Israel's Cash Use Plummets, Bank of Israel Warns of Rising Costs

The use of cash in Israel is rapidly declining, with a significant drop in weekly users from approximately 80% in 2019 to an estimated 48% by 2025. Concurrently, digital wallet usage has surged from about 5% to 47% in the same period, according to a new Bank of Israel survey. Despite this trend, cash still accounts for a substantial portion of transactions, with 43% of daily transactions and 32% of their value conducted in cash as of 2023, based on Central Bureau of Statistics data. The Bank of Israel expresses concern that as cash usage decreases, services for withdrawing and depositing cash may shrink, making it less accessible and potentially more expensive. This could create a self-reinforcing cycle where reduced accessibility leads more people to abandon cash. The bank argues it is more cost-effective to maintain the existing cash infrastructure while it is still active than to attempt to restore it later.

Cash usage varies significantly across different demographics. In the Arab community, 75% of transaction value is in cash, compared to 29% in the Haredi (ultra-Orthodox) community and 15% in the non-Haredi Jewish community. Lower socioeconomic groups also rely more heavily on cash, with 57% of transaction value in low-income households paid in cash, versus 27% in middle-income and 14% in high-income households. Small transactions are also more likely to be paid in cash, with 63% of transactions under 10 shekels and about 50% of those under 50 shekels conducted in cash.

Globally, cash usage is also declining, though Israel's cash in circulation relative to GDP (6.4%) is lower than the Eurozone (10%) and Switzerland (9%), but higher than Australia (4%) and the UK (3%). Many Israelis still value cash as a safety net, with 70% wanting to keep it as a backup for digital payment failures and 41% seeing its importance during security or economic crises. While the number of ATMs in Israel is high and increasing, only about 2,600 are bank-affiliated, with non-bank ATMs being more widespread but more expensive and unable to accept deposits. The Bank of Israel's concern is that the reduction in affordable and accessible cash services could make using cash more costly and inconvenient, potentially conflicting with the government's goal of combating the black market while ensuring public access to cash.

International examples show efforts to preserve cash access, such as in the UK where banks must provide alternatives when closing branches or ATMs, and in Norway where the right to pay with cash is legally reinforced. While no specific legislative action has been announced in Israel, the Bank of Israel emphasizes maintaining cash accessibility as part of its strategic plan.