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Nurturing a healthy future for cash

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5 Mins.

The unique role that cash plays in economies is immutable. Consumer demand for the option to pay in cash is one key reason – but so too are national security considerations such as ensuring a resilient payment option in the face of a national crisis or cyber-attacks, as well as the wider social objective of inclusion for people who remain under-banked and outside the financial system. Reflecting that imperative, central banks and other key players across the currency ecosystem are taking decisive steps to ensure that cash remains a vital part of economies.

Rapid technology advances continue to expand the wealth of digital and card payment options open to consumers and businesses. Despite their widely appreciated advantages, people in most countries remain wedded to cash.

Around 60% of consumers in the euro area, for example, say they value the option of using cash as “very or fairly important” – something that shows in their spending habits: cash is still the most frequently used method of payment at the point of sale, changing hands in 59% of transactions.1 Consumers consistently say that they count on cash’s widespread acceptability, ease of use, security features, and transaction anonymity. Cash also provides individuals and households – and even some businesses – with a clear overview of their expenditure.

Cash has resilience as a payment mechanism during crises, whether these are man-made or natural. There were widespread payment system failures globally, for example, as a result of the Microsoft outage in July 2024. And natural disasters, such as hurricanes and earthquakes, can knock out important parts of the payments infrastructure.

Social inclusion is another compelling reason to retain cash as part of the payments ecosystem. In the US, data from the Federal Deposit Insurance Corporation2 shows that around 4.5% of US households (or approximately six million households) lack an account with any bank or credit union, and Black and Hispanic households are more than twice as likely as their white counterparts to be unbanked.

Action to safeguard the role of cash

Governments, central banks, cash industry players, and currency and payments think tanks around the world have been taking action to highlight and preserve the central place of cash as both a means of payment and a store of value. These efforts can be clustered into four types of activity: legislative, infrastructure support, research, and communications.

Hand holding various euro banknotes

1. The legislative imperative

Many countries have legislation in place covering the use of cash, but the requirement to accept it as legal tender often has loopholes that pre-date today’s payment systems and related practices. Countries and state groupings such as the EU are moving to close loopholes and put the “right to use cash” on a stronger legal footing.

In 2023, Slovakia amended its constitution to give citizens a right to pay in cash, while in May 2024 Norway introduced legislation to strengthen existing rights to make cash payments. Sweden introduced a law in 2021 requiring banks to provide cash services, and since then Sweden’s central bank has, in legislation, called for “urgent” strengthening of cash as a payment means, inspired by the threat of potential cyber-attacks following its joining of NATO.

The introduction and enforcement of legislation protecting the right to pay with cash is not limited to Europe. The People’s Bank of China has repeatedly taken action against merchants and institutions who refuse cash. It has launched several nationwide campaigns on the issue and recently fined a branch of KFC and other businesses for refusing to take cash.3 It has particular concerns about the exclusion of the country’s vast elderly population, many of whom are less digitally literate.

2. Support for the cash infrastructure

For cash to remain a meaningful part of an economy, people need to be able to withdraw from and pay into accounts in local communities. As traditional bank branch networks decline in size, efforts need to be made to put alternative arrangements in place.

In some countries, retail financial institutions have come together to share the costs of maintaining an ATM network. In Belgium and the Netherlands, the main high-street banks have created a shared, independent ATM infrastructure that can operate independently of any single bank’s network.

In other countries, more emphasis is placed on using the post office branch network – at least for straightforward financial transactions. The idea is that communities whose size may not support a bank branch will often have a local post office which can be used for simple banking. Globally, according to research by the UN’s Universal Postal Union, 80% of post office branches worldwide are in rural areas.4

Facts & figures

0%

Point-of-sale transactions involving cash

(ECB, 2002 survey)

0%

Number of unbanked US households

(Federal Deposit Insurance Corporation, 2021)

3. Research: understanding the evolving cash economy

Governments and central banks must act differently if they are going to intervene effectively in support of cash. Institutions such as the Federal Reserve of Australia publish overviews5 of cash use, legislatures publish research briefings on key metrics relating to cash, and there are numerous published reports into cash infrastructure such as the distributions of bank branches and ATMs. This can take the form of whole population-level access or specific groups who may be at risk of exclusion, such as the Bank of Canada’s analysis6 of the country’s First Nations’ access to cash.

This research provides crucial intelligence to inform both practical and policy responses to threats to the availability of cash. Research into access to cash has informed the development of concepts of minimum acceptable distances to access an ATM or branch. The Eurosystem is developing “a wide range of analytical tools to define, measure, and assess access to cash … paying close attention to developments … in economies where cash use has declined markedly and some parts of the cash infrastructure have deteriorated.”7 There is no doubt that this information will drive agreements (voluntary or otherwise) between financial players to ensure that vital infrastructure remains in place.

Hands holding euro banknotes.

4. Educating and communicating on the sustained value of cash

The ongoing resilience of cash is a story that often gets overlooked amidst hype about digital payments and currencies. However, serious players are making real efforts to redress this lopsided narrative.

Think tanks, such as Cash Essentials, publish whitepapers and influential analyses on the future role of cash.8 These contribute to the quality of debate between central banks, policy-makers, and legislators about the different purposes that cash serves in 21st-century economies.

Some central banks have also undertaken public communications campaigns to highlight the importance of not over-relying on the availability of digital payments. In 2022, the Austrian National Bank launched the Euro Cash 360° Platform together with the Austrian Mint, consumer organizations, employee representatives, the Senior Citizens Council, and the Association of Municipalities to promote cash.

As those four areas of activity highlight, the ongoing importance of cash for economies and for society is increasingly being widely recognized. Moves to safeguard the role of cash going into the future are being put in place. This is especially true in countries where digitalized payments already constitute a large proportion of transactions, and the limitations and risks of a digital-only economy have become all-too apparent.

Key takeaways

  • Protecting cash as a payment option requires action by governments and central banks.
  • The infrastructure required to support cash in the economy needs to be monitored.
  • Bank branch closures means that new approaches to accessing cash have to be explored, particularly in rural areas.
  • Information on the crucial role cash plays is starting to counter the narrative about the digitalization of payments.
  1. Study on the payment attitudes of consumers in the euro area (SPACE) – European Central Bank, 2022

  2. National Survey of Unbanked and Underbanked Households, Federal Deposit Insurance Corporation, 2021

  3. China Fines KFC and Other Businesses for Rejecting Cash Payments, Caixing Global, 2024

  4. Global Panorama on Postal Financial Inclusion, Universal Postal Union, 2023

  5. The Cash-use Cycle in Australia, Reserve Bank of Australia, March 2023

  6. An Exploration of First Nations Reserves and Access to Cash, Bank of Canada, August 2021

  7. Guaranteeing freedom of payment choice: access to cash in the euro area, European Central Bank, 2022

  8. Cash is more than a public good, Cash Essentials, March 2024

Published: 08/10/2024

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