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Cash: A Means of Payment, A Store of Value and So Much More!

Categories : Future of Cash
September 27, 2022
Tags : Costs of payments, Future of Cash conference, Futures Literacy
Delegates from central banks, the cash industry, and academia gathered in Madrid for the 2022 edition of the Future of Cash, a much-anticipated event initially scheduled for April 2020.
Guillaume Lepecq

Chair, CashEssentials

This post is also available in: Spanish

Led by Guillaume Lepecq, Chair of CashEssentials, the two-day event was bookended by two other important initiatives. First, a three-part Futures Literacy Lab, in association with the UNESCO Chair for the Future of Finance, aimed to imagine cash’s role in the Future Monetary Landscape. Second, and to conclude, a half-day research seminar sought to understand the Cost of Payments better.

Setting the Scene

Day One of the conference welcomed three senior central bank representatives – Helena Tejero from the Banco de España, Paloma Varela from the European Central Bank and Kathleen Young from the US Federal Reserve. All three are relatively new to their current senior posts (Kathleen was appointed Chief of FedCash Services for Federal Reserve Financial Services just a few days earlier!). Still, all brought a wealth of industry experience and information from their respective organisations, providing delegates rich insights into the continually evolving cash environment.

Each central bank speaker remarked on the significant growth of currency in circulation since the start of the Covid-19 pandemic but also highlighted in Europe a further spike in demand at the onset of the Russian invasion of Ukraine, reinforcing how in times of adversity and uncertainty, people still turn to cash.

More recent returns of excess cash to central bank branches were also noted as inflation and interest rate rises start to bite, a trend with an increased focus on the cost of holding cash stocks to watch in the coming months.

The trends relating to the two major US dollar and euro currencies were not alone, as Antti Heinonen, member of the CashEssentials Steering Committee and former Director of Banknotes at the ECB, showed through the data he regularly compiles from more than 100 central banks and issuing authorities. Growth in banknote demand throughout the height of the COVID-19 pandemic averaged more than twice the long-term trend rate, and while trends in 2021 reverted closer to the norm in most countries, currency issue remains robust.

The disparity between increased currency issued and declines in actual transactional currency use was a repeated theme of the conference, as was the increasing focus being taken by central banks to understand better the dynamics of the commercial cash infrastructures in their countries.

Banco de España and the Federal Reserve shared their research on changes to cash access as commercial bank branches and ATMs continued to close. Alex Bau, VP of Data and Policy Analysis at the Federal Reserve, drilled down on this data in the CashEssentials’ research seminar, describing the analysis and simulation work done to estimate the consumer impact and cost of further reductions in cash access.

More Cash but Fewer Cash Payments

Further central bank insights on Day Two reinforced many of the critical themes that already surfaced, with a specific focus on cash trends in Germany being presented by Heike Wörlen from the Deutsche Bundesbank, Gianluca Maddaloni from Banca d’Italia sharing his cash supply-chain management analysis in operatic fashion and Ian Woolford from Te Pūtea Matua, the Reserve Bank of New Zealand (RBNZ), providing an update on the work being undertaken as part of the Bank’s Future of Money – Te Moni Anamata – programme.

Other central bank presentations came from

Making A Case for Cash

Issues discussed here –  including access to cash, acceptance of cash and cash and crises – were three of six themes debated later in a series of speed-dating-style round table discussions.

The three other speakers, Javier Rupérez from the Spanish cash campaign Plataforma Denaria, Brett Scott, author of Cloudmoney and Zennan Green at Glory Global Solutions, made forceful presentations to defend cash.

Cash, Innovation and CashTech

Ahead of the inaugural CashTech Innovation Awards, three CashTech entrepreneurs, Sandipan Chakraborty of Sonect, Sergio Kvaternik of viafintech and Julian Schubert from Koenig & Bauer, debated the topic ‘Can CashTech Solve the Cash Conundrum?’ While the CashTech industry is still nascent, the innovations to provide alternative cash access, acceptance and, in the case of Koenig & Bauer’s ValiCash™, an effortless way of authenticating banknotes via a smartphone app, all offer significant contributions to support the future of cash.

The Role of Cash in the Future Monetary Landscape

As mentioned, ahead of the Madrid gathering, several participants took part in a Futures Literacy Lab to imagine the role of cash in the future monetary landscape. To the broader conference delegates, Lab moderators Martin Calnan, UNESCO Chair for Futures Literacy and Riel Miller, Senior Fellow at Ecole des Ponts Business School, provided insights into the Lab learnings, together with Antti Heinonen, Guillaume Lepecq and Richard Wall (Chairman of the International Association of Currency Affairs) – who were three of several group facilitators.

What was evident from the Lab feedback and conference is that though cash is one of many competing payment methods, it is much more! While cash is a unit of account, a store of wealth and demonstrably turned to for contingency purposes, cash has many other intrinsic and intangible characteristics, many deeply rooted in culture and tradition.

No one should take these unique properties and attributes for granted or leave them to market forces and aggressive payments industry competition. Cash access, acceptance and use may all diminish; being payments-system agnostic is not good enough!

Two comments emerged from the Lab sessions – ‘if we start thinking about the future of cash, we’ll spend less time discussing its short-term demise’ and ‘Money is like an army. If you don’t have your own, you will have someone else’s!

This post is also available in: Spanish