The cashless society myth: PayPal, Square, and bitcoin have not stopped cash from being a growth business


  • US. cash in circulation has grown at a 5 percent-plus rate for the past two decades, with the number of notes in circulation doubling to 40 billion between 1996 and 2016

  • Cash remains the most frequent method of payment in the U.S., representing roughly 31 percent of consumer transactions, more than electronic, credit, debit or checks

  • Even with internet sales led by Amazon growing quickly, e-commerce represents less than 10 percent of all retail transactions

  • Use of cash by U.S. households is consistent across most income levels, around 25 percent, and goes way up at the lowest incomes

I would never predict the death of cash over the next decade or two. I think cash is going to be with us for a long time to come,” PayPal CEO Dan Schulman recently told the New York Times.

“It’s still decades and decades and decades. It’s going to take our lifetime and our kids’ lifetime before you start to see this work itself out,” said Michael Vaughan, chief operating officer at millennial-friendly Venmo — which is owned by PayPal — when he spoke at a Wharton conference earlier this year.

With the rapid disruptions caused by successful Silicon Valley-based mobile payment companies like PayPal and Square, and technology giants Google and Apple making greater efforts to handle purchase transactions through smartphones, it is easy to expect the dollar’s obit to appear any day now. But even Amazon, with an increasing hold over consumer spending in an e-commerce environment, and internet transactions growing at an annual rate above 15 percent, it represents a sector with less than 10 percent of all retail transactions. And data from the Federal Reserve Bank of St. Louis shows that U.S. currency in circulation, over $1.6 trillion currently, continues to go in only one direction: up.

Cash in circulation has growth at a 5 percent rate for the past 20-plus years, with the number of notes in circulation doubling to 40 billion between 1996 and 2016. That annual growth rate has ticked up a little higher recently and matches the growth of euro notes in circulation — roughly 6 percent growth, according to the European Central Bank. Cash remains the most frequent method of payment in the United States, representing roughly 31 percent of consumer transactions, more than electronic, credit, debit or checks.

Cash usage is consistent across most U.S. household income levels and increases significant at lower incomes — 30 percent of U.S. households are unbanked or underbanked. In international markets, demand for dollars — specifically $50 and $100 denominations — remains high, according to the Fed.

Percentage of cash usage by US household income

Income level

Percentage using cash

Percentage of US households in income level

$125,000 and greater 24% 19%
$100,000 to $124,999 25% 9%
$75,000 to $99,999 26% 12%
$50,000 to $74,999 27% 17%
$25,000 to $49,999 35% 22%
Less than $25,000 43% 21%

Federal Reserve Bank, US Census


For all the experimenting with cashless kiosks, some institutional investors have put an alternate theory to work: There is still a lot of money to be made in cash.

Closely watched activist hedge fund Starboard Value took a big stake in cash management company Brink’s a few years ago, seeing lots of money being left on the table by a bloated company unmotivated to make the most of its opportunity. Starboard has trimmed back on its position since a new management team was put in place under turnaround executive Doug Pertz, and growth metrics — and stock performance — improved. Brink’s stock is now the third-smallest holding among publicly traded stocks reported in Starboard’s portfolio, at roughly $47 million, according to an SEC filing from May and based on the current share price.

SouthernSun Asset Management, an affiliate of asset management conglomerate Affiliated Managers Group, remains a big investor in Brink’s. One factor that sparked its portfolio management team’s interest in cash as a stock story: all of the headlines about its impending death.

“The world has seemed locked into always discounting these businesses as if there is no way for them to adapt,” said Michael Cook, SouthernSun CEO and chief investment officer. And that led him to a related question: Were businesses like Brink’s potentially undervalued? Its closest competitors include overseas company Loomis and Prosegur.

“For them it is not where retail is going to be 20 years from now, but retail is not dead and the retail market is under-penetrated from a cash management standpoint,” the fund manager said. “Amazon is an increasing part of my life, but money disappears at Walgreens each day.”

The fastest-growing cash markets are overseas

Cash still accounts for the overwhelming number of consumer transactions globally.

The percentage of households using cash is much higher in the developing world than it is in the United States or Europe, and that is where Brink’s growth is strongest, with South America representing 29 percent of total revenue but 49 percent of operating profit. North America is 39 percent of revenue but only 20 percent of operating profit.

“The key markets don’t have headwinds the average American who follows the stock market would think,” Cook said. “In literally every other market than in America, people are pretty conscious about making sure they have money in euros or rupees,” he said. “That’s the anecdotal piece of it, but the large-scale numbers there still back it up.”

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