There are several reasons why cash continues to be popular.
A society becomes cashless with strong intent to be cashless and not just by providing more ability to go cashless.
India probably has most advanced payment infrastructure in the world and yet >90% of txns are cash.
Cash survives due to anonymity where tax evasion is a norm.
— Kunal Shah (@kunalb11) December 27, 2019
Given below are the Top 5 reasons for the continued use of cash in my opinion:
- Cash just works. There’s no dependency on battery, network signal, education level of payer and payee, etc. Cash payments seldom fail. When you pay with cash, you don’t have to run around between merchant and bank to reverse a wrong payment entry, which is something that happens not irregularly with digital payments.
- Cash is the most convenient method of payment (barring the hassles of finding exact change). I say this as a person who has been using credit cards for over 30 years.
- Cash provides privacy and anonymity. Digital payments leave a long money trail. Some people prefer cash to avoid surveillance that’s a part of digital payments.
- Merchants incur an explicit cost of accepting digital payments. Called Merchant Discount Rate (MDR), it ranges from 0.2% (debit card) through to 2–3% (credit card) and even 10-20% (Gen Y Mobile Payments / Carrier Billing e.g. Boku, Zong). While they do face a cost of handling cash, that’s a fixed cost compared to the variable cost involved in each digital payment. As a result, merchants may discourage / disincent consumers from paying with digital payments, and consumers may use cash in response.
- Back in the day, tax evasion used to be another reason for popularity of cash. But that has become a relatively small driver of cash usage in today’s digital world in which big time tax evasion and money laundering allegedly take place via cryptowallets, wire transfers between shell companies, and other digital innovations.