2024-08-29 01:10:32
A study by the Raddar consultancy firm indicated that Colombia is the Latin American country where cash is most widely used, at 85%.
Huila Daily – National (Economy)
In a scenario marked by the growth of digital payments and economic difficulties, cash continues to be the main means of payment in Colombia. According to a recent report by the consulting firm Raddar, 85% of Colombian household spending in June 2024 was made in cash, a figure that reflects the deep preference for this payment method, despite the advance in the use of credit and debit cards.
The study highlights that, although consumer credit has shown significant growth, cash remains dominant in the daily economy of Colombians. This phenomenon is even more pronounced in regions with less access to financial products, where technological limitations and lack of adequate infrastructure restrict the adoption of electronic payment methods.
Far above the global trend
Globally, resistance to fully adopting electronic payments remains at around 30% of consumers, according to the report. Factors such as a lack of uniform acceptance of these methods, connectivity failures and security concerns are barriers that hinder a full transition to a digital economy. In Latin America, Colombia and Mexico stand out for their high preference for cash, with Colombia leading this trend in 2024.
The economic context in Colombia has been influenced by a restrictive monetary policy adopted by the Banco de la República. In an attempt to control high inflation, the central bank raised interest rates and limited the growth of cash in circulation. However, these measures have not succeeded in reducing the use of cash, which remains the preferred means of payment for the majority of Colombian households.
Deteriorated labor market
Raddar notes that the share of cash in spending has increased due to a higher inflow of remittances and a decrease in the use of credit. “The situation reflects a deteriorating labor market, which limits household income and presents challenges in accessing and using financial products,” the report details. In this context, cash is perceived as a safe and reliable payment method, especially in regions with less access to financial services.
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The speed of circulation of money, a key indicator for the economy, is also affected by variables such as the interest rate and inflation. According to data from the Bank of the Republic, these factors have had a significant impact on the demand and circulation of cash in the short term. Despite the 18% growth in the use of electronic payment devices in 2023, cash remains the preferred currency in sectors such as public transport, professional services and supermarket shopping.
Remittances
Raddar’s report also highlights the crucial role of remittances in the economy of many Colombian households. “The inflow of remittances has increased the availability of cash in many households, especially those that depend on this income for their livelihood,” the study notes. This trend underscores the importance of cash in preserving economic stability, particularly in households facing financial difficulties.
The dominance of cash in Colombia also has roots in the informal economy, a sector that still represents a significant part of the country’s economic activity. Despite technological advances and government policies to promote financial inclusion, the Colombian financial system still faces challenges in achieving full adoption of digital payments.
Raddar concludes that the transformation towards a more digital economy in Colombia will require a combination of effective public policies and the provision of accessible and secure financial services for the entire population. Although the Colombian economy shows signs of recovery in certain sectors, the road to a comprehensive adoption of digital payments is still long, and cash continues to be king in Colombian household spending.
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