Deutsche Bank Research Management Stefan Schneider
With the growing use of digital payments, the need for physical cash is no longer self-evident. But: Demand for euro cash is on the rise. Euro cash in circulation tripled between 2003 and 2016 to EUR 1.2 trillion and thus, grew faster than GDP at current prices. It is estimated that euro cash is used for domestic payments, hoarded for saving purposes and held outside the euro area at roughly equal parts.
9 June 2017
However, there are voices calling for limits on cash usage or for abolishing cash altogether on grounds of fighting crime. But abolishing cash would not eliminate crime. In fact, there are alternative methods to transfer illegal funds without leaving many traces, albeit at higher transaction costs.
Which advantages does cash offer citizens in a digital world? Cash can be used without technical equipment, electricity, banks or other financial service providers. If ultra-loose monetary policy caused banks to charge negative interest on their clients’ deposits, depositors could turn to cash in order to protect their savings. Last but not least, cash strengthens privacy. A state-led abolition of cash could weaken citizens’ trust in the currency as well as in public authorities. Therefore, the choice between cash or digital funds should be left to citizens themselves