The Future of Cash Beyond Corona · ‘using-the-future’, more ‘futures literate’, becauseof twofacts. One isthatthe future doesnot yetexist, itcanonlybeimagined. Twoisthathumanshave

The Future of CashBeyond Corona

Webinar – 19 May 2020

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CashEssentials is as an independent initiative, which aims at offering a platform for debate about the payments and monetary ecosystems, to

conduct and foster high-quality research on cash and its future.

Understanding

CashUsageby

GuillaumeLepecqand

FranzSeitz

www.cashessentials.org September 2019

The Evolution of Cash is not Linear

Source: Jobst C, And Stix H, The cash comeback: Evidence and possible explanations

Cash in Circulation/Nominal GDP

5

Forget Forecasting – Let’s Become Futures LiterateFutures literacy is a capability. It is the skill that allows people to better understand the role that the future plays in what they see and do. People can become more skilled at ‘using-the-future’, more ‘futures literate’, because of two facts. One is that the future does not yet exist, it can only be imagined. Two is that humans have the ability to imagine. As a result, humans are able to learn to imagine the future for differentreasons and in different ways. Thereby becoming more ‘futures literate’.

Our PanelHead of Innovation and Payments, European Savings and Retail Banking Group.

Chairman, Banknote Ethics Initiative; Former Head of Banknotes, EuropeanCentral Bank

Economist, Weiden TechnicalUniversity of Applied Science

Senior Consultant, Demos Helsinki

Diederik Bruggink Antti Heinonen

Petteri Lillberg Franz Seitz

7

Agenda

Introducing Futures LiteracyFive tensions in the new world

Petteri Lillberg

What will drive the future of cash in the nextdecade?

Diederik BrugginkAntti HeinonenFranz Seitz

A Futures Table – An example Petteri Lillberg

Q & A All

Conclusion Guillaume Lepecq


Petteri Lillberg

Petteri Lillberg is a Senior Consultant at Demos Helsinki, focusing on strategy, foresight and societal impact across industries and organisations.A noted columnist and international speaker, Petteri holds an M.Phil from Cambridge University. He also serves at the board of Unicef Finland.

Demos Helsinki is an independent think tank, working together with the public sector, private sector, and NGOs. We want to impact the ongoing global transformations actively and aim to build sustainable and fair post-industrial societies.

9

Why Futures Literacy?

1. If no representations about future exist, then there would be only reactions ratherthan actions

2. We think about the future so that we can make sense of it and make betterdecisions in the present moment.

3. There is no single future, but instead a large number of possible futures to navigateamong. Engaging in Futures Literacy helps to identify which of them are possible, probable and desirable and create own agency.

A futures table is a tool for imagining radical futuresand exploring the largest uncertainties.

A Futures table is a precisely defined frameworkabout the future. It´s a framework which containsthe most important aspects of change.

It is on purpose polarised to allow discussingmeaningful alternative development directions. Byshowing them we can identify our own agency increating a desired futures.

The key tool for today

Futures table shows key tensions that reveal alternative

development directions

VARIABLE 1 VARIABLE 2 VARIABLE 3 VARIABLE 4

VALUE A VALUE A VALUE A VALUE A

VALUE B VALUE B VALUE B VALUE B

VALUE C VALUE C VALUE C VALUE C

5 key tensions

We cannot know how these tensions will develop in the future, but we can imagine radically opposing outcomes and increase our understanding what kinds of futures the different combinations of outcomes create, and what are the choices we can make.

Sustainability and Inclusion

Economic growth

vs.

Planetary boundaries

Economy

Recovery led by national regimes

vs.

Regional and global institutions

Technology

Digital platforms and data as public policy tools

vs. Platforms and data as commercial, privately-held domains

Money

Centrally issued and diversified means of payment

vs. Privately issued and fragmented means of payment

Society

Surveillance

vs.

Right to anonymity

Head of Innovation and Payments, European Savings and Retail Banking Group.

