European Payments Council: to Improve the Efficiency of Cash, Recirculate
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The European Payments Council recognizes the importance of ensuring access to cashMoney in physical form such as banknotes and coins. More which is essential to 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, as expressed in the Payments Service Directive which promotes access of all to a paymentA transfer of funds which discharges an obligation on the part of a payer vis-à-vis a payee. More account and a minimum set of payment instruments including a cash withdrawal card. In order to ensure access to cash in a convenient and affordable way, participants in the cash value chain pursue two main complementary strategies:
- Shortening and thus optimising 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
- Reducing manual handling and any redundant processes.
RecirculationThe right to recirculate banknotes that have been checked for authenticity and sorted for fitness by banks and cash-in-transit companies. The right is normally based on rigorous rules established by the central bank. More can be defined as the process to put again in circulation banknotes received from the public (consumers, retailers, or others) without handing over these banknotes to a national central bank.
A number of contextual factors also support the development of recirculation:
- The reduction of national central bank branches and the shortening of opening hours
- The reduction of bank branches and ATMs
- Increasing environmental concerns should limit transportation
- The emergence of new players such as independent ATM networks
- Recirculation also contributes to business continuity of the cash cycle
A 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 facility is a service whereby the customer pays electronically a higher amount to the retailer then the value of the purchase for goods and/or services and receives the difference back in cash.
Recirculation can take place at several locations:
- At the bank branch
- At an ATM with a recirculation function
- In a commercial cash centreProcessing centre for large volumes of cash, often in facilities that have special security and logistic characteristics. Cash centres can be operated by a central bank or a commercial entity (usually bank or a cash-in-transit company). More operated by a bank or cash-management company
- At a merchant via cashback or 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 services.
In 2016, national central banksIn general, the expression refers to the central banks of different countries. More within the 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 area checked for fitness and authenticityThe condition that a security element of a banknote or security document is genuine. More 32.3 billion notes whereas credit institutions and cash management companiesCompanies specialized in the logistical handling of cash including several of the following operations: transportation, storage, counting and processing, packaging, replenishment and servicing of ATMs. See Cash-in-Transit. More checked 33 billion notes. For the first time, recirculation has overtaken central bank processing.
Cash-in-shop, also referred to as a “virtual ATM” is an example of a new cash recirculationThe right to recirculate banknotes that have been checked for authenticity and sorted for fitness by banks and cash-in-transit companies. The right is normally based on rigorous rules established by the central bank. See also Recirculation. More method allowing a customer to withdraw cash from their payment account using a mobile application at a participating shop.
The report highlights that there are significant national differences in the organisation of the cash cycle and that there is no “one-size-fits-all” solution. Nonetheless, in spite of a European regulatory framework for recirculation there are still a number of distinct national dispositions that hinder recirculation and the EPC calls for more convergence of national cash cycles, in particular to reduce differences of treatment within the Single Market. Several examples illustrate how recirculation could be further developed; they include:
- The implementation of Balance SheetA piece of paper or substrate of 800 mm by 700 mm, on which banknotes are printed. The “sheet to sheet” printing technique is the most widely used in printing of banknotes, but the roller printing technique also exists. More Relief Mechanisms or Notes Held To Orderfacilities whereby central banks store cash in commercial cash centres.
- The EurosystemThe Eurosystem comprises the European Central Bank and the national central banks of those countries that have adopted the euro. More could delegate level 3 authenticationThe process of proving that a banknote or security document is genuine. More of banknotes to cash managementManagement and control of cash in circulation. More companies under the supervision of the ECB
- Retailers should be authorised to replenish ATMs, under specific security requirements and regulations.
- Experiments whereby smaller retailers would deposit cash at large retailersshould be carried out.
- A “smart national location policy” taking into account security aspects should be able to optimise the cash access and deposit infrastructure, in line with the requirements of the public.
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