Cash: An inclusive, original payment instrument (2024)

The CMS Cash Index was launched in 2016 to track the infusion of cash back into the economy across various commerce points. Since then, it has demonstrated the trend of cash usage among consumers across and its robust co-existence with digital payments in the country.

While digital payments are gaining a lot of ground, cash usage remains indispensable in many countries today. One of the key reasons why Germans prefer cash is led by their concern for privacy, and the desire to retain control over their spending. High installation costs and processing fees resulted in a preference for cash payments in Japan.

Even in Europe with a high penetration of digital payments, many countries are strengthening the consumers’ right to use cash, to solidify the commitment to a complete payment choice. Since Oct’22, banks in Norway have been given stricter requirements to offer better cash services as part of the Financial Enterprises Act. These efforts highlight the essential contribution of cash to a stable economy and inclusive payments. Even in large & developed economies, people still actively prefer cash usage due to various factors.

1. Higher risks – even the most educated consumer risks falling into phishing traps, becoming a financial nightmare
2. Overspending – the pain of parting with money is felt more acutely if one uses a physical currency, leading to a desire to retain control over spending habits
3. Inclusion - vulnerable groups like the elderly or low-income households who may have less access to digital payment means, get neglected from the digital payment eco-system

At home in India, the question remains – ‘Despite the rapid scale-up of UPI, how does cash continue to experience robust growth?’ The key to resolving this paradox lies in the nuance that as a cash logistics company and being an enabler of the Indian banking system, our report captures the usage of cash within the formalised economy. As this formal economy continues to witness rapid growth, it will act as a powerful tide lifting all payment mechanisms, including cash.

Our recent analysis, as captured in the CMS India Cash Vibrancy Report in May’23, illustrates the strong demand for cash transactions in India - from ATM cash withdrawal patterns across metropolitan, semi-metropolitan, semi-urban, and rural centers to sector-level analysis of business activity through retail cash management data. With a 10.1% growth in monthly average cash replenishment at ATMs and a strong 1.3X increase in average cash collection per point with e-commerce companies in FY23, Indian consumers have demonstrated the relevance and importance of cash in the Indian economy.

Cash is not just a payment mechanism and takes many avatars. Its ‘store of value’ was strongly demonstrated across the world during the Covid 19 phase with people finding confidence in it during the crisis. It also ‘bridges trust’ in a transaction, demonstrated by Cash on Delivery trends of more than 60% contribution to payments. The doubling of digital frauds in the last one year has exposed the complexities one has to deal with in reclaiming lost money. Especially in the case of low-income groups, transaction failures can result in a large proportion of their money being debited from the bank account, and reversing it can take multiple days.

As we look into the future of cash, it's important to reflect on our behavior in the physical world. With banks expanding their branch expansion to establish the connect, digitally native companies opening physical branches to build trust, organised retail expanding its footprint in smaller towns and cities for access, it demonstrates the behavior of Indian consumers and their belief in physical transactions. The preference for cash payments is linked to consumers’ traits and attitudes toward buying behavior.

As an original instant payment, cash cuts across generations, economic status, digital literacy, geographical locations and most importantly, it provides a freedom of choice and right to consumers. Cash will continue to play a unique role in our society, not only as public money and a universal means of payment, but also as a very inclusive instrument. There is no equivalent substitute to this critical resource ‘cash’ across all key parameters that completely meets the needs of consumers.