Diederik Bruggink

Diederik Bruggink holds responsibility at the twosavings and retail banking associations for all innovation and payments topics from a worldwideperspective. In that role, he analyses the multiple dimensions of the payments market, proposing and assisting in agreeing member positions with respect to their payments’ and related businesses. He alsoadvocates the associations’ positions on paymentswith policymakers, regulators, standardisation bodies, industry associations, and enabling a constant member dialogue on developments, with a particular focus on innovation. He is one of the key authors of the first three editions of the World Payments Report, makes regular appearances at industry conferences and serves as a member of the editorial board of, and regulator contributor to, the Journal of Payments Strategy & Systems. He is also a Board Member of the European Payments Council (EPC) and within the EPC he is also the Chair of the Cash Efficiency Working Group.

DisclaimerThe views and opinions expressed in this presentation are those of the author and do not necessarily reflect the official policy or position of the ESBG or its Members.

© 2020 – European Savings and Retail Banking Group / BRU

In 2018, nearly 142 billion cashless transactions were made in the EU at a 7,6% CAGR

Source: European Central Bank – Statistical Data Warehouse

13

26,68 28,14 29,62 30,88 32,71

21,67 23,05 23,52 24,84 25,13

3,61 3,32 3,02 2,69 2,40 2,08 2,38 2,83 3,39 4,011,63 1,75 1,72 1,68 1,58

50,34

55,70

62,19

69,15

76,02

0

10.000

20.000

30.000

40.000

50.000

60.000

70.000

80.000

2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018

Credit transfers Direct debits Cheques E-Money Other Cards

Mill

ions

of t

rans

actio

ns(T

otal

s in

char

t are

in b

illio

ns)

Number of Cashless Transactions in Europe (2014-2018)

BE BG CZ DK DE EE IE GR ES FR HR IT CY LV LT LU HU MT NL AT PL PT RO SI SK FI SE UK




14

5,2% 3,8%

17,9%

10,9%

54%

26,68 28,14 29,62 30,88 32,71

21,67 23,05 23,52 24,84 25,13

3,61 3,32 3,02 2,69 2,40 2,08 2,38 2,83 3,39 4,011,63 1,75 1,72 1,68 1,58

50,34

55,70

62,19

69,15

76,02

0

10.000

20.000

30.000

40.000

50.000

60.000

70.000

80.000

2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018


Mill

ions

of t

rans

actio

ns(T

otal

s in

char

t are

in b

illio

ns)


BE BG CZ DK DE EE IE GR ES FR HR IT CY LV LT LU HU MT NL AT PL PT RO SI SK FI SE UK




15

5,4% 3,7%17,9%

11,4%

49%

22,74 24,0925,38 26,62

28,03

18,00 19,14 19,44 20,61 20,78

2,97 2,76 2,54 2,29 2,05 2,08 2,38 2,83 3,39 4,011,63 1,75 1,72 1,68 1,58

34,56

38,42

43,14

48,35

53,24

0

10.000

20.000

30.000

40.000

50.000

60.000

2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018


Mill

ions

of t

rans

actio

ns(T

otal

s in

char

t are

in b

illio

ns)


BE BG CZ DK DE EE IE GR ES FR HR IT CY LV LT LU HU MT NL AT PL PT RO SI SK FI SE


Average number of transactions per person per day, by instrument of payment

Source: ECB Occasional Paper Series, “The use of cash by households in the euro area”, No 201 / November 2017

16

1,7 1,7

1,6

1,5

1,4 1,4 1,4

1,3 1,3 1,3

1,2 1,2

1,1

1 1

0,9

0,8

0,7

0,8

0,5

0,3

0,2 0,2

0,1

0,2

0,3

0,2

0,3 0,3 0,3 0,3

0,6

0,3

0,4

0,2

0,4 0,4

0,5

0,6

0,5

0,0

0,2

0,4

0,6

0,8

1,0

1,2

1,4

1,6

1,8

IT ES GR MT CY PT AT IE SK SI Euro area LU LT LV DE FR SE FI NL EE

Cash Cards


COVID-19 Impact on card transactions

Source: Mastercard International Investor Relations. Note: Growth trends of metrics are versus the comparable year ago period. 17

