Examining the state of cash

Cash usage tends to be the elephant in the room when it comes to the ATM industry. Prior to 2020, many were heralding the downfall of cash as customers turned to different payment methods such as mobile apps. This cashless trend only picked up steam in the wake of COVID-19, as many didn't use cash for fear of being infected.

We, however, need to look at what the current state of cash actually is, and we can gain a few insights through how customers are withdrawing cash at ATMs.

In 2021, the overall withdrawal and deposit transaction count decreased at ATMs, said Bill Budde, VP of banking strategy and solutions at Hyosung, in an email interview. In particular volumes decreased by 5% year-over-year, with deposits decreasing by 8-10% and withdrawals by 3%, Michael Graham, VP of retail strategy and solution at Hyosung, said by email.

When customers did go to the ATMs, however, they performed larger cash transactions than in the past.

"Customers performed larger cash transactions at ATMs in 2021 as compared to 2020 while visiting the ATM less often. The overall result was that withdrawal and deposit transaction count decreased while withdrawal and deposit total dollar amount increased," Budde said.

Simon Powley, head of advisory services and consulting at Diebold Nixdorf agreed with this observation.

"We are seeing more cash deposit volume at the ATM than ever before, which is fueling a greater interest in cash recycling since cash management costs are expected to increase over the next five years. As FIs continue to become more efficient, and consumers' expectations continue to change, they will continue to move transactions to ATMs," Powley said by email.

One side effect of this trend is that customers are using cash less often for purchases under $25, but customers are also going to stores less often and making larger purchases when they do go.

"However, the average value of cash held in consumers' pocket, purse or wallet increased to $74, which is up $20 compared to 2019. There are still a tremendous amount of cash transactions happening," Powley said.

Another trend at play here is the sharp increase in the amount of currency in circulation in 2021.

"US Cash in circulation was up (about) 13% (as of June 2021) from same period 2020 with similar upticks in cash in circulation in the UK and Europe," Graham said. "With more cash in circulation, the amount of cash media dispensed increased YoY in 2021 as well as the amount of cash deposited increased YoY in 2021."

But all this raises a question: how many people are still using cash? The answer is that it tends to depend on the geographical region. Graham pointed out that cash is the primary payment method in Asia-Pacific, Latin America and Middle East-Africa regions and is still strong in Germany, Italy and Spain.

Overall around 20% of payments in the world are made with cash, Graham said. "Despite the decrease from 2020 cash usage for in-person payments, 28% of those in-person transaction continued to be in cash."

All that being said, while cash has certainly taken a hit in recent years, it likely isn't going anywhere anytime soon.