The reasons why Russians’ craving for cash has increased again

“Many people prefer to go into cash and keep money “under their pillow”

Russians’ demand for cash has unexpectedly increased. This is evidenced by recent banking statistics: the average bill for withdrawing rubles from ATMs increased by a quarter – to 35 thousand, against 28 thousand a year ago. The dynamics can hardly be called explosive, but it confirms a stable trend: even today, in times of unconditional omnipotence of online payments, bank cards and digital money, many people prefer tangible bills. Cash is, in the words of Hemingway, that “holiday that is always with you.”

In contrast to the situation with withdrawals, the average deposit amount for the year remained almost unchanged – 11.9 thousand rubles versus 11.3 thousand. According to banking statistics, Russians more often topped up their accounts through ATMs than withdrew them: 76% of the total number of transactions versus 24%. But in this case we are talking about the number of “approaches” to the ATM, and not about the physical money supply with which it operates. According to the vice-president of the Association of Russian Banks, Alexey Voylukov, over the past year the volume of cash in circulation increased by 12%, which is comparable to the growth in the first three quarters of 2023 in the volume of cash withdrawn by plastic cards.

At the end of 2023, Russians had almost 18 trillion cash rubles in their hands – 10% (1.9 trillion) more than in 2022, the Central Bank reported. And this despite the fact that non-cash payments in a variety of forms continue to rapidly develop in the country. First of all, plastic cards. After all, it is convenient and saves time. However, the attractiveness of cash, its win-win nature as a savings vehicle, has not gone away – especially in the eyes of citizens.

“This is the general defensive psychology of our people, shaped by many crises,” says financial analyst, Candidate of Economic Sciences Mikhail Belyaev. – Since times today are far from being the most stable, the population is acting in accordance with what is happening – acquiring cash. Even despite the rather high interest rates on bank deposits, this form now seems to them to be the optimal savings solution. Our official inflation is 7.5%; in reality, consumer prices rose much more last year.”

Note also that the demand for paper money has a pronounced seasonality. It traditionally intensifies during the summer holidays or on the eve of the New Year holidays. At the same time, the trend invariably grows in situations of non-standard or outright force majeure. As it was, for example, in the first months of the covid pandemic of 2020, or in the early spring of the stormy year 2022.

“The obvious reason for the 25% increase in the average amount withdrawn from an ATM is the widespread rise in prices for goods and services,” says Alexander Shneiderman, head of the sales and customer support department at Alfa-Forex. – Secondly, in 2023, the average salary increased by an average of 14%, and for certain categories of blue collar workers – by tens of percent. Builders began to be paid 69% more. In addition, relatives of SVO participants receive wages for them, and many prefer to withdraw cash and keep the funds “under the pillow.”

Will this trend strengthen in the future? It is unlikely that the volume of cash in circulation will increase very noticeably in 2024; there are no prerequisites for this yet, says Alexey Vedev, director of the Center for Structural Research at RANEPA. In his opinion, inflation today has stabilized at an average level and is trending downward. The devaluation of the ruble is not expected, there are no problems with payments using plastic cards – neither technical nor any other. Over the past few years, there was a truly serious surge in consumer interest in cash only in April-May 2020, at the beginning of the pandemic, when people closed their bank deposits en masse. Then a real threat arose to the stability of the banking system and financial markets, which were deprived of liquidity and vital working capital. Today there is nothing like that.

According to Igor Nikolaev, chief researcher at the Institute of Economics of the Russian Academy of Sciences, Russians are often deterred by fairly high bank commissions when making online payments. According to the logic of many, it is better to withdraw the entire amount of 15-20 thousand rubles from an ATM and then transfer it to the recipient “hand to hand” than to lose 100, 200, even 50 rubles. In addition, cash is preferred not only by consumers, but also by sellers, especially in markets or in free-standing retail stores. They either refer to a malfunction of the terminal, or, more often, do not justify their request to pay in cash.