Israel's Central Bank Warns of Declining Cash Use, Potential Exclusion
Translated & summarized from Mako by baba
Israel's central bank is warning about the declining use of cash, with digital wallet adoption soaring to 47% by 2025 from 5% in 2019. Weekly cash usage has fallen to under 50% from 80% in the same period. Despite this, 70% of Israelis want to continue using cash, which remains vital for small transactions and in certain communities. The bank fears reduced accessibility and increased costs for cash users.
The story in 6 lines · by baba
- Digital wallet use in Israel is projected to reach 47% by 2025, a sharp rise from 5% in 2019.
- Weekly cash usage has decreased to below 50% from approximately 80% between 2019 and 2025.
- Despite declining use, 70% of Israelis want to continue using cash in the future.
- Cash remains dominant for small transactions and is preferred in Arab communities and lower socio-economic areas.
- The Bank of Israel is concerned about reduced accessibility and increased costs for cash users.
- About 70% of Israelis view cash as a backup for digital payment failures.
The Bank of Israel has issued a warning regarding the significant decline in cash usage across the country, expressing concern that this trend could negatively impact accessibility and increase costs for those who continue to rely on physical currency. According to a review by the Bank's Currency Department, the proportion of Israelis using digital wallets at least once a week has surged from 5% in 2019 to an estimated 47% by 2025. Concurrently, weekly cash usage has dropped from approximately 80% to under 50%.
While the total amount of cash held by the public and in bank vaults continues to grow, reaching about 134.7 billion shekels, its growth rate has slowed considerably. The adoption of digital payment methods like Apple Pay and Google Wallet is primarily replacing physical credit card use (50%), with cash use being the second largest casualty (26%).
Despite the shift, a substantial portion of the population still prefers cash. Approximately 70% of Israelis wish to continue using cash in the future, a figure that has remained stable across surveys. Cash remains the preferred method for small transactions, accounting for 63% of payments up to 10 shekels, compared to 25% for transactions over 500 shekels. Usage is higher in the Arab community (75% of transaction value) and in socio-economically lower-ranked localities (57%), compared to 14% in higher-ranked areas. The ultra-Orthodox community also shows higher cash usage (29%) than the non-ultra-Orthodox Jewish community (15%).
Reasons cited for preferring cash include better expense control due to its tangible nature, the finality of cash transactions for small business owners, and its function as a backup for digital payment failures. Notably, since the outbreak of the war, more people have reported keeping larger amounts of cash at home.
The Bank of Israel's primary concern is that reduced cash usage could lead to a contraction of the necessary infrastructure, making cash less accessible and more expensive for consumers. This could disproportionately affect individuals who prefer or need to use cash daily, as well as the broader public's access to a reliable payment system during emergencies. The central bank has stated its commitment to maintaining cash accessibility and its usability as a payment method.
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