Who Really Needs Cash?

The Dutch National Bank (DNB) recognises that while digital payments are a preferred payment solution for some, they are a challenge for others. A missing element in understanding this is the extent to which cash is important and which groups cannot do without cash.

DNB has used its 2022 Dutch Payment Diary to investigate this and has published a working paper with the results ¹.

The study

Although this paper does touch on the usual areas of how those on different incomes, ages, education etc. regard cash, the main focus is on three groups who find digitisation hard, those who have: 

• Low Digital Literacy (LDL)

• Physical disability

• Financial difficulty (FD).

The Netherlands has a wide mix of different digital payment options and cash, and these are available throughout the country. It is, therefore, a good test bed for this study. 19,136 people filled in the payment diary. Four areas were explored across the different segments: 

• The individual share of cash transactions at the point of sale (POS) on the registration date

• Whether the individual only uses cash

• Whether the individual cannot do without cash

• Whether the individual prefers to use cash.

7% of respondents always use cash to pay. 28% said they cannot do without cash.

Results

Five key hypotheses were explored, and the results are summarised in figure 2 from the report shown below. On the whole the use of cash at the POS was consistent with statements that people only used cash.

1. There is a need for cash

While 23% of respondents pay with cash at the POS, those with LDL used it 42% of the time, those with a disability 30% and FDs 31% of the time. Compared with the 7% of all respondents who only use cash, 18% of LDLs only used cash. Equally, compared with the 28% who prefer to use cash, 45% of LDLs, 36% of those with a disability and 35% of FDs preferred cash. The findings clearly indicated that these groups both need and prefer cash.

2. Cash is a more important payment instrument for people with LDL than people with high digital literacy (HDL).

LDLs use cash 9% more than HDLs, are 5% more likely to use only cash, 9% more likely to say they cannot do without cash and 10% more likely to prefer cash. This data supports the hypothesis.

3. The importance of cash varies across disability groups

People with a mild intellectual disability find cash easier to use. They are 8% more likely to use it at the POS than those without and 6% more likely to prefer to use cash. The difference for those with physical disabilities or FDs was small. This data supports the hypothesis.

4. The importance of cash increases for those with FD

People with FD prefer cash by a margin of 10% more than those who do not face FD. The sole use of cash for payment is 5% more. This data supports the hypothesis.

5. The importance of cash is related to demographics

The findings in this section are similar to those found in other countries.

Age: Those over 75 years old are dependent on cash by 16% more than 25-34 year olds and they use it at the POS 13% more. 12-24 year olds are the age group saying they are best able to live without cash, 11% more than the next closest age group, 25-34 year olds.

Income: Those earning €23,400 are 10% more likely to use cash only than those earning €65,000 or more. At the POS they use cash 9% more.

Education: Those with low levels of education only used cash 10% more than those with high levels of education. At POS, they used it 6% more.

Why do people prefer cash?

77% of those who prefer cash find it easier to use than debit cards. Seven out of ten people found cash reduced the chance of overspending compared with paying by card. This was the most frequently cited reason for using cash. Two thirds said they used cash out of habit.

Safety and privacy were also high on the reasons for using cash rather than debit cards, but perhaps an important future indicator is that 20% of people thought that retailers wanted them to pay digitally.

Amongst the three groups studied closely, safety, personal contact and budgeting featured as important. Those with LDL gave cash a 12% higher score for safety than digital payments. Blind and visually impaired people gave cash 18% more points for personal contact than digital payments and those with disabled or limited hand movement 19% more. 85% of those with FDs preferred cash for budgeting. This compares with 71% for those who did not have FDs.

Conclusion

DNB is clear that there is a strong need to maintain cash both for society generally as well as for those who find digital payments challenging.

1 - ‘Uncovering the digital payment divide: understanding the importance of cash for groups at risk.’ Carin van der Cruijsena and Jelmer Reijerin. DNB Working Paper No. 781.