Cross border volume

-40%-35%-30%-25%-20%-15%-10%

-5%0%5%

10%15%

14/03/202

0

21/03/202

0

28/03/202

0

04/04/202

0

11/04/202

0

18/04/202

0

25/04/202

0

02/05/202

0

Switched volume

Switched volume US Rest of World

-30%-25%-20%

-15%-10%-5%0%

5%10%15%20%

25%

14/03

/2020

21/03

/2020

28/03

/2020

04/04

/2020

11/04

/2020

18/04

/2020

25/04

/2020

02/05

/2020

Switched transactions-60%

-50%

-40%

-30%

-20%

-10%

0%

14/03

/2020

21/03

/2020

28/03

/2020

04/04

/2020

11/04

/2020

18/04

/2020

25/04

/2020

02/05

/2020

Cross border volume


COVID-19 Impact on card transactions

Source: Visa Inc Investor Relations. Note: Growth trends of metrics are versus the comparable year ago period. 18


Poll

• Since the Corona crisis hit your region, has the number of payment transactions (cash and cashless) you personnaly make changed?• During the crisis I made less payment

transactions• During the crisis I made the same number

of payment transactions• During the crisis I made more payment

transactions• n = 183

19

147; 80%

23; 13%

13; 7%


Poll

• Since the Corona crisis hit your region, how has the way you pay personal transactions changed?• During the crisis the share of cash

transactions of total transactions decreased• During the crisis the share of cash

transactions of total transactions remained the same

• During the crisis the share of cash transactions of total transactions increased

• n = 167

20

127; 76%

26; 16%

14; 8%


COVID-19 Payment-related observations

• At announcement of lockdowns: increase in cash withdrawals.• Promotion of cashless payments.• Promotion of contactless payments, increase of contactless limits.• Decrease in cash withdrawals (reports of down to 50% of pre-COVID-19 levels).• Decrease in card transactions (reports of down to 70%-80% of pre-COVID-19

levels).• Shift to remote transactions, chargebacks, refunds.• Impact on customer behavior when restrictions will be relieved yet unclear.

21


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 in 2001 and 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.

Annual growth rates of banknotes in circulation vary significantly

0

10

20

30

40

50

60

- 10 < -10 < -5 -5 < 0 0 < 5 5 < 10 10 < 15 15 < 20 20 < 25 > 25

year 2018

Number of currencies

Annual growth rate of banknote circulation in value terms %

One size does not fit all (even in the future)

0

10

20

30

40

50

60

- 10 < -10 < -5 -5 < 0 0 < 5 5 < 10 10 < 15 15 < 20 20 < 25 > 25

year 2018

year 2016

Number of currencies

Annual growth rate of banknote circulation in value terms %


Franz Seitz

Professor Franz Seitz teaches Economics with a special focus on Monetary Policy and Financial Markets at Weiden Technical University of Applied Sciences. He is author of numerous articles in national and international journals. His main fields of research are monetary theory and policy, financial markets and banking as well as payments markets, especially cash in circulation. For many years now, Professor Seitz is acting as a consultant in different projects for central banks, commercial banks and financial as well as non-financial corporations.

Cash at the POS

Source: ECB (2018)

0

4

8

12

16

20

24

2012 2013 2014 2015 2016 2017 2018 2019

Canada China JapanSweden Switzerland UKUS euro area

Cash relative to GDP (%)Cash relative to GDP (%)

Worldwide, cash in circulation relative to GDP was about 10% in 2018, compared to 8% in 2011!

Source: BIS, National Central Banks

Cash: different motives

outside euro area other euro area countriesstore-of-value transaction balances

5-10%

20-25%

45%

25%

The case of Germany

5-10%

20-25%

45%

25%

The case of Germany§ domestic transaction demand§ availability of alternative means of

payment (payments instruments innovation)

§ hoarding and opportunity-costs

§ mistrust in the financial (banking) system§ size of the shadow economy§ precautionary demand and (financial and

economic) crises related demand§ disasters§ uncertainty§ foreign demand Source: author’s calculations

Head of Innovation and Payments, European Savings and Retail Banking Group.

