The rumor of cash's death is greatly exaggerated

• Key insights: Fed research finds cash payments are declining, but very slowly. 
• What's at stake: Banks will need to support cash payments, which are more expensive than digital options 
• Expert quote: "Cash has shown its resilience," Fed economist Shaun O'Brien said.

If there's a "biggest" story in the payments industry over the past decade, it has been the massive migration toward digital wallets, contactless transactions and a parade of new electronic methods that are always threatening to make paper money extinct. 

But it hasn't worked. Not entirely at least.

Seventy six percent of consumers carried cash in their pocket in 2025, according to the Federal Reserve's Diary of Consumer Payment Choice, which shows cash usage remains strong and likely a necessity for banks to support. Consumers made an average of six cash payments a month in 2025, and while that is down from 14 in 2016, it's not zero.

"That really speaks to the public's reliance and view of cash as available," Shaun O'Brien, an economist at the Federal Reserve, told American Banker. "There is a sheer number of people relying on cash as a back-up payment option." 

What the Fed found

Consumers aren't carrying a ton of cash or hiding a lot of it under the mattresses, but it's still a tangible part of life. The average amount of money people hold in their pocket, purse or old school wallets was $69. And nearly half (45%) store an average of $364 for emergency purposes. 80% of consumers had used cash within the last 30 days before being surveyed to make a payment, and 90% plan to continue using cash in the future, according to the Fed.

"Cash has shown its resilience," O'Brien said. "There was a decline during the pandemic, but cash usage has stabilized in the years since."  Over the past decade, there has been a shift toward digital payments, but not enough to render cash obsolete. Thirty eight percent of consumers prefer using credit cards in person (compared to 24% in 2016), with 40% saying they prefer debit cards. Debit preference was 42% in 2016. 

"Once people use a payment method, and it works, they are more likely to use that method again and be more reluctant to use others," O'Brien said. 

Digital payments usage also depends on demographic and generations. Households earning less than $25,000 per year and adults 55 and older relied more on cash than other cohorts. Rural residents make an average of nine cash payments per month, compared to six cash payments made by consumers in suburban and urban areas.

But older consumers are also using digital payments. For example, one in ten people over 65 have used a mobile phone to make a payment. Ten years ago, that was one in 50, according to the Fed. "The older cohorts do change, but gradually," O'Brien said. "Older cohorts are using new payment methods. Not a ton, but they are using them." 

Overall, Consumers made an average of 47 payments per month in 2025, making 16 payments with credit card, 15 with debit card and six with cash.

"Habits are slow to change, but in the long term we see people moving toward more digital forms of payments," O'Brien said. "But those shifts will take a very long time to materialize." 

A slow crawl

Banks for years have grappled with the cost of maintaining cash, which is more expensive than digital payments for banks and consumers. Cash costs banked consumers $124 per year, based on ATM fees, the risk of misplaced cash or having it stolen, according to Crone Consulting. And for governments, cash costs 1%-2% of GDP, according to Crone Consulting. 

For banks, cash management expenses include logistics such as armored cars, secure transport, and physical security to move and protect paper money; labor such as processing paper checks and cash, which requires significant manual labor for counting, verification, and reconciliation—in addition to other maintenance costs. The cost to process paper checks is up to eight times that of digital transfers.

"The continued trend of cash being replaced by credit cards and checks being replaced by ACH continues," Tony DeSanctis, a senior director at Cornerstone Advisors, told American Banker. 

"We expect this migration from paper to digital to only accelerate over the coming years as the demographics of consumers shifts younger and younger."

Since the Fed's report tracks mobile payments based only on standalone wallet balances, debit and credit card payments via a mobile wallet show in the "card" category (the Fed's data show about 5% of payments are made by a mobile app). DeSanctis said that while that's correct, categorizing payments in that manner misses a broader point that mobile wallets are being adopted at a much higher rate. For example, 61% of Americans use digital wallets to shop online, and 38% use digital wallets to make purchases at physical stores, according to Capital One's shopping research. 

"Payments are driven by habit, and with that comes inertia. Old payment types never die…checks anyone? But that is often the challenge banks face," Gareth Lodge, a principal analyst at Celent. "They don't want to risk losing business by not offering a particular payment type. In addition, the different payment product teams compete with each other for revenue. That's a large part why banks haven't killed checks. They don't want to lose the revenue."

The lingering support for paper also highlights that many banks look at revenue, not cost, and therefore not margin either, Lodge said. 

"They rarely consider what is best for the bank or customer. That's less because they don't care, but that it's hard to do, and requires as much a mindshift and strategy as anything," Lodge said.