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Digital payments adoption and the demand for cash: New international evidence

Author

Listed:
  • Arango-Arango, Carlos A.

    (Principal Researcher and Adviser, Central Bank of Colombia, Colombia)

  • Suárez-Ariza, Nicolás

    (Director of Research and Development, Precia, Colombia)

Abstract

Around the world, the adoption of digital payment systems continues to grow apace. At the same time, however, the demand for cash continues to grow in both developed and developing economies. This puzzle has found only partial explanations in the previous empirical literature. This paper presents further conclusive evidence that the adoption of digital payments reduces the demand for cash. It also discusses how growth in the demand for cash is driven by economic growth and lower interest rates as well as secular positive trends in the demand for large denomination banknotes, related to unobservable factors.

Suggested Citation

  • Arango-Arango, Carlos A. & Suárez-Ariza, Nicolás, 2020. "Digital payments adoption and the demand for cash: New international evidence," Journal of Payments Strategy & Systems, Henry Stewart Publications, vol. 14(4), pages 392-410, December.
    • Handle: RePEc:aza:jpss00:y:2020:v:14:i:4:p:392-410
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    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Khando Khando & M. Sirajul Islam & Shang Gao, 2022. "The Emerging Technologies of Digital Payments and Associated Challenges: A Systematic Literature Review," Future Internet, MDPI, vol. 15(1), pages 1-21, December.
    2. Justus Meyer & Federica Teppa, 2023. "Euro area consumers' payment behaviour and banking digitalisation," Working Papers 772, DNB.
    3. Rösl, Gerhard & Seitz, Franz, 2021. "Cash and crises: No surprises by the virus," IMFS Working Paper Series 150, Goethe University Frankfurt, Institute for Monetary and Financial Stability (IMFS).
    4. Bank for International Settlements, 2020. "The dawn of fintech in Latin America: landscape, prospects and challenges," BIS Papers, Bank for International Settlements, number 112.
    5. José Bran-Guevara & Luisa Fernanda Hernández-Ávila & Daniela McAllister-Harker, 2022. "Servicios Financieros Digitales en Colombia: Una caracterización y análisis de riesgos potenciales," Borradores de Economia 1193, Banco de la Republica de Colombia.
    6. Antón, Arturo & Hernández-Trillo, Fausto & Ventosa-Santaulària, Daniel, 2021. "(In)Effective tax enforcement and demand for cash," Journal of Macroeconomics, Elsevier, vol. 70(C).

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    More about this item

    Keywords

    demand for cash; banknotes; digital payments; payment innovations;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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