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Digital payments adoption and the demand for cash: New international evidence
Journal of Payments Strategy & Systems,
14
(4),
392-410
(2020)
Abstract
Around the world, the adoption of digital payment systems continues to grow apace. At the same time, however, the demand for cash continues to grow in both developed and developing economies. This puzzle has found only partial explanations in the previous empirical literature. This paper presents further conclusive evidence that the adoption of digital payments reduces the demand for cash. It also discusses how growth in the demand for cash is driven by economic growth and lower interest rates as well as secular positive trends in the demand for large denomination banknotes, related to unobservable factors.
Keywords: demand for cash; banknotes; digital payments; payment innovations
The full article is available to subscribers to the journal.
Author's Biography
Carlos A. Arango-Arango is a principal researcher and adviser in the Payment Systems and Banking Operations Department at the Central Bank of Colombia. His current research focuses on payments economics and financial inclusion. He has published research on industrial organisation, labour and monetary economics and has worked at the Canadian Central Bank and the World Bank. He received his PhD in economics from the University of Illinois at Urbana-Champaign.
Nicolás Suárez-Ariza is the Director of Research and Development at Precia, a leading company in the provision of valuation prices for the Colombian financial sector. He has also worked for the Central Bank of Colombia, where he researched banking, money and payments. He received his MSc in quantitative finance and actuarial sciences from Tilburg University.
