Cash: resisting the odds

While cash is being used less and less in Europe and France, there have never been so many banknotes in circulation, a phenomenon better known as the "banknote paradox". In a study, the European Central Bank (ECB) attempts to find several explanations for the resilience of cash and its record levels.


Decline in cash use in favor of card payments

While the health crisis has given a boost to contactless payment, the French have remained attached to cash to pay for their purchases. An IFOP survey carried out for Monnaie de Paris between February and April 2021 shows that over 90% say they use cash regularly, compared with 70% on a daily basis.

Respondents attribute many benefits to species, including :

  • free use (94%),
  • its universality (93%),
  • associated privacy (92%),
  • safety (91%).

Although cash still accounts for 72% of transactions by volume within the eurozone, this proportion has fallen by 6 points in just 3 years. This decline has been to the benefit of card payments, which have gained 8% between 2016 and 2019, according to ECB data. This new practice is gradually becoming the norm. Merchants are equipping themselves to meet demand.

Rising demand for banknotes in the euro zone

While the use of cash is declining, the value of euro banknotes in circulation amounted to 1,435 billion euros in 2020, up 11% on 2019. This money supply has even increased by an average of 5% a year over the last ten years. So the question arises: if these bills are being used less for everyday purchases, where are they? This is difficult to answer, as " cash is used anonymously ", says the ECB.

In its study The paradox of banknotes, the institution indicates that 30% to 50% of the value of euro banknotes was held abroad in 2019, in " developing or transition countries " that consider the euro a " strong currency ". Another explanation: between 27.5% and 50% of the value of banknotes in circulation would be hoarded. More precisely, each citizen would hold between 1,270 and 2,310 euros in cash reserves, according to the ECB.

These reserves include those of companies and banks. Cash held in the vaults of financial institutions rose by 60% between 2014 and 2019, to 90 billion euros. This is due to the fall in the deposit facility rate, which makes it cheaper to hold cash reserves in vaults.