We are in a different place compared with even two years ago and the conversation about the future of cash is changing substantially. This was visible in the agenda and the conversations of this year’s Future of Cash conference, which took place in Warsaw at the start of November.
While declining use of cash at the pointof-sale had been steady in a number of countries, in 2020 the pandemic suddenly put that decline into apparent free-fall, and not just in the ‘usual’ countries. Minds were focused and concern moved up a number of gears.
At the same time, we have seen faster payment schemes (FPS) rolled out across many countries, driving significant payment change across the non-western world. UPI in India and Pix in Brazil have hit the headlines, but in their shadow FPS schemes have been, and continue to be, implemented in numerous countries. QR codes, of course, have played an integral part in changing behaviour.
While these FPS schemes have seen mass adoption of digital payments, a number of changes have added noise to the whole payment environment. Think open banking, crypto currencies and now stablecoins. Their actual impact on payments may be small, but they have added to a sense of a new payment world order driving cash further towards the shadows.
Central Bank Digital Currency (CBDC) peaked a couple of years ago and, apart from in Europe which has a sovereignty driver, has morphed into a focus on crossborder payments. But CBDCs are now re-entering cash conversations with their off-line payment function arousing interest primarily for reasons of payment resilience in times of crises, but also for extreme less-cash societies.
Three themes emerged during the conference.
1. Cash and digital
Considerable time was spent understanding what is happening to cash around the world today; today’s story is about meeting society’s payment needs for the future, with cash a core part of that story.
Two presentations stood out as showing how this is happening already.
The conference did, of course, cover the cash distribution crisis in Australia created by there only being one cash in transit company, and it had excellent explanations of how the Dutch National Bank (DNB) and Geldmaat in the Netherlands, LINK in the UK, Euronet in Poland, Bancomat in Sweden and others, have taken structured routes to ensure the four ‘A’s’ of cash are safeguarded (Access, Acceptance, Accessibility, and Affordability).
2. Cash and resilience
One of the reasons that cash is a core part of the future is its role at times of crises. We heard from Narodowy Bank Polski (NBP) in detail about the impact of both COVID and Russia’s invasion of Ukraine on their cash system. The Bank of Spain spoke about the impact of both the flooding disaster in Valencia and then their power outage and the core role that cash played. The European Central Bank reviewed the role of cash in every European crisis since the euro was established. The message is clear, when bad things happen, the public rush to cash.
We are hearing again and again from central banks the message, ‘keep calm and carry cash’. Resilience requires the four ‘As’ of cash to be in place so that cash continues to be used day to day. Without regular use at scale, there is nothing to fall back on, which is why events like this that offer detailed information on what others have done, is useful.
3. The future of cash
The conference points towards a new agenda for cash built around four themes.
The conversation is being reframed about how cash is an integral part of national and international payment systems. We should not be talking about cash v digital, but cash and digital payments. The role of politicians, financial institutions and central banks needs to be how to ensure that payment choice is preserved. Cash is a legitimate and highly valued payment method. It must not be regarded as ‘a memory of the past’.
Presentations from Monnaie de Paris, the ECB, and SICPA touched on the public’s attitude to cash. SICPA has carried out extensive research of Gen Z and their attitude to life, payments, and cash. A session which included two Gen Z individuals reinforced and expanded on our collective understanding.
While Visa spends $1.3 billion on promotions, central banks remain determinedly neutral on the grounds of payment choice. Perhaps cash as a continuum of payments, one part of a spectrum, could be a route to making changes to sustain the use of cash. Certainly the insights about Gen Z mean we are better placed to get the messaging heard.
Perhaps it is time to talk about CBDC as a form of cash. Retail CBDC work is continuing around the world, in part reinvigorated by the interest in and momentum of stablecoins. The ‘anchor’ role of physical cash keeping commercial payments honest may be needed in a digital world given that regulations seldom quite deliver what they are intended to.
The off-line capability of retail CBDCs could deliver cash-like functionality and, with the European Parliament’s recent direction for work on an off-line CBDC to progress, perhaps the time has come to include this in considerations of the future of cash.
SICPA presented its research, ‘Currency Spectrum Futures’. In effect SICPA started from the point that if cash did not exist, we would need to invent a physical token of exchange. If we did this, it would not look like today’s banknotes and coins.
SICPA has talked to 50 central banks and interviewed 245 people to consider a future cash. This is the second part of a three part project.
This conference was an outstanding opportunity to re-think the position of cash and its future. This summary only touches on the detail behind all of these topics. It does not even mention the half day workshop on ATM interchange fees which underpin their business models. There is much to think about and do. The next conference will be at the start of 2027. Dates and details to follow.
