Five Tensions Will Shape the Future of Cash

This interview was published in the May issue of 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 News and is republished with permission of the editors.

Q: What can the industry do to counterAutomatic device for the counting of banknotes or coins. More the ongoing negative reports of cashMoney in physical form such as banknotes and coins. More?

A: We need to separate the short-term from the long-term. In the short-term, we have seen a brutal drop in transactions, cash and non-cash as well as a shift to online and contactless payments. Over the same period, there has also been a spectacular surge in precautionary holdingsBanknote demand motivated by the store of value function of banknotes, for saving purposes or as a precaution for uncertainties. See Hoarding. More of cash in many countries.

I believe we need to focus on the long-term. Cash is an infrastructure industry and we need to develop a long-term vision, to be able to pro-actively steer 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 and address the challenges cash is facing today.

Q: CashEssentials describes itself a think-tank and platform for debate on payments and monetary eco-systems. What are you doing to assess the future of cash?

A: CashEssentials is currently undertaking a long-term scenario-planning exercise, using a ‘Futures Literacy’ approach. UNESCO defines Futures Literacy as the skill that allows people to better understand the role that the future plays in what they see and do. Futures literacy teaches us that there is no single future, but rather a multitude of possible futures to navigate and that we need to imagine the future.

We have identified five tensions that will shape the future of cash in the next decade. We cannot know how these tensions will precisely develop, but we can imagine radically opposing outcomes and increase our understanding of what kinds of futures the different combinations of outcomes create, and what choices we can make.

The five tensions are:

• Economic recovery: will it be driven by a few individual countries or by post-WW2 global institutions?
• The new society: will citizens accept as the new normal, state and/or capitalism surveillance or will they demand the right to anonymity and freedom?
• Sustainability and inclusion: will economic growth become the priority or will we aim for a more sustainable and inclusive social model?
• Technology: will digital platforms and data be used as public policy tools or will they be commercial, privately-owned enterprises?
• The governance of 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: will money be issued by centralised and public entities or will it be privately issued and fragmented?

Q: Any indicators as to the real-life impact of these tensions?

A : Let’s take the example of inclusion. The International Monetary Fund has warned that the ‘Great Lockdown’ will result in the worst recession since the Great Depression. OXFAM has warned that the pandemic could push half a billion people into poverty. For these vulnerable groups, cash will be a vital part of the transition from exclusion to inclusion. For economist and Nobel Laureate Esther Duflo, governments businesses and NGOs should focus on direct cash transfers to economically vulnerable populations to avoid entering into a society-wide poverty trap.

The next phase of this Futures Literacy exercise will consist in imagining radical scenarios based on these five tensions. The work is ongoing. We will be holding a webinar on this topic on 9 June and registrations are open here.