“When people lose the ability to transact, when they don’t have a means of exchangeThe Eurosystem comprises the European Central Bank and the national central banks of those countries that have adopted the euro. More, then social cohesion is very quickly challenged. There’s nothing more distressing than seeing a café serving hot coffee beside a bank whose ATM doesn’t work – one had a generator.” – Adrian Orr, RBNZ’s governor.
On February 13 and 14, Cyclone Gabrielle hit New Zealand, leaving at least 11 people dead, displacing thousands, and cutting power to 225,000 residents. ATMs in many towns went down.
Cash industry incumbents, including the Reserve BankSee Central bank. More of New Zealand – Te Pūtea Matua (RBNZ), commercial banks, cash service and security companies, ATM providers, and maintenance firms, worked to restore cash services.
In 2020, the RBNZ established a new department to protect the role of cash in payments and plan for the future of money in New Zealand. The Money and Cash Department (Tari Moni Whai Take) develops guidelines for the RBNZ’s work in money and cash, investigates the role of a central bank digital currency (CBDC)A digital payment instrument, denominated in the national unit of account, and a direct liability of the central bank, like banknotes. A general purpose CBDC can be used by the public for day-to-day payments like cash. More and digital private currencies, and improves the efficiency and sustainability of the cash system.
According to the RBNZ’s Future of Money – Cash System Redesign issues paperSee Banknote paper. More (2022: 25, 55),
Graph 1. New Zealand: Cash in the Hands of the Public, 1995-2021 (2017 prices, NZD per person).
The use of cash in retail payments has declined steadily since 2007, per N.Z.’s Household Economic Surveys (see Graph 2). The share of cash in household payments declined 56% between 2007 and 2019 (RBNZ 2022: 23).
Graph 2. New Zealand: Use of Cash in Household Payments, 2022
Per the RNBZ (2022: 11-12), there is a significant mismatch between sources and recipients of cash in New Zealand (see Graph 3, panels A and B). Bank ATMs and merchants are the primary sources of cash, with 56% and 34% of cash withdrawals respectively; bank branches are the leading recipients of cash, with 50% of all cash deposits.
Graph 3. New Zealand: Sources and Recipients of Cash, 2022
New Zealand’s banking and cash infrastructure has declined since the mid-2010s. ATMs and branches for the five major banks have reduced markedly since 2017 (see Graph 4). These banks have closed 42.3% of branches and 9.6% of ATMs since 2017 (RBNZ 2022: 13, 24).
Independent ATMs have increased in rural communities lacking back branches. In 2020, six banks launched regional banking hub pilots in four towns: Opunake, Twizel, Martinborough, and Stoke.
Graph 4. New Zealand: Top Five Banks’ Branches and ATMs, 2011-2022
In a November 2022 speech, 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.” Silk added:
“This could include supporting merchants:
- to recycle cash at point-of-sale,
- by remunerating them for cash out services,
- by facilitating frequent, affordable cash delivery and collection for merchants,
- through consolidation within the cash system with the creation of utility entities.”
The RBNZ estimates New Zealand’s cash system annual costs at NZD600-900 million (see Table 1 and Graph 5). Most charges accrue to merchants accepting and dispensing cash (NZD415-625 million), followed by banks, cash-in-transit companies (CIT), and the Reserve Bank storing, processing, and distributing cash (NZD165-255 million).
Table 1. New Zealand: Cash System Costs, 2022
Cuadro 1. Nueva Zelandia: Costos del sistema de efectivo, 2022
Graph 5. New Zealand: Cash System’s Costs Allocation, 2022
“Any reduction in the availability of cash and branch closures will impact certain pockets of society more than others. It is important that financial institutions maintain a strong focus on financial inclusion, finding ways to service and support those less able to access the electronic channels.” – Geoff Bascand, RBNZ’s deputy governor.
While New Zealand has achieved high levels of financial inclusion, cash remains critical for people living with illness, those going through stressful life events (“including but not limited to natural disaster and pandemics, and family breakdowns”), seniors, people recently released from prison, and those requiring transitional housing (RBNZ 2022: 60-62).
Low-income households, those receiving government support, or those identifying as Pacific people or as Māori tend to rely heavily on cash (RBNZ 2022: 26-27, 66-68):
While a reliable cash system increases the resilience of New Zealand to climate changeThis is the action by which certain banknotes and/or coins are exchanged for the same amount in banknotes/coins of a different face value, or unit value. See Exchange. More, a shrinking cash infrastructure increases its vulnerability: