Yves Mersch, member of the European central bank (ECB) executive board, recently expressed himself on the role of cashMoney in physical form such as banknotes and coins. More in the evolving payments landscape and highlighted its popularity among consumers. He also explained that cash is a crucial tool to build consumers’ trust in the central bank and the financial system overall. Mersch is a fervent advocate for paperSee Banknote paper. More moneyFrom the Latin word moneta, nickname that was given by Romans to the goddess Juno because there was a minting workshop next to her temple. Money is any item that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular region, country or socio-economic context. Its onset dates back to the origins of humanity and its physical representation has taken on very varied forms until the appearance of metal coins. The banknote, a typical representati... More and already underlined its advantages on multiple occasions.
In recent years, we have seen a proliferation of new paymentA transfer of funds which discharges an obligation on the part of a payer vis-à-vis a payee. More instruments in the market, with mobile banking apps and virtual currencies adding up to credit and debit cards. As a result, many banks are considering shifting to digital in order to avoid storage, issuance and handling costs inherent to hard cash and remain competitive against non-banking startups. Nevertheless, Mersch sees this move as an error and reminded that banks should always ensure consumers’ freedom of choice and respect their desires. Recent studies of the ECB indicate that 80% of transactions are made in cash at points of sale (POSAbbreviation for “point of sale”. See Point-of-Sale terminal. More), representing more than the majority of payments in terms of value. In Mersch’s view, banks should use cash as a means of customer retention rather than going against their will and imposing restrictions.
Furthermore, virtual technologies that could replace cash – such as the Distributed Ledger Technology (DLT) used for bitcoinBitcoin is commonly said to be a cryptocurrency, a digital means of exchange developed by a set of anonymous authors under the pseudonym of Satoshi Nakamoto, which began operating in 2009 as a community project (Wikipedia type), without the relationship or dependency of any government, state, company or body, and whose value (formed by a complicated system of mathematical algorithms and cryptography) is not supported by any central bank or authority. Bitcoins are essentially accounting entries i... More – are still in their early stages and various security, governance and operational questions remain unaddressed. Before proposing these tools to consumers, governments must ensure that these comply with minimum requirements in terms of efficiency and safety while safeguarding people’s personal data. Mersch warned that a hasty adoption of untested technology could backfire – should there be a problem -and affect the public’s trust in currencyThe money used in a particular country at a particular time, like dollar, yen, euro, etc., consisting of banknotes and coins, that does not require endorsement as a medium of exchange. More and institutions.
Finally, cash represents a tangible connection between citizens and the central bank, a crucial link to maintain trust. Commercial banks that do not respect consumers’ preference for cash and force them to adopt digital instruments are at risk of losing their loyalty and confidence.
To read the original article, please click here.