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Economics

Study Notes

Cash - Will it Survive? (Financial Economics)

Level:
GCSE, AS, A Level, IB
Board:
AQA, Edexcel, OCR, IB, Eduqas, WJEC

Will technological advance in the financial sector fast forward the use of cash as a medium of exchange? In December 2016 the total value of notes in circulation in the UK surpassed £70bn for the first time. This is equivalent to £1100 for every person in the UK.

  • Globally there are over 500 billion banknotes in circulation and cash accounts for 85% of transactions
  • In 2015, cash accounted for less than half of UK consumer payments for the first time. Technology is allowing us to make transactions drawing on our bank deposits e.g. contactless payments
  • But technology makes cash more secure e.g. authenticity of notes
Source: Bank of England

Cash still has important advantages for users:

  1. Immediately acceptable and immediately certain that a transaction is complete
  2. Useful as a contingency e.g. when online systems fail
  3. Cheaper for businesses to process e.g. vs debit & credit cards
  4. Remains a store of value if inflation is low and when confidence in the banking system is fragile
  5. Strong demand for cash in the shadow economy 6.Rising levels of self employment also supporting use of cash

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