During a recent speech on monetary policy challenges for European banks, Yves Mersch, Member of the Executive Board of the European Central Bank raised the issue of cashMoney in physical form such as banknotes and coins. More usage.
Anti-cash lobbying fails to respect the will of the general population
«We currently witness frequent lobbying, overt and covert, to abolish cash. I won’t dwell today on the plausibility of the justifications proposed, except to note that such lobbying fails to respect the will of the general population: cash remains popular. Recent research for the ECB finds that 80% of transactions at point of sale are in cash. Even adjusting for the value of transactions, cash still accounts for the majority. Indeed, the demand for cash currently outstrips the growth in nominal GDP. » Mersch said.
At the recent International Cash Conference hosted by the Deutsche Bundesbank, Carl-Ludwig Thiele, member of the Board of the Bundesbank declared that the war on cashThe expression refers to various policies by governments and campaigns run by other stakeholders, including providers of alternative payment instruments, aimed at reducing or at abolishing the use of cash altogether. This includes for instance the withdrawal of high‐denomination banknotes or restrictions on cash transactions as well as spreading misinformation on the usage and properties of cash. More had shifted from an economic debate into a public one as opponents of cash are increasingly calling for limitations on its usage and its abolishment.
There are valid privacy reasons for maintaining cash
For Mersch, «there are valid privacy reasons for maintaining cash, and it provides the general public with direct access to central bank moneyA liability of a central bank, including banknotes in circulation and banks’ deposits with the central bank. More. For an independent institution like the ECB, maintaining that link is important, which is why we place great emphasis on ensuring people’s continued trust in cash.» Other reasons to prefer cash include budget management and trust.
Banks should facilitate rather than obstruct customers in using their preferred method of paymentA transfer of funds which discharges an obligation on the part of a payer vis-à-vis a payee. More
Mersch concluded «Given this widespread desire to use cash, banks should facilitate rather than obstruct customers in using their preferred method of payment.» In times of low profitability and increased competition including from Fintech startups, «keeping your customers happy is key to keeping them as your customers.»