 2010’s.

One reason for the difference might be that the financial crisis was not felt as universally as the pandemic, or at least its threat had been confronted. In addition, there may have been diverse reasons for the precautionary demand during the pandemic, such as general fear of discontinuity of systems and institutions due to infections and self-isolations, as well as limited possibilities to consume, and not just the worry about collapse of financial institutions as during the financial crisis.

The available data do not allow to dig globally behind the figures that have produced the exceptional growth rates by value of banknotes in circulation in 2020. However, anecdotal evidence shows that in the case of a few currencies at least, this has been the result of both withdrawals from and lodgements to the central banks having decreased significantly. The high growth rates in the value of banknotes in circulation have then resulted from a smaller decrease in withdrawals than in lodgements.


Fig 1: Annual growth rate by value of banknotes in circulation of 140 currencies in 2020.

Fig 2: Annual growth rates by value of banknotes in circulation in 2019 and 2020.

Fig 3: Annual growth rates by value of banknotes in circulation during the last decade.

Fig 4: Annual growth rates by value of banknotes in circulation in 2008 and 2020.

(Antti Heinonen will be giving a presentation on this topic at the Asian Future of Cash Online event on 6 July at 11.00 Singapore time (UTC + 8 hours).

Also in this issue:

  • Support for Euro Remains High, but Not for Low Value Coins
  • Goznak Buys Banknote Innovation Systems
  • When is a Counterfeit not a Counterfeit? We Need to Know!
  • Glory – a Mixed Picture Across Global Markets
  • People In The News
  • News in Brief
  • A Busy Year for the RBI
  • Defining Minimum Visual Quality Standards: Malaysia’s Approach
  • The Bank of England – Planning for the ‘New Normal’
  • Bank of England Annual Report – Banknotes Increase, Counterfeits Fall
  • The New £50
  • The Paradoxical Development of the Usage of Cash: a Global Update
  • Markets Gain as Confidence Returns
  • New Traffic Light Security Ink from GSI
  • Before, During and After the Pandemic – Measures Taken, Lessons Learned
  • Cash & Payment  News June
  • Banknote Security: Getting People to Pay Attention
  • Sustainability and Protecting the Environment in Banknote Presses and Printing
  • Changes to Currency News, and New Online Platform
  • Event Update from Currency Research
  • Albania Rolls Out New Series with Two More Notes
  • In Other News…
  • Imagining the Currency of the Future
  • Upcoming Events

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