Mitch Cohen, Chief Security Officer, eCurrency
In the shadows of the Acropolis, over 100 participants, from 21 countries and 28 Central Banks and commercial banks met with suppliers of the paper note and coin industry. eCurrency was invited to speak at the Future of Cash conference in Athens, Greece in February. The conference targets the cash industry, including printing companies, minting companies, cash logistics companies, along with the central banks and commercial banks that rely on these technologies.
(Photo: Mitch Cohen, CSO, presenting eCurrency solution)
Conference Director, John Winchcombe, spoke about the war on cash and why digitization was a threat to paper money. “People need urgently to wake-up to the implications of the disappearance of cash as society faces the ‘dangers’ of a cashless world,” he said. He further argued that cash use is actually increasing not decreasing. But, the data and anecdotes presented by the many conference
speakers provided a different view.
Yes, the amount of cash is increasing. However, its use is shifting from transactions to storage, or hoarding of cash. Doris Schneeberger of the European Central Bank found that 45% of Euros were used for domestic storage of value, 30% for stored value outside of Europe and only 25% for transactions. Jan Bindnerkamp of De Nederlands Bank reported that the percentage of transactions that used paper money had decreased from 75% to 40% over the last ten years. Several countries reported a shift to larger notes typically used for storing value rather than transactions. And there are signs of decreasing numbers of ATMs. So, while there is an increase in cash in circulation, digitization is still the prominent trend.
As the use of paper money in transactions decreases, so does the use of ATMs, the ROI for the banks, and therefore the number of ATMs. The topic of this last mile problem for cash was thematic of several presentations. A reduction in ATMs itself threatens to further reduce financial inclusion and drive the cost per cash transaction even higher.
The paper money industry is responding in several ways including white labeling ATMs, nationalizing ATM’s, and creating services that allow the public to use a smartphone app to withdraw cash from a local retailer with extra cash on hand.
Another trend noted in the conference was the increase of smart safes which scan bank to automate counting, fitness checking and support remote tracking.
In other words, the industry is working to reduce the friction of paper money to compete with digital money. In doing so, the industry is also removing the strongest argument for the protection of paper cash. It was argued that paper money would be necessary when power and networks fail. Yet, the distribution of paper money is becoming increasingly dependent on the same power and data networks.
Schneeberger also pointed out that the increased digitization of paper money handling technologies obstructs the introduction of new, more secure paper notes.
In his presentation and panel discussion, Mitch Cohen, Chief Security Office of eCurrency, explained that CBDCs do not necessitate the elimination of paper money. It is not an either-or proposition. Both will exist for years to come. He also pointed out that, like it or not, consumers are moving more and more transactions to private electronic money operators. A well designed CBDC solution will allow consumers to continue to use electronic money operators of their choice but those systems will transact in CBDC. In this way, the Central Banks can continue to fulfil their mandates, even as transactions in paper money decline.