It is very clear that there has been, and continues to be, a sharp reduction in the use of cash to make payments. This is true not only in Britain, but in many other countries as well. However, the amount of cash in circulation, far from reducing, has actually been rising. The key point is that cash payments represent a flow, whereas cash in circulation represents a stock.
Key learning objectives:
How has cash payments and cash in circulation changed over the last decade?
Why has cash in circulation not fallen in line with the reduction in cash to finance transactions?
What can explain the rise in cash holdings?