Cash saves the day: How cash infrastructure enhances resilience during a card payment system outage

Can cash infrastructure mitigate the adverse effects of a card payment system outage? As cashless payment systems become increasingly prevalent, societies are becoming more vulnerable to technical disruptions such as card payment system outages. This paper investigates a one-day nationwide card payment system outage at a major retailer in Switzerland. To quantify the loss in card sales at the retailer's stores and the increase in cash withdrawals at ATMs, we generate granular counterfactuals by forecasting card payments and cash withdrawals at the store and ATM level. We then use residual-on-residual regressions to control for high-dimensional confounders and estimate the causal effect of outage-induced card payment losses on ATM withdrawals in an event-study framework. Our district-level results suggest that for every 100 lost card payments, there were 11 additional ATM withdrawals. In value terms, for every CHF 100 loss in card payments, ATM withdrawals increased by approximately CHF 68. We also find only limited evidence of increased card payments at competing stores during the outage or at outage-affected stores on the day after the outage. Our findings suggest that cash infrastructure can serve as a resilience buffer during card payment system outages and that consumers rely on cash as their primary fallback payment instrument.