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Cash – trending up, trending down?

July 19, 2010

Cash – trending up, trending down?

Being in the business of managing cash processing product platforms, we always want to understand where the market and customer needs are headed. We need to know how promising our ideas are for the long haul, plus we need to substantiate our investment in the business. Like most other businesses, we feed on data and statistics to predict the future.

The question always comes up: is cash usage going up or down? It seems like such a simple tidbit of data to collect – but it’s not! Statistics from the Fed are fascinating: there are 27 billion US banknotes in circulation worth more than $900 billion. Because many people outside the U.S. like to keep some “Franklins” in a stable and anonymous form, around 60% of that $900 billion isn’t even in the country. So how much is here, and where is it trending? The Fed keeps printing more currency, card payments continue to rise, so what does the cash trend line look like? There’s plenty of research to show it trending both ways, it all depends on how you ask the question.

Cash is most often used in small transactions, with such velocity that it tends to recycle itself in the market. A growing segment of the population is unbanked, so they’re natural cash users. Cash is by nature a private transaction and many value its anonymity, the rest use cash because it’s just plain easy to use.

I’ve come to the conclusion that definitively measuring cash trends and volumes is a SWAG at best, but the stronger conclusion is there’s a LOT of cash in market transactions. So much so that the trend becomes less meaningful for now. So we’ll keep charging ahead and enhancing our offerings to help keep cash a low friction payment mechanism.

~Bob Walters

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