Israel's Central Bank Warns of Declining Cash Use, Potential Exclusion
Translated & summarized from N12 by baba
Israel's Bank of Israel warns that the sharp decline in cash usage, driven by a surge in digital wallets, could make cash less accessible and more expensive. While digital wallet use is projected to reach 47% by 2025, about 70% of Israelis still want to use cash. The central bank is committed to maintaining cash accessibility despite these trends.
The story in 6 lines · by baba
- Digital wallet use in Israel is projected to reach 47% by 2025, up from 5% in 2019.
- Weekly cash usage has fallen from about 80% in 2019 to under 50% recently.
- Around 70% of Israelis still want to use cash in the future, citing control and backup.
- The Bank of Israel fears reduced cash accessibility and increased costs due to declining use.
- Cash remains dominant for small transactions and is more prevalent in certain communities.
- The total amount of cash in circulation continues to grow, but at a slower pace.
The Bank of Israel has issued a warning regarding the significant decline in cash usage among Israelis, expressing concern that this trend could lead to reduced accessibility and increased costs for those who continue to rely on physical currency. Digital wallet usage has surged dramatically, with the percentage of Israelis using them at least once a week rising from 5% in 2019 to a projected 47% in 2025. Concurrently, weekly cash usage has fallen from approximately 80% to under 50% in the past year.
Despite the rise of digital payments like Apple Pay and Google Wallet, a substantial portion of the population, around 70%, still wishes to use cash in the future, viewing it as a reliable backup and a tool for managing expenses. The data, based on a survey of Hebrew speakers aged 16-74 connected to the internet, indicates that the shift to digital wallets primarily impacts credit card usage, with cash being a secondary casualty.
While the total amount of cash held by the public and in bank vaults continues to grow, reaching approximately 134.7 billion shekels, its growth rate has slowed considerably. The Bank of Israel is concerned that the diminishing use of cash could lead to a reduction in the infrastructure supporting it, making it harder and more expensive to access and use.
Cash remains prevalent for smaller transactions, with 63% of transactions under 10 shekels conducted in cash. Usage is also higher in the Arab community (75% of transaction value), in socio-economically lower-ranked communities (57%), and within the Haredi (ultra-Orthodox) community (29%) compared to the non-Haredi Jewish population (15%). Small business owners value cash for its liquidity and the finality of transactions, while many Israelis keep cash at home as a backup for digital payment failures, a practice that has increased since the start of the recent conflict.
The central bank emphasizes its commitment to ensuring the accessibility and usability of cash as a payment method, even as digital alternatives gain traction.
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