Currency New asked a cross-section of cash experts from different parts of the cash cycle (and the world) to consider the challenges of 2019 and the priorities for 2020, with each facing the implications and realities of changing usage. Here is the interview with Franz Seitz, Professor at the Ostbayerische Technische Hochschule in Germany, and member of the CashEssentials Steering Committee. This article was first published in Currency News Volume 18 – n° 1 January 2020.
Franz Seitz will be presenting at the next Future of Cash Conference in Madrid.
During 2019, I carried out a wide range of research looking at key topics affecting cash, the impact of less cash, cash and the shadow economy, cash and negative interest rates and non-transactional demand for cash.
Less cash will have a negative impact for financial systems
The conclusions largely challenge the accepted wisdom. For example, less cash will have a negative impact for financial systems whilst increasing risks in the event of a financial crisis.
The evidence for cash driving the shadow or black economy are hard to establish. When you study its growth and evolution, it is not clearly linked to increases in the level of cash in circulation.
The existence of cash means central banks cannot introduce negative interest rates, and I have shown that introducing negative interest rates would have negative repercussions on the economy.
In 2020, my research will focus on cash usage in different countries in Europe, particularly the Eurosystem compared with Switzerland and Sweden, the relationship between less cash in circulation, the potential public demand for Central Bank Digital Currencies and the cost of different payment media from a consumer perspective.
Key challenges for 2020: availability and acceptance
The key challenges facing the future of cash are how to make cash available and the acceptance of cash and the impact of less cash on both payment networks and society.
My research shows that cash will decline if it is not made available and it is not accepted. Central bank policies are, therefore, important for the future of cash. When one considers the disadvantages of a cashless society for the economy as a whole, can central banks really continue their policy of being neutral on payment methods?
Cash usage in transactions is likely to reduce, but cash will survive because there will continue to be demand from at least a proportion of consumers who, in particular, will use it as a store of value.
But the public is unaware of the risks and consequences of less cash. It is important to have an efficient mix of payment options and to lose cash would be a serious development with negative and unintended as well as unexpected consequences.