The average amount of cash kept in an Israeli wallet has jumped from 260 shekels to 339 shekels ($72 to $94) between June 2016 and last December, the Bank of Israel reported on Wednesday.
This increase outpaces growth in the use of payment methods like credit cards or debits, and is faster than the growth in the volume of cash circulation. It likely stems from the greater availability of ATMs.
Despite this growth, the central bank’s survey from last December indicated that only 10% of Israelis tend to keep 500 shekels or more in their wallet. Still, 13% of those surveyed said they had paid cash for an expensive item like a car, major appliance, furniture or jewelry in the previous month. Some 40% of those people who had used cash for such purchases said they paid over 5,000 shekels.
The ban on major cash transactions goes into effect in January. The law criminalizes payments using large sums of cash. Until now, the ban was only for businesses or self-employed people receiving the payment, if they didn’t report the cash received. The law forbids individuals from paying over 11,000 shekels in cash to any businesses. Fines will range from 15% to 30% of the amount.
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Parallel to these developments, the Bank of Israel reports a slowing down in the growth of cash turnover during the last two years. Over the past decade, the volume of cash circulation has grown on average 11% annually, while in 2017 it only grew by 8%. The slowdown has become even more pronounced recently, growing 4% in the 12 months preceding July, and 1% between January and July.
According to a comparison conducted by the central bank's currency department, headed by Ilan Steiner, there is no clear global trend in the growth of volume of cash circulation. Such growth in the United States was 7% in 2017, while it decreased by 5% in Australia. Volume shrank 4% in the Euro zone in 2016, the last year of available statistics.
The central bank initiated a push in the circulation of 20-shekel notes last year, while it started introducing the new red notes. The number of 20-shekel notes jumped 23% from some 40 million at the end of 2016 to 49 million by the end of 2017. Meanwhile, the number of 200-shekel notes and 100-shekel notes climbed 10% and 3%, respectively. As a result, 200-shekel notes made up half of all notes and 73% of their collective value. The volume of cash circulation reached 82.2 billion shekels by the close of 2017 – made up of 580 million bills worth 79.8 billion shekels and the rest in coin.
“Many people have eulogized and continue to eulogize cash prematurely, but it continues to be a major form of payment in Israel and globally,” said Ronen Ben-Ari, CEO of Brinks Israel. “The public continues to choose cash because it is convenient and simple, doesn’t come with service fees and doesn’t require swiping, a third party, electricity or a battery.”