While cash is facing several challenges in the euro area with an increasing number of people moving towards cashless payments and digital banking, the reports of the demise of cash are greatly exaggerated, Deutsche Bank has said in its latest research note.
"Cash is facing many challenges in the euro area. The European Central Bank (ECB) has decided to cease production of the €500 ($532) note due to concerns over its facilitation of illicit activities," the bank said while adding that the cash in circulation is three times more than what it was in 2003.
While many would attribute this to the never-ending stream of money that the central banks have been pumping into the economy through quantitative easing (QE) and ultra-low interest rates, Deutsche Bank's Heike Mai believes that most of the increase in cash since 2008 comes from abroad and hoarders. Cash held outside the euro area was worth €80 billion and cash hoarded domestically by the real economy is estimated to be valued at €120 billion.