Despite digitization, US consumers aren’t ready to quit using cash just yet

The findings: Just 25% of respondents in an August-September 2024 Talker Research survey agree with the statement “cash is dead,” suggesting that banks aren’t going to be released from their duties of managing cash volume and replenishment for ATMs anytime soon.

• Only 5% of the survey respondents admit they never carry any cash on their person.
• And when asked which form of payment method they’d eliminate forever, if they could, they ranked both paper checks (36%) and credit cards (16%) above cash (12%).

Conducted on behalf of the neobank Chime, the survey sample was composed of 2,000 Americans evenly split by gender and generation.

Why it matters: Managing cash remains a regular and mandatory part of a financial institution’s (FI’s) day-to-day operations. And data from the Fed backs up consumers’ belief that cash is far from extinct: Even as the digitization of payments and banking continues, US currency now in circulation still surpasses $2.26 trillion—a 28% increase compared to February 2020.

• Ease of cash access still influences consumers’ choice of financial services provider. A recent YouGov survey commissioned by Diebold Nixdorf found that 82% of respondents wouldn’t sign up with a new primary FI unless it offered convenient access to cash.
• And with 43% of Talker Research survey respondents heading to their bank to get more cash, and an equal percentage availing themselves of the nearest ATM, cash handovers remain one of the most common ways for consumers to interface with their FI.

Who likes cash best: Counterintuitively, younger, digitally native generations showed a preference for paying in and being able to access cash. Baby boomers (24%) and Gen Xers (23%) are twice as likely to “rarely” carry cash than Gen Zers (12%).

• 18% of Gen Zers carry it because they frequent cash-only businesses—more than any other generation.
• And consumers of all ages are almost equally likely to carry cash because they’re worried they might need it (27%) as they are to use it as “fun money” (26%).
• 35% of all respondents say carrying cash makes them feel prepared.

The TikTok generation’s “cash stuffing” trend—in which they’re budgeting to limit discretionary spending by allocating cash across variously labeled envelopes—is just one factor driving the increase in their cash usage since 2022.

What this means for banks: Investing in automated cash recycling technology could help banks shoulder increasing costs associated with managing cash. ATM Marketplace estimates that cash recycling can provide banks with 20% savings in total cost of ownership and reduce cash replenishment efforts by up to 75%.

What if you don’t have cash when you need it? Running up against a cash-only occasion when they’ve forgotten to replenish their wallets is one fear that’s motivating consumers to continue carrying it. Sixty-four percent of Talker survey respondents admitted they’d experienced this at one time or another.

• Two in five had it happen in the past month. On average, those consumers found themselves without cash at least three times each month.
• The youngest generational cohorts are particularly susceptible heading out without enough cash: Just 14% of Gen Z and 18% of millennials say finding themselves short has “never” happened to them, compared to 39% of baby boomers and 26% of Gen X.

Lack of cash forces consumers to face the much-disliked inconvenience of using an ATM with a high fee (27%), passing up the goods or service they wanted (25%), or casting about for a quick way to secure some money (13%).

What this means for banks: FIs with a strong branch presence should promote easy accessibility to cash in their marketing, consider expanding their ATM presence, and allow users to easily find the nearest in-network ATM location through mobile apps. Digital-only banks or those that have closed many locations should consider covering customers’ ATM fees, at least up to a certain threshold.

Redefining reality: Paradoxically, the digitization of banking has become so widely accepted that many consumers perceive the balance showing on their screen as “more real” than the bills and coins in their wallets.

• 29% of respondents in the Talker survey believe that spending cash doesn’t actually “count” as spending money because it doesn’t make their balance decrease.
• Many younger generational cohorts are exceptionally vigilant about that particular number. Fifty-eight percent of millennials check their bank account balances daily—with almost 19% checking their balances multiple times per day, per MarketWatch.

What this means for banks: Consumers who've grown comfortable with an abstract concept of money are likely to be more receptive to blockchains, tokens, NFTs, and digital assets. A Policygenius survey from April 2024 confirmed this, finding that one-fifth of younger generations own digital assets—about the same percentage that own a house. News stories about the FTX-related convictions have been superseded by election coverage drilling down into the presidential candidates' positions on crypto. Post-election, banks should prepare for a revival of interest in crypto products.