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There is a duality playing out across the globe when it comes to the usage of cash. On one hand there are the folks who insist that cash is dying and that we should strictly become a cashless society. On the other hand, governments and individuals realize the importance of keeping cash in the mainstream in order to maintain an inclusive economy for the millions of Americans who are either unbanked or underbanked. Underbanked or unbanked households tend to be those who experience greater financial hardships and are particularly people of color. 

The rise of contactless credit cards (CTCs), especially during the time of COVID-19, has made the issue even more complex. 

So, are contactless payments causing the demise of cash? Not really.

In a paper titled Losing Contact: The Impact of Contactless Payments on Cash Usage, author Marie-Hélène Felt of the bank of Canada investigated the impact of contactless credit cards on cash use in Canada during the time period of 2010 and 2017.

The Data

The author used finite fixture modeling to provide evidence of the impacts of contactless payments on extensive versus intensive margins of cash usage. She used a two-part model and found that while cashless payments do appear to negatively impact the intensive margin of cash usage, it does not negatively impact the extensive margin.

The author did find that the impact of contactless payments was very minor during the study period. In the conclusion the author writes, “the overall impact of CTCs on the transactional usage of cash in Canada is very small over the 2010-2017 period. While estimates from the two-part model are slightly more negative than those from the linear panel model, their magnitude is still very small, at about 3 percent”

With more and more states and municipalities in the U.S. passing legislation to protect cash as a viable format of payment, it is unlikely that cashless payments will completely take over. This is welcome news to the millions of Americans who use cash on a regular basis.