A Global Update on Cash Demand in Turbulent Times.

by Antti Heinonen

The paradoxical development of the two motives to use cash – the decline in its usage in payments accompanied by the growth in its holdings – has been evident for a number of years, but the Covid-19 pandemic has accelerated this trend. Several payment studies confirmed the increase in online shopping and the growing use of contactless and mobile payments media in 2020, resulting in a significant decrease in the use of cash in transactions. At the same time, precautionary demand for cash grew, as is typical in times of uncertainty. In 2020, the use of cash as a store of value reached record growth rates, even exceeding those of the 2008 financial crisis.
When the pandemic eased its grip towards the end of 2021, a kind of return to a new normal was visible in cash demand. However, the events since then have shown this to be only temporary. Not only have the lockdowns during the pandemic disrupted global supply chains, but the shocking Russian invasion to Ukraine has created further uncertainty. Even if the war has hit hardest on the Ukrainian people and infrastructure, its impacts have been felt across the world, besides creating a strong reaction, it has brought about a galloping inflation of food and energy prices.
The presentation will focus first on the development of banknote circulation in value terms in 2021, and address particularly what did happen to the higher-than-normal cash balances accumulated during 2020. Secondly, addressing the development also in volume terms will shed further light on the store of value function of cash. Thirdly, the impacts on cash demand caused by the growing inflation and the geopolitical tensions created by the Russian attack will be assessed by considering the annual growth rates of the banknote demand in June 2022.
The two developments of cash usage going in opposite directions have raised questions within the central bank community on how to ensure the resilience of the cash infrastructure, and the access to and acceptance of cash. A functioning cash infrastructure in normal times is also a prerequisite for its operational capability in a crisis. The developments have also intensified discussion about central bank digital currency (CBDC) as a complementary form of public money. According to the most recent survey of BIS, nine out of 10 central banks in the survey are exploring CBDCs, and more than half are now developing them or running concrete experiments. Against this background the presentation will in conclusion elaborate why the avoidance of deterioration of the cash infrastructure is as important as the development of the CBDC from the point of view of the issuance of public money.

Antti Heinonen

Antti Heinonen has been the chairman of the Banknote Ethics Initiative since its inception in 2013. He was the chairman of the Central Bank Counterfeit Deterrence Group, reporting to G10 Governors, between 2008 and 2012 and the Director, Banknotes at the ECB from 1998 until 2008. He chaired the Banknote Committee of the European System of Central Banks for more than 10 years and the Eurosystem Cash Changeover Co-ordination Committee which had the overall responsibility for the co-ordination of the euro cash changeover in 2002. Prior to joining the ECB he was the chief cashier for the Bank of Finland. He holds degrees in economics and mathematics from the University of Helsinki, and has written several books on banknotes and their history.

The European Retail Payments Board Report on access to and acceptance of cash

by Diederik Bruggink

At the end of 2020 the Euro Retail Payments Board (ERPB) agreed to set up a working group on access to and acceptance of cash in the euro area. The working group was tasked to conduct a stock taking exercise of various ongoing initiatives by relevant stakeholders and to identify gaps not yet addressed and deserving further investigations. Diederik Bruggink, who was co-chair of this working group, will present the findings of this report.

Diederik Bruggink

Diederik Bruggink works at the European Savings and Retail Banking Group (ESBG where he is responsible for all payments topics worldwide. In that role, he also advocates the associations’ positions on payments with policymakers, regulators, standardisation bodies, industry associations, and enabling a constant member dialogue on developments, with a particular focus on innovation. He is also chair of the Cash Efficiency Working Group of the European Payments Council (EPC) and he was co-chair of the Euro Retail Payments Board (ERPB) working group on access to and acceptance of cash.

The Cash Industry Environmental Charter: Towards a Greener Cash Cycle.

by Leeann Shanks

NatWest is one of four organisations within the UK – and the only bank – operating within the Note Circulation Scheme on behalf of the Bank of England. NatWest Group is responsible for processing a significant proportion of the UK’s cash. In recent years, it has established a number of pilot schemes to mitigate the climate impact of cash, including the reduction of single use plastic.

NatWest Group has then led the UK Cash Industry to collaborate to deliver a sustainable future for cash, both financially and environmentally by creating the UK Cash Environmental Charter. As a founding signatory of the Charter NatWest has played a pivotal role in the delivery of transitional programmes of work with a continued focus on the reduction of single use plastic. Leeann will talk through the thought process to the creation of the Charter and what NatWest is doing to achieve the targets agreed.

Leeann Shanks

Leeann Shanks has a wholesale banking career spanning 22 years. During this time Leeann has worked in a variety of disciplines such as the Cash, Payments, Commercial Cards, Corporate, Commercial and Retail Banking. Leeann has a passion for the environment is currently leading the sustainability programme within NatWest’s Cash, Coin and Self-Serve Business, reducing the carbon footprint of operation’s and driving the strategic themes forward. Leeann also works closely with UK Cash Industry partners to continue the transition to a more sustainable UK Cash Cycle.

How BdE is addressing the environmental sustainability of cash.

by Carlos Gonzalez

Central banks have a great opportunity to steer and reduce the environmental impact of all the activities that are under their control and responsibility. Cash activity is probably the only core activity conducted by central banks that can be considered as an industrial one and so, its environmental impact has to be managed accordingly.
But each cash cycle has different participants, regulations and peculiarities. Banco the España is facing this challenge in a structured, global and comprehensive way, taking into account the different steps of the cash cycle in Spain, from cradle to grave, and also adapting its cash environmental strategy to the latest social and legal requirements.

Carlos Gonzalez

Carlos joined the Banco de España in 2003. Since then he has been working in cash areas, assuming different responsibilities in the definition and implementation of cash projects and policies, cash circulation analysis, banknote production issues, security and environmental topics related with the euro banknotes. He has represented the Banco de España in different groups depending on the Banknote Committee of the Eurosystem. During this period, he also worked at the Directorate of Banknotes of the ECB. He has a degree in Economics (University of Alicante), an Executive-MBA (Comillas Pontifical University-ICADE) and a Diploma in European Business (University of Northampton).