Companies Stockpile Emergency Funds Amid Economic Uncertainty... Cash Holdings Double in 3 Years

Corporate Cash Holdings Increased by 111.4% Compared to 2018
Continued Decline in Cash Usage... Account Transfers Account for 86%
Significant Rise in Franchise Stores Refusing Cash Payments

Corporate Cash Holdings (Data provided by Bank of Korea)

As economic uncertainty increased during the COVID-19 pandemic, the amount of emergency cash held by households and businesses significantly rose. In particular, the average cash holdings of companies doubled compared to 2018.

On the 15th, the Bank of Korea announced the results of the '2021 Cash Usage Behavior Survey by Economic Agents.' This is a triennial regular survey conducted on households and businesses to understand characteristics related to cash usage by the public, and it was conducted for the third time following 2015 and 2018.

The survey results showed that companies expanded their cash holdings for daily operating funds as well as for emergencies due to increased economic uncertainty.

The average cash holdings of companies reached 4.7 million KRW, a 111.4% increase compared to 2.22 million KRW in 2018. Cash holdings for operating funds increased by 2.07 million KRW (135.6%) to 3.6 million KRW from 1.53 million KRW in 2018, and reserve cash for emergencies (1.1 million KRW) also rose by 410,000 KRW (58.3%).

Looking at sales revenue, companies with sales of 10 billion KRW or more saw a particularly large increase in cash holdings (15.21 million KRW), up 275.7%. By industry, average cash holdings decreased in food and accommodation (1.11 million KRW) and transportation (1.09 million KRW) compared to 2018, while arts, sports, and leisure-related services (9.27 million KRW), wholesale and retail trade (8.88 million KRW), and manufacturing (3.42 million KRW) saw significant increases.

Households showed little change in transaction cash holdings, but the proportion of households holding reserve cash increased.

Most household heads surveyed (97.0%) held transaction cash, with an average cash holding of 82,000 KRW, similar to 78,000 KRW in 2018.

The proportion of respondents holding 50,000 KRW or more in transaction cash rose by 11.0 percentage points from 49.3% in 2018 to a majority of 60.3%. The average reserve cash held by households for emergencies was 354,000 KRW, showing a decreasing trend. However, the proportion of households holding reserve cash increased by 8.1 percentage points to 31.4% from 23.3% in 2018.

With the expansion of non-cash payment methods, cash usage continued to decline.

The average monthly cash expenditure per household over the past year was 510,000 KRW, a decrease of 130,000 KRW (25.4%) compared to 640,000 KRW in 2018. The share of cash in total expenditures also dropped significantly to 21.6%, about half of credit and debit cards (58.3%).

Businesses showed a similar trend. The average monthly cash expenditure of companies over the past year was 9.12 million KRW, a sharp decline of 68.5% from 29.06 million KRW in 2018. The share of cash expenditures continuously fell to only 1.2%, while account transfers increased to become the largest share at 86.0%.

(Data provided by Bank of Korea)

Cash payment refusals also increased at franchise stores and others. 6.9% of all households reported experiencing refusal of cash payments at stores or restaurants in the past year, a significant rise from 0.5% in 2018.

Among those who experienced cash payment refusals, 64.2% encountered this at franchise stores such as cafes, while refusals also occurred at self-employed businesses (13.7%) and corporate supermarkets (5.4%). People in their 20s (12.6%) experienced cash payment refusals relatively more often, and even the elderly aged 70 and above (2.3%) experienced cash payment refusals that had not occurred before.

Coin usage continued to decline. Among banknotes held by households, 50,000 KRW and 10,000 KRW notes accounted for 48.1% and 41.9%, respectively, while 5,000 KRW and 1,000 KRW notes made up only 9.8%.

This content was produced with the assistance of AI translation services.