Cash holding by consumers: The role of the perceived characteristics of money

This study examined why consumers who typically pay electronically at points of sale still carry cash and explained the inertia of demand for cash by considering the additional (perceived by consumers) characteristics of cash. The research was motivated by the growing discussion on why cash, despite the increasing importance of e-payments, remains a significant part of the demand for money. The study focused on psychological factors and consumers' perceptions of certain features of cash, which make it an attractive additional option for precautionary reasons, and therefore, explored beyond the typical discussion of money as a means of payment. The structural equation modeling based on data collected as part of a survey of Polish consumers was used to verify the hypotheses. It was revealed that cash becomes a reserve solution for consumers, which is kept “just in case” to expand the scope of personal freedom and flexibility in making payments and protect against various potential restrictions and threats related to e-payments. Consumers' holding of cash as an additional option depends on three key factors: attitude toward cash, particularly the flexibility it offers, unusual purchasing situations, and perceived card or mobile payment risk, considered as a moderator. In the debate on the future of cash, the study supports the position that cash has a place in the modern payment system, although it plays a different role. Cash is a supportive backup solution. Eliminating cash significantly reduces consumer welfare.