Diederik Bruggink

Diederik Bruggink holds responsibility at the twosavings and retail banking associations for all innovation and payments topics from a worldwideperspective. In that role, he analyses the multiple dimensions of the payments market, proposing and assisting in agreeing member positions with respect to their payments’ and related businesses. He alsoadvocates the associations’ positions on paymentswith policymakers, regulators, standardisation bodies, industry associations, and enabling a constant member dialogue on developments, with a particular focus on innovation. He is one of the key authors of the first three editions of the World Payments Report, makes regular appearances at industry conferences and serves as a member of the editorial board of, and regulator contributor to, the Journal of Payments Strategy & Systems. He is also a Board Member of the European Payments Council (EPC) and within the EPC he is also the Chair of the Cash Efficiency Working Group.


Instant payments – the new normal?

• As per the Commission, instant payments can assist the ambitions of strengthening the international role of the euro and achieving European sovereignty in payments.• Instant payments launched in 2017, critical mass expected by 2020. Adherence

and Reachability perceived as issues.• In Commission’s view, by the end of 2021 a full rollout of instant payments

should have been established, meaning that from then everyone should be able to use instant payments everywhere and in all situations.• Action Plan on FinTech including a Strategy on an Integrated EU Payments

Market (non-legislative proposal) expected by Q3 2020.

30


Different consumer preferences exist when it comes to retail payments


31

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

BE BG CZ DK DE EE IE GR ES FR HR IT CY LV LT LU HU MT NL AT PL PT RO SI SK FI SE UK EU

Relative Share of Cashless Transactions in the EU (2018)



Remarkably, over the same time period the demand for cash (banknotes) is showing an increase as well


32

0

200.000

400.000

600.000

800.000

1.000.000

1.200.000

1.400.000

2014 2015 2016 2017 2018

Euro banknotes in circulation (millions)

9,40%

9,50%

9,60%

9,70%

9,80%

9,90%

10,00%

10,10%

10,20%

2014 2015 2016 2017 2018

Euro currency in circulation as percentage of GDP

CAGR 5,2% CAGR 1,2%


At the same time natural cash distribution points –branches and ATMs – are decreasing


33

0

50.000

100.000

150.000

200.000

250.000

2014 2015 2016 2017 2018

Number of bank offices (euro area)

290.000

295.000

300.000

305.000

310.000

315.000

320.000

325.000

330.000

2014 2015 2016 2017 2018

Number of ATMs (euro area)

CAGR - 5,2% CAGR - 1,9%


Access to cash will likely become a policy issue during 2020 under pressure of consumer associations

As per EU consumer associations:Cash is a public good which calls for public measures by the EU: • All physical traders are obliged to accept payments in cash. • Consumer access to cash is free of charge. • There is a minimum availability and balanced geographical distribution of ATMs. • ‘Cash withdrawals in shops’ are promoted, as a complementary option to the use

of ATMs.

Source: Bureau Européene Unions de Consommateurs Paper: CASH VERSUS CASHLESS: Consumers need a right to use cash

34


What to expect?

• Impact on customer behavior when restrictions will be relieved yet unclear.• In markets that gradually open up again the number of cash withdrawals and

card transactions are showing slight increases.• Will customers be locked-in current digital payment wallets?• What will be the impact of longer lower volumes on the actors in the cash

business?• Will there still be (investment) appetite to invest in new digital payment

methods?• Consumers will be the judges initially.

35


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 until2008. He chaired the Banknote Committee of the European System of Central Banks for more than10 years and the Eurosystem Cash Changeover Co-ordination Committee in 2001 and 2002. Prior to joining the ECB he was the chief cashier for the Bank of Finland. He holds degrees in economicsand mathematics from the University of Helsinki, and has written