Bundesbank symposium: Cash still has a valid role to play

16.06.2023 DE

Bundesbank President Joachim Nagel is expecting to see a further decline in the use of cash at the point of sale. Recent analyses indicate that the trend towards cashless payments will continue, but not at the same pace as during the pandemic, he said in a video message at the “Ensuring the supply of cash – including in times of crisis” symposium in Berlin. Even so, he added, cash is deeply embedded in our everyday lives.

Digital euro would have much the same characteristics and benefits as cash

That is mainly due to the characteristics that are unique to cash, Mr Nagel said. Cash, he explained, boasts a combination of characteristics that set it apart from other means of payment. One unique feature is that cash is the only way so far for private individuals to hold central bank money. All other types of money are issued by the private sector. Another is that cash is inclusive and enables every member of society to participate in the money cycle and economic life, no matter whether they bank online or have an account. For children, especially, cash can make it easier to learn how to handle money responsibly. Adults appreciate the privacy guaranteed by cash and the better overview it provides of their spending behaviour.

And that means [cash] chimes with what consumers want, in many respects, the Bundesbank President argued. The Bundesbank and the Eurosystem are therefore committed to ensuring that euro cash will remain available in the future as a means of payment and a store of value. That commitment to cash is not at odds with the considerations on introducing a digital euro. A digital euro would have much the same characteristics and benefits as cash – only in digital form, Mr Nagel observed.

Balz: A national cash forum – that’s my personal goal

Bundesbank Executive Board member Burkhard Balz spoke in his remarks about the prominent role that cash plays in emergencies and crises. It seems unrealistic that cash will be replaced outright by electronic payment instruments in a crisis event, he said. All the more so given that not every member of the general public is familiar with electronic means of payment and not all retailers have electronic payment terminals. Cash still has a valid role to play even as payments become increasingly electronic, Mr Balz said. What is more, people tend to hoard cash for precautionary reasons in times of crisis, he noted, citing as an example the significant uptick in demand for banknotes and coins in the euro area, and also in Germany, during the coronavirus pandemic in particular. Similar developments play out in other crises and also outside the euro area, he remarked. This, he reasoned, explains the paradoxical observation that cash is in growing demand even though it is being used less.

Given the crises all around us, it is therefore all the more important for us to consider how we can maintain the cash supply even under adverse circumstances, Mr Balz added. To address this challenge, he said, it is crucial that all cash handlers are able to act swiftly, crisis routines have been readied, and mutual lines of communication can be counted on at all times even in the event of technical outages. In addition to the Bundesbank, the cash handler community mainly comprises banks, cash-in-transit companies and ATM network operators. Mr Balz said he regards a national cash forum as his personal goal for further stepping up and institutionalising dialogue and interaction within that community. Being a market-neutral player with a legal mandate, the Bundesbank is an ideal candidate for the role of initiator and coordinator in a forum of that kind, the Bundesbank Executive Board member argued.

Other panel discussions

The symposium was aimed at participants from the worlds of business, academia, politics and public administration. In addition to speeches and presentations, the programme featured a number of panel discussions. One such panel saw representatives from various European central banks discuss the current state of their contingency and crisis planning arrangements. For instance, the Oesterreichische Zentralbank (OeNB) advises households to stow away a certain amount of cash as a way of planning ahead for a potential crisis, the OeNB’s Stefan Varga reported. Professor Franz Seitz from Weiden Business School and Professor Gerhard Rösl from OTH Regensburg also advocated the role that cash plays in a crisis situation. For Franz Seitz, cash is a pillar of successful crisis policy.