The mantras of the “Next Generation EU” project (“Make it Green,” “Make it Digital, “Make it Healthy,” “Make it Strong,” “Make it Equal”) might seem, at first sight, to lead directly to the adoption of a digital euroThe name of the European single currency adopted by the European Council at the meeting held in Madrid on 15-16 December 1995. See ECU. More and the disappearance of cashMoney in physical form such as banknotes and coins. More.
However, the use of cash is entirely compatible with the Next Generation EU project, provided that a profound modernization of the cash cycleRepresents the various stages of the lifecycle of cash, from issuance by the central bank, circulation in the economy, to destruction by the central bank. More occurs. Instead of being perceived as an obstacle, EU legislation could be considered a tool for modernization.
Cash Can Be Seen as “Green,” “Digital,” “Healthy,” “Strong,” and “Equal.”
- A 2018 Dutch National Bank study concluded that payments’ environmental impact is generally small compared to other goods and services. Moreover, research shows that using cash generates greater “pain of paying”, which may lead to less conspicuous and more sustainable consumption.
- Cash is a critical component of a digital monetary ecosystem. It is the last mile of the system and safeguards against the challenges and threats of digitalization because it always works.
- Cash protects individuals’ right to privacy and against state and corporate surveillance. It covers the most vulnerable against the digital divide.
- Cash reduces disaster risk by acting as a critical exchangeThe Eurosystem comprises the European Central Bank and the national central banks of those countries that have adopted the euro. More mechanism and ‘safeSecure container for storing money and valuables, with high resistance to breaking and entering. More haven’ in times of crisis. It generates resilience against technical outages, cybercrime and natural or artificial disasters. It does not need electricity or an Internet connection to work.
- Cash is universal and equally available to all, regardless of age, gender, income, nationality, or ethnicity. It does not discriminate and is a crucial element of social cohesion and financial inclusionA process by which individuals and businesses can access appropriate, affordable, and timely financial products and services. These include banking, loan, equity, and insurance products. While it is recognised that not all individuals need or want financial services, the goal of financial inclusion is to remove all barriers, both supply side and demand side. Supply side barriers stem from financial institutions themselves. They often indicate poor financial infrastructure, and include lack of ne... More.
There is no perfect substitute for cash, and an efficient monetary landscape necessarily includes cash. Consequently, it is essential to ensure it remains viable and sustainable in the future. This requires progress in three key areas:
- Establishing a regulatory framework that ensures access to cash for all and its acceptance. This includes strengthening legal tenderMoney that is legally valid for the payment of debts and must be accepted for that purpose when offered. Each jurisdiction determines what is legal tender, but essentially it is anything which when offered (“tendered”) in payment of a debt extinguishes the debt. There is no obligation on the creditor to accept the tendered payment, but the act of tendering the payment in legal tender discharges the debt. More status to ensure mandatory acceptance.
- Redesigning the critical infrastructure to distribute and collect cash. The closure of bank branches and ATMs has led to the deterioration of access to cash. Alternative cash distribution channels should be scaled up.
- A widespread public education campaign ensures all citizens – and regulators – fully understand cash’s social and economic role. It is time to argue the case for cash in the public policy space.
We could solve all the above challenges by combining technology, new business models and regulation.
- Technology is available to automate the handling of notes and coins in the frontFacade, face. See Obverse. More and back office: smart safes, coinA coin is a small, flat, round piece of metal alloy (or combination of metals) used primarily as legal tender. Issued by government, they are standardised in weight and composition and are produced at ‘mints’. More and note recyclers, self-check-out, paymentA transfer of funds which discharges an obligation on the part of a payer vis-à-vis a payee. More stations… Technology reduces labour costs and physical handling of cash and increases security. CashTechThe expression was first coined by CashEssentials and is the encounter of cash and technology. It brings together innovative companies who leverage software and modern communications technology to improve cash services: access to cash; acceptance of cash; and the efficiency of the cash cycle for all stakeholders. More, the encounter of cash and technology, leverages software and modern communications technology to improve cash services: access to cash, acceptance of cash, and the efficiency of the cash cycle for all stakeholders.
- The opportunity cost of handling cash can be tackled. For instance, 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 held in a smart safeA safe way to make the cash management of a retailer more efficient. Banknotes and/or coins deposited into the device are counted and provisionally credited to the account holder. The retailer does not have access to the contents of the safe, which is usually serviced by a cash management company. More can be credited to a bank account without physically transferring the money. This also reduces the environmental footprint by reducing the transportation of cash. CashbackA service whereby the customer pays electronically a higher amount to a retailer than the value of the purchase for goods and/or services and receives the difference in cash. It is also a reward system associated with credit card usage, whereby the consumer receives a percentage of the amount spent on the credit card. More and cash-in-shopService allowing a customer to withdraw cash from a payment account using a mobile application on a smartphone at a participating shop supporting the application. Also referred to as a “virtual ATM”. Unlike cashback, a cash-in-shop transaction does not require the consumer to make a purchase. More solutions require a business model that remunerates the service’s retailers. The answers are there, but adoption has been slow. According to the latest ECB study on the payment attitudes of consumers (SPACE), less than 9% of cash in the hands of consumers is obtained through cashback and cash-in-shop channels in the euro area.
- Bearing in mind the above, we believe that EU-wide regulation can contribute to accelerating the adoption of these solutions for the benefit of all by defining the conditions under which banks provide these services to retailers and a business model for retailers when they provide cash services on behalf of banks.
A Win-Win-Win Situation
Such legislation could generate the following benefits:
- Increase the customer base in terms of people who do not have access or prefer not to use digital payments;
- Further increase of the customer base, with customers visiting the shop to withdraw cash but then deciding to purchase goods or services;
- Efficient cash managementManagement and control of cash in circulation. More, including the reduction of the risk of robberies and saving time counting cash and depositing it into a bank;
- Immediate transfer of the money into their current account, with savings in terms of lost interest.
For financial institutions:
- Ensuring both individual customers and merchants have adequate access to cash services;
- Responding to the critics arising from the closing of branches and ATMs;
- Putting in place an efficient and economic infrastructure, managed by third parties at no extra cost, with material savings in personnel costs (compared to branches) and security costs (compared to off-premises ATMs).
- Ensuring financial and social inclusion;
- Providing freedom of choice in terms of payment options;
- Cash being a legal tender, would be accepted by all merchants;
- Controlling financial transactions and fighting against tax evasion;
- Improving hygiene in the distribution of food and fight against transmissible diseases;
- Making available more payment methods;
- Providing more cash access points;
- Ensuring a resilient payments infrastructure in case of a cyber-attack, a power or internet outage, or a natural or artificial disaster.
This legislation would have positive repercussions for the entire payments ecosystem.
Please share your thoughts on the need to promote EU legislation to facilitate the access to and acceptance of cash.
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