Rumours about the demise of American banknotes are greatly exaggerated

Abstract

Despite predictions about its imminent disappearance, cash remains a dominant force in the US payments system. Certain population segments are strongly attracted to its unique bundle of features, particularly privacy and tangibility. One force actually boosting cash usage is the increasing role played by immigration from Latin America in the US workforce. In addition, innovations in electronics and computing have affected the cash world, making banknotes circulate more efficiently. Technological advancements, however, have disproportionately enhanced forms of electronic payment, and the resultant cost savings have worked their way through the rent chain, inducing many consumers to switch away from cash to other payment media such as credit and debit cards and online banking. Most recently, even the most cash-intensive industries are in the process of making notable shifts. This paper examines the transition away from cash in three of these venues: casinos, transport (taxis and toll roads) and vending machines. While it is much too early to proclaim the end of cash, it appears that a reduced role for cash within a growing proportion of US households is now under way.