Apocalypse now? Canadians turn to cash as a hedge against chaos

The Pandemic may have saved it.

According to the Bank of Canada's latest Methods of Payments Survey, Canadians used bills and coins to make only 22 per cent of payments in 2021.

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Canada is on course to become a cashless society. A quarter of respondents told the central bank that they didn't have any cash in their wallet or home, compared with 11 percent who said they did.

The survey showed that demand for cash had gone up. Canadians had an average of $127 of cash on hand, an increase that was greater than inflation, according to the central bank. Canadians were holding less $5 bills, while demand for $20, $50 and $100 bills increased.

Are we about to see the end of the world now? Not exactly, but the demand for cash appears to relate to a desire among Canadians to establish a hedge against economic crisis, geopolitical uncertainty and perhaps even technological failure, considering the degree to which the collapse of Rogers Communications Inc.'s systems crippled day to day commerce this summer.

According to the Bank of Canada report, the uncertainty caused increased demand for cash over and above the stable level of growth.

The Bank of Canada has the power to keep enough money in circulation. Canadians' desire for cash is relevant in discussions over whether the central bank should introduce a digital unit of exchange as a sharp turn away from hard currency would argue in favor of a creating a Central Bank Digital Currency. From now on, the central bank will produce a Methods of Payments report every year.

The Bank of Canada's survey results were consistent with other findings that show cash in circulation has increased even as use has decreased.

The Royal Bank of Canada reported in May that the demand for cash was at its highest level in 60 years, even as a shift to e- commerce and digital payments accelerated. The economics team at Royal observed that Canadians were more likely to hold onto cash than to spend it.

If Canadians don't use more cash for transactions, what is the reason for its continued appeal? Josh Nye of the Royal Bank of Canada wrote that crises are often linked to a dash for cash. At the turn of the century, there was increased demand for both small and large denominations of notes due to fears of the Y2K bug.

Canadians were shown in July that digital payment networks aren't always safe. The Interac debit payment network was crippled by the breakdown of the telecom network. The credit cards were useless at the stores. Cash was the center of attention for a day.

Canadians may be more likely to keep cash on hand in the wake of the episode. Canadians were told to keep some money in their pockets.

Public safety authorities say it is a good idea to have money on hand in case of an emergency. A disaster kit should have at least $200 in small bills.

Canadian authorities can be pretty sure that Canadians are keeping a decent amount of cash. A survey done by the Bank of Canada found that most people will continue to use cash in the future.

The report said that cash is seen positively in terms of acceptance, cost, ease of use and security.

The email address is shughes@postmedia.