Online transactions may be on the rise, but cash isn’t disappearing anytime soon

Cash is fighting back. It is one of the strange paradoxes of the world. We are paying more and more by card (particularly contact) and by phone, but the amount of cash in circulation continues to climb in just about every country in the world bar Sweden. We’ll come back to Sweden in a moment; first, some numbers.

Last year in the UK there were more than £73bn worth of notes in circulation – £73,198m to be precise – up from £67,819m in 2016. That is much faster than inflation and growth combined, and works out more than £1,100 each for every man, woman and child in the country. The numbers for US dollars are even more stunning. There are some $1.6 trillion of notes in circulation, which on my quick tally is $5,000 per person in America.

Of course, not all those dollars are in the US. Dollars are still the preferred medium of exchange for the global drug-dealing community, but they are used around the world for quite legitimate transactions. Go to an art dealer in Cairo or a posh hotel in Zanzibar and you will usually find the prices are in dollars – and your folding ones will be most welcome.

The euro too has a growing international presence, which explains why there is the equivalent of €3,300 in circulation for every person living in the eurozone. They are not all under the mattresses of German savers. In many places it seems to be nudging out the dollar as the preferred extranational currency, with roughly half the German-issued notes ending up outside the eurozone, either sent abroad by migrant workers or spent by German holidaymakers, or simply held as a store of value by people who don’t trust their own currency.

Yet even in Germany cards are nudging out cash. According to the Bundesbank, last year for the first time cash accounted for less than half of all transactions by volume. A study by the bank suggested that Germans liked using cash because it taught children how to use money and manage their own finances. But obviously you can’t carry out online transactions by cash and as that grows the balance will shift.

So what is happening? On the one hand there is a steady shift away from using cash across the developed world, even in bastions such as Germany. On the other there is an apparently insatiable demand for more banknotes to be printed, even in the UK, where cards are very widely used and online transactions are climbing every year.

I have found no single, simple explanation. Indeed the experts seem to be stumped. There are a number of possibilities and the issue is which are important and which not. The very low interest rates, particularly in Europe, have probably had some effect, because if your money earns nothing in a bank there is no advantage, aside from security, in keeping it there. Indeed, the fear that banks are not really safe seems to have tipped many Europeans towards holding more cash.

There is probably some reaction too against the tracked economy. Some people, particularly those with a bit of money, prefer not to have every payment they receive or make recorded on a bank or social network computer. Obviously the drug trade is a cash one, and it may be that it is increasing worldwide relative to the economy as a whole. There may also be a rise in the grey economy, activities that are perfectly legal in themselves but which practitioners prefer for whatever reason to keep outside the tax net.

But this rebellion against tracking – if that is what it is – would have to be huge to account for the increase in the use of banknotes, and there doesn’t seem to have been a big increase in tax evasion in recent years. So none of this really explains what is going on.

What I think we can be fairly sure about is that cash will continue to be important for another generation at least. It has been around a long time, perhaps 5,000 years. And even in Sweden there are pressures to protect its use. The value of Swedish krona in circulation has been falling since 2009 and the total value now is back to 1990 levels. The Riksbank, the central bank, is taking measures to protect cash payments, though if people simply won’t use cash then there is not much it can do about it.

So is Sweden a sign of things to come, or an outlier? My guess, looking at all those pounds, dollars and euros in circulation is the latter. But it is up to those who use to choose.