The Cash Paradox? Is It All About to Change?

Both before, during and since the two years of COVID, the industry has become very aware of what has become known as the cash paradox, identified as the continued growth of cash in circulation compared with a country’s GDP, despite its declining use for payments.

Some central banks have done their best to identify where the cash is but haven’t been able to do so with any degree of certainty.

They do know where it isn’t – ie. in daily use for payments, since there is data on that.

The general view is that the large volume of cash not in daily circulation, ie. that issued but not active, is in store somewhere, held as a reserve for an emergency. The cost of holding cash with very low or even negative interest rates has, up until now, made this an attractive option. As has low inflation.