12 editions of Cash & Payment News™, 12 weeks of Digital Currency News™. What have we learnt? What has changed?
This was the year when the COVID-19 pandemic did not go away as we had hoped. Inevitably much has been published about what was done in 2020 to cope and first tentative thoughts about the longer-term impact and implications. Central banks and academics are poring over the numbers, with survey data thrown into the mix.
A brutal summary is that the public still turns to cash in a crisis, there is no credible alternative, but that public payment behaviour has shifted. Perhaps not as much as at first thought, but enough to cause the banks to scramble away from cash and bank branches towards apps and self-service.
Cash & Payments
There have been articles on cash usage across regions – Asia, Europe, the US – with deep dives into Canada, the Netherlands, Germany, Italy, Turkey and Rwanda. Inevitably, many of these have focused on how the central banks, commercial banks and cash in transit companies are responding to different levels of ‘less cash’ situations. Coins have been a particular area of interest.
The decline in bank branches has been much reported and questioned. Access to cash research frequently questions how the withdrawal of services is driving change at the same time as commercial banks justify their changes on customer behaviour.
We have reported on work done to make the cash cycle competitive and appropriate for the changing demand, with reports on better infrastructure and equipment, particularly modern ATMs which can accept and recycle deposits and work without contact, co-operation to optimise networks to deliver access cost-effectively, the use of data and new ways of working to reduce vehicle movements etc.
At the same time as we have reported on the response of cash to changing demand, digital crime has been a frequent theme. It is clear that the rush to digitalisation is creating security problems which the criminals are exploiting. The size of the thefts is eye-wateringly large. They are dismissed because the losses are a tiny fraction of the overall transaction values but is there a point where consumers lose confidence? The security risks of cash seem disproportionately reported when you consider what is going on.
Similarly, the cost of payments has been a recurring focus. While the latest is Amazon declining to accept Visa credit card payments because they are too expensive, this is one of a number of stories through the year of court actions and authorities expressing their concerns. While the cost of cash is clear, the true cost of electronic payments is hard to determine and invisible to consumers.
Financial inclusion is a much talked about topic, with digital payments constantly promoted as being an important part of the strategy to address this. We have run a number of stories which suggest this is simplistic and optimistic in equal measure and that the evidence does not clearly support this. Perhaps it is true for some, but for people who need cash today, it is unclear that they are ready or able to cope with the digital world.
Starting in June we have published a stream of stories about sustainability in the cash sector. It is harder to write about payments generally because central banks do not measure them, and the payments sector certainly don’t.
The good news, as was shown in the white paper ‘Cash: a Roadmap to Sustainability’, is that a significant amount of good work is being done by the industry. Sustainability will remain a key agenda point in 2022.
In addition to putting a glossary of CBDC terms on the website, we have run a number of articles explaining technology such as programmable money, proof of concept v proof of work, QR codes and the role of retail data in modern decision making. As the world changes, we need to keep up!
This year has also seen Central Bank Digital Currencies (CBDCs) move from novelty to familiarity. While a small number of countries, for example the Bahamas and the ECCB, have issued a CBDC, for most countries they remain a long, long way away from being a reality, let alone unseen ‘wall paper’, but the journey has started.
What that means in reality, putting to one side the launch of Digital Currency News to follow and tell the story, is that central banks have become comfortable with key topics such as disintermediation, resilience, inclusion, privacy etc., but are now looking at legal and regulatory structures, security of the technology, how it would work and be attractive alongside existing payments, the realities of cross border payments and the regulation of cryptocurrencies and stablecoins.
2021 has seen cash recover somewhat from the shocks of 2020, but it remains under pressure.
One positive is that its importance and role in a crisis and as a bedrock for a significant and important part of societies has never been clearer. We have recorded an industry that has responded to the crisis effectively and is working hard to be competitive for the future.
It will be interesting to see if 2022 brings a focus on the cost of payments, the cost and risks of digital crime, the environmental sustainability of digital payments and just how effective they are at delivering financial inclusion.
Those topics apply equally to CBDCs, and perhaps Digital Currency News will get answers on those. If they do, whether payments or CBDCs, we’ll bring you the story and run it alongside cash and the cash cycle.
On that note, see you in 2022, hopefully face to face!