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Looking back at 2024

Categories : Cash is a public good, Cash is available to all users, Cash is the most widely used payment instrument, Uncategorized
January 16, 2025
Tags : 2024 Review, Access to cash, Cash Infrastructure, Public good
2024 marked a pivotal chapter in the evolving narrative of cash. From New Zealand’s innovative community cash trials to Germany’s National Cash Forum, efforts were made to enhance access and acceptance of cash. Research delved into its psychological and societal importance, while the Paris Olympics exposed the challenges of cashless society. This retrospective captures key moments that shaped the discourse on relevance of cash, reflecting its enduring role in fostering financial inclusion, economic stability, privacy and consumer choice.
Guillaume Lepecq

Chair, CashEssentials

January: New Zealand Launches Community Cash Trials

The Reserve Bank of New Zealand announced it will launch and fund trials to test new ways for consumers and merchants to withdraw and deposit banknotes and coins, at little or no cost. Rather than preserve a cash infrastructure that has already been degraded, the RBNZ aims to redesign the cash cycle. The trials will take place in communities lacking a commercial bank branch or an ATM and test new ways for people and retailers to withdraw and deposit cash.

Karen Silk, RBNZ’s assistant governor, stressed the importance of “exploring policies that support merchants having an expanded role in cash distribution to augment the current and shrinking commercial bank-centric cash system.”

Read more: https://cashessentials.org/new-zealand-will-launch-community-cash-trials-in-2024/

February: German Central Bank Establishes National Cash Forum

The Deutsche Bundesbank established a National Cash Forum, gathering representatives of the banking industry, retail trade, consumer protection, the CIT industry, and vending machine operators to jointly develop solutions to current cash management issues.

“The objective of the National Cash Forum is to preserve cash as an efficient and widely used means of payment in a changing payment landscape.” said Burkhard Balz, the Bundesbank Executive Board member responsible for cash and Chair of the Forum.

Read more: https://cashessentials.org/germany-central-bank-establishes-national-cash-forum/

March: Cash Is More than a Public Good

A new CashEssentials paper addresses the questions ‘Is cash a public good? Is it a basic right?’ to clarify the debate and advance policy recommendations.

Banknotes and coins constitute a form of public money as a public institution issues them. However, like private money, they serve private purposes and are not a public good per se.

However, the cash ecosystem and its collective benefits — financial and social inclusion, economic stabilisation, the resilience of the payments system, and protection of privacy — are public goods in the economic sense. They are non-rivalrous in consumption—all people can benefit equally from them—and nobody can be excluded from using them. Economic theory suggests that, without the participation of the government, their provision cannot be guaranteed.

Read more: https://cashessentials.org/blog/page/4/

April: The Netherlands draft Legislation to Rescue Cash

In April 2022, payment industry stakeholders agreed to a Cash Covenant, listing voluntary actions to improve the quality of cash services. However, in May 2023 a report commissioned by the DNB and the Ministry of Finance, concluded that voluntary agreements would not suffice, and that legislation would be needed.

The Cash Payments Act (CPA) seeks to “organize the set-up and financing of the cash cycle in such a way that a socially desirable level of cash services is offered in the longer term, and that cash remains usable as a means of payment” The CPA targets both large banks and CIT companies as the primary stakeholders for preserving cash services in the Netherlands.

Read more: https://cashessentials.org/the-netherlands-legislation-seeks-to-rescue-cash/

May: U.S.: Visa and Mastercard Settle ATM Class Action Lawsuit for $197 Million

Visa and Mastercard have agreed to pay a combined $197 million to settle a case brought by millions of consumers who withdrew cash from ATMs and accused the companies of anti-competitive behaviour. The class action lawsuit alleged that Visa, Mastercard, and other banks violated federal antitrust laws by adopting restraints that inflated ATM surcharges (also called ATM access fees) paid by consumers and businesses.

The settlement is a stark reminder that reverse interchange fees which are unilaterally set by card schemes are an important component of the cost of cash.

https://cashessentials.org/us-visa-mastercard-pay-107-million-to-settle-atm-class-action-lawsuit/

June: From Secrecy to Transparency – The Evolution of Banknote Communications

Banknote communications have developed rapidly over the last few decades and best practices have been evolving. A fully fledged banknote information campaign requires extensive resources, and central banks therefore use partnership programs to spread their messages.

When planning communications campaigns, the following points are worth considering:

Read more: https://cashessentials.org/from-secrecy-to-transparency-the-evolution-of-banknote-communications/

July: France – Cash Counts

An opinion poll by Ifop for the Monnaie de Paris shows that cash remains the most trusted means of payment and that the level of attachment to cash is strengthening.

According to the poll, cash is the second most used means of payment (after payment cards) with 74% of French people declaring they use cash on a day-to-day basis, a level on the rise (68% in 2022). The elderly are the most frequent users (77%), followed by the people aged under 35 (73%). Cash is extensively used to pay in small shops for donations and charity. Paying in cash in supermarkets in on the rise, especially among younger people, a trend possibly explained by the high level of inflation (as cash allows to better visualize one’s spending.

