Currency News 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 Steve Gordon, from Te Pūtea Matua, the Reserve Bank of New Zealand . This article was first published in Currency News Volume 18 – n° 1 January 2020.
The RBNZ will be presenting at the next Future of Cash Conference in Madrid In October.
Scoping the dynamics of cash use
December 2019 saw the Reserve Bank of New Zealand’s (RBNZ) Future of Cash programme close out three years’ of investigation and scoping of the dynamics in cash use, risks to the system and society, and broad options to help transition to a society with less cash.
Over the past three years the programme has built up a compelling picture of the challenges that the falling transactional use of cash are providing to the banking system and customers alike. 2020 will be a year of confirming new directions and taking significant strides to address these challenges.
The New Zealand approach during 2019 included the establishment of an ongoing work programme with the central bank’s onshore wholesale cash customers; a re-run of a statistically robust cash use survey previously run in 2017; two rounds of public consultation to confirm issues and receive feedback on some proposed changes to the Bank’s legislative mandate; consultation with stakeholder organisations across the public, private and voluntary sectors; a news and social media programme; and direct engagement with potentially affected communities.
The first months of 2020 will see the RBNZ and the government consider and make decisions with potentially significant implications for the Kiwi cash system.
A key decision for us is the extent of change we are prepared to seek in relation to our own operational arrangements.
Currently our primary vaulting and processing site is in Wellington which is a remote location in relation to where most cash is used, in the upper North Island. There is potential for new commercial and logistical arrangements which promote greater resilience and efficiency by keeping surplus cash closer to markets, and help cut down environmental impacts from cash movements.
Our Future of Cash team has been struck by both the strong similarities and subtle differences between different jurisdictions’ experiences and responses to the cash conundrums. We really appreciate the willingness and help received from colleague central banks to share information and experiences. In terms of exemplars, we have looked most to the UK, Norway and Sweden as nations where the issues and approach have most resonance with our banking system, social issues, scale and size.
A new stewardship role for the cash system
The Bank has yet to publicly confirm how far it wants to push for legislative change to support the cash system. In late 2019 it sought feedback on proposals for it to be given a wider legislative mandate, including a stewardship role for the cash system with associated information gathering powers, an authenticity and quality checking standards-setting power for ATMs and other cash handling equipment that can return cash to customers, and the ‘back pocket’ power to require banks to continue to provide cash services similar to what is emerging in Sweden.
The final decisions on these matters will rest with the government, but we will keep on working with the banks and other cash system participants to improve the system’s efficiency and resilience, while keeping users’ needs in mind.
Focus areas agreed with the banks last year include ongoing system monitoring, system- level resilience, risk and business continuity management, and authenticity and quality management for cash-in-circulation.
We believe that cash has a future
We are doing all this because we believe that cash has a future, and the work we are doing should help ensure this. However, we also need to be monitoring and influencing developments in fintech and other aspects of the payments systems which have the potential to benefit current cash users – particularly if they can replicate some of the features and benefits over which cash generally has a monopoly.
These features and benefits include options for freedom, autonomy and privacy in transacting; the ‘always works’ aspect of cash, including its role as a back-up to other payments options; and helping ensure social and economic inclusion for people who are less connected to the digital and financial worlds.