Covid-19 has taken a toll on the US economy. There has been a reduction in access to cash that has resulted in an increase in financial exclusion in society. For generations cash has played a huge role in society. It has been the primary means of payment for quite some time now. However, over the past few years, cash has been in decline. The decline has been further fueled by the Covid-19 pandemic. There are certain implications of this decline as the production of cash impacts distribution of cash to businesses and citizens alike.
Notes and Coins Continue To Be Used
Most adults in the US still make use of cash some of the time and there are certain sections of society which are largely reliant on cash for meeting their everyday requirements. It was further reported that more than $100 billion are spent every year in shops using coins and notes. It represents $1,500 for each child, woman, and man.
Banknotes Experience an Increase in Demand
Even though the use of cash has fallen when it comes to daily transactions, there has been an increase in demand for banknotes continuously. However, central banks do not possess much reliable information which can be used for quantifying how much is held, why it is happening, and where.
Research has revealed that an increasing number of notes are used as a store of value of major currencies. The demand for cash has seen an increase due to potential factors like interest rates and low inflation. Confidence has increased in the real value of cash after the 2008 financial crisis, which reduced confidence in banks.
Cost of Running the Existing Cash Infrastructure
The cash system is complex and large. When it comes to running the cash system, it can be costly for both businesses and taxpayers. However, as there has been a continuous reduction in the use of cash, it is putting significant pressure on the cash system.
The majority of costs associated with cash production and distribution tend to be fixed. Commercial operators continue to warn about impending pressure on business models that rely on higher cash volumes. The risk of financial exclusion is on the rise due to the reduction in the ability of people having access to cash, especially since the costs of using cash have increased.
Migration to Digital Cash and Bitcoin
Central banks are trying to understand which consumers make use of cash the most and why they even need it in the first place. There has been an increase in migration to digital cash and Bitcoin in recent times. Bitcoin offers a great opportunity to the masses. It can be used for just about everything. As governments relax legislation regarding Bitcoin, it is expected to be the future.