DNB Reports on the Future of Cash Infrastructure

The Dutch National Bank (DNB) has written to the Dutch House of Representatives presenting its report, ‘The Future of Cash Infrastructure in the Netherlands’. The DNB commissioned a study from McKinsey in December last year as the basis for this report.

McKinsey identified three key attributes relating to cash:

  • It continues of offer the only credible fall-back solution should electronic payments be disrupted. It notes that this becomes less effective as cash infrastructure declines.

  • Cash is the most accessible form of money and payments, which is important for particular groups in society.

  • Cash is public money, a claim on the central bank, available to all.

It found that at 96% of places where payments are made in person, cash is still accepted but noted that in a third of those places retailers actively encouraged people to pay electronically.

The cost of cash varies with usage rather than the size of the infrastructure, an important point as cash usage declines. Although passing on costs to those who incur them is an option, the DNB’s letter noted that heavy users of cash are often the vulnerable in society, those least able to pay.

Security of payments is a risk for retailers. The DNB said that money laundering and fraud are not an excuse to hamper the legitimate use of cash, to reduce accessibility of infrastructure or to reduce the inclusiveness of the payment system.

McKinsey concluded that today electronic fall-back solutions were not sufficiently robust. Their scope, how widely available they are, and their inclusiveness means they aren’t yet a credible alternative. The DNB will continue to research digital options to create fall-back options should electronic payments fail.

If a robust fall-back solution is available, the DNB note that the societal functions of cash become the reason for cash to be sustained, cash becomes a ‘public good’, and this is a matter for government.

Although cash does have societal value, already the infrastructure is shrinking and retailers are asking people to pay electronically, the first step to rejecting cash. As a result, cash is at risk. One option is to follow Sweden’s approach and to regulate to safeguard cash.

The DNB would prefer to attempt to seek multi-lateral agreements between stakeholders to maintain cash rather than go straight to regulation. Experience shows this works, the Geldmaat shared ATM network is an example of this, and it creates flexibility for the future. This would buy time during which to find alternative solutions to allow the public to continue to enjoy the key attributes associated with cash.