Jörn Tenhofen of Swiss National Bank in this short note looks at high demand for large banknotes in Switzerland:
In contrast to what one might believe, the demand for banknotes has remained strong in recent years in most advanced economies despite continuing innovation in payment technologies. This Economic Note highlights the importance of the store-of-value motive for holding banknotes. The motive is reflected in the importance of the opportunity cost – the level of interest rates – to explain the demand for large-denomination banknotes in Switzerland.
Demand for banknotes is due to following reasons:
• the volume of transactions as well as the corresponding price level;
• the opportunity cost, which measures the implicit cost to an individual holding noninterest-bearing banknotes instead of a bond or bank deposit (e.g., savings accounts or term deposits), which can be measured by an interest rate;
• the degree of economic, financial, and political uncertainty (at home and abroad), which determines domestic precautionary demand for cash as well as safe-haven demand from abroad since cash is free of credit risk. Examples of episodes of elevated uncertainty include banking crises, financial instability abroad and episodes of high inflation;
• other factors such as payment habits or innovations in payment technologies.
Tenhofen shows that it is opportunity cost that is driving the demand for large banknotes in Swiss case.
Mostly Economics 