Cash inspires confidence and consequently, French people do not want to see it disappear. The idea of a cashless world is met with rejection and 83% of the French population are worried about the possibility of cash disappearing (versus 81% in 2022). Even among people who prefer to pay digitally, a vast majority (72%) is concerned about the disappearance of coins and notes.

Read more: https://cashessentials.org/france-cash-counts/

August: Paris 2024 Olympics: no Competition for Visa

Given the size, scope and duration of the event, the Paris Visa-sponsored Olympics represent a unique laboratory for a future without cash. Here are some lessons.

  1. The process is not consumer-driven. It is solely supply-side driven, with Visa willing to pay colossal amounts to be the exclusive payments service provider. There is a similarity with Coca-Cola who is the exclusive provider of beverages at the Olympics.
  2. The monopoly is detrimental to inclusion, both financially but also socially. All consumers cannot be expected to carry a Visa card, even at the Olympics, where one would expect the vast majority of visitors to be fully banked. What about children? Should they carry cards as well? What about the Paralympics? What solutions are available for instance for blind or partially sighted visitors? Or those with limited hand functionality?
  3. By forcing consumers to use their products, Visa is turning them into a commodity with no added-value for the consumer. In an interview with Forbes, the Chief Marketing Officer of Visa, Frank Cooper says “we seek to remove friction from transactions and to open up new opportunities for commerce for more and more people.” Excluding other payment instruments – including cash – achieves just the opposite: it creates barriers to transactions. Like sports, payments should operate in a level playing field.
  4. In Beijing in 2022, Visa faced competition not only from cash but also from the digital yuan. It will be interesting to watch how Visa reacts if other Central Bank Digital Currencies are launched in countries hosting the Olympics.

Read more: https://cashessentials.org/paris-2024-olympics-no-competition-for-visa/

September: the Digital Euro from a Consumer, Retailer and Industry Perspective

A new paper (Godschalk, Krüger and Seitz) concludes that the launch of a digital euro would be complex and expensive and provides no guarantee of adding value to the existing payment systems.

Setting up a subsidised state-backed/public payment system with mandatory acceptance and additional price regulation will lead to imbalances and potential competitive distortions, the effects of which can only be foreseen to a limited extent. Efficient European payment systems used at national or even cross-border European level may be ousted by the “artificial” new state-backed/public competitor. There is a very real risk that a complex system that offers hardly any added value will weaken competitiveness on the European payment market without significantly influencing the position of international systems.

Read more: https://cashessentials.org/publication/the-digital-euro-from-a-consumer-retailer-and-industry-perspective/

October: New Research confirms that Consumers Spend more when using Digital Payments rather than Cash

The “cashless effect” refers to a phenomenon where consumers tend to spend more when using non-cash payment methods instead of cash. This has been a consistent finding over the past 40 years of research. The reason behind this effect is often linked to the “pain of paying” – the psychological discomfort experienced when spending money. When paying with cash, the pain of paying is stronger because the money is physically handed over, making the loss more tangible. In contrast, cashless methods like credit cards or mobile payments reduce this pain, making it easier for consumers to spend more.

Another paper – Money you could Touch: Cash and Psychological Ownership (Jashim Khan and Russel Belk) shows that cash not only influences how much we spend but also fosters a profound sense of psychological ownership that digital payments do not replicate.

Read more: https://cashessentials.org/publication/less-cash-more-splash-a-meta-analysis-on-the-cashless-effect/

November: Resilience and the Cash Infrastructure: The Role of Access, Acceptance, Availability, and Affordability

 A new paper (Roesl G. and Seitz F.) analyzes the role of a well-functioning cash infrastructure for the stabilizing role of cash and the resilience of cash cycles. It highlights the critical role of the 4 A’s – access, availability, acceptance, and affordability – as crucial building blocks of a robust cash infrastructure.

The paper also discusses the public good characteristics of the “institution” cash which should encourage central banks to re-evaluate their position of “neutrality” as a player in the payments market to a more active role. This is usually in line with central bank mandates.

Read more: https://cashessentials.org/publication/resilience-and-the-cash-infrastructure-the-role-of-access-acceptance-availability-and-affordability/

December: Cash vs. Gifts: The Ultimate Christmas Showdown

The perennial dilemma reappears every year: gift or cash? Economic utility vs sentimental value: it’s a debate as old as time.

Economists often advocate for cash gifts. Why? Because cash provides maximum utility. In layman’s terms, it lets the recipient buy whatever tickles their fancy, be it a new gadget, a cozy jumper, or a lifetime supply of eggnog. It’s the gift that says, “I care about your preferences, but not enough to figure them out myself.”

Despite the economic efficiency of cash, physical gifts carry intangible benefits that cash cannot replicate. Gift-giving serves as a social signal, demonstrating thoughtfulness, effort, and the strength of the relationship between the giver and the recipient. This signaling can enhance social bonds and convey sentiments that cash gifts may not effectively communicate. The Institute of Economic Affairs argues that gifts require the giver to understand the recipient’s preferences, thereby strengthening social ties.

Read more: https://cashessentials.org/cash-vs-gifts-the-ultimate-christmas-showdown/

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