Cash here to stay, at least as a store of value

Participants in a discussion on access to cash on June 13 expected cash to remain part of payments. However, declining cash use would make it harder for the private sector to support cash services.

The discussion was part of a panel on access-to-cash policies at the Central Banking Summer Meetings in London.

Cash use in payments varied widely among the three European countries represented. In one Nordic country, cash use is minimal. In another western European country, cash is still used for 15% of transactions. The central European country on the panel reported 62% of payments in that country were in cash.

Almost everyone present believed that cash would still be in use in 2040. Although cash may become less common as a payment method, it remains a popular store of value. “The functional role [of cash] is declining”, but “the precautionary role is increasing”, one panellist said.

For many people, the immediate liquidity of cash stocks is more valuable than any interest payments on bank deposits, they added.

Another participant from a western hemisphere central bank said cash “gives [consumers] a sense of security”, especially in environments where natural disasters are common. However, another participant noted demonetisation of older banknote issues may make cash less attractive as a store of value.

Two of the three panellists said that cash in circulation exceeded 10% of their total GDP, but the third – from the country with low cash use – said cash levels had fallen to less than 1% of GDP.

One panellist, from a western European central bank, quipped: “Everyone wants cash to be around, but no one wants to pay for it.” Many central banks outsource cash distribution, but if cash circulates less, these services cease to be profitable.

If cash becomes more of a welfare or emergency service, then there may be debates in the future about whether cash distribution should remain – or be taken back into – the public sector, participants said.

Some panellists said it is difficult to get commercial banks to provide expensive cash processing and distribution services. The panellist from central Europe said their country has lost one-fifth of its ATMs in recent years.

In Central Banking’s Currency Benchmarks 2022, 19 of 31 responding central banks had policies to guarantee public access to cash. Thirteen required commercial banks to provide minimum service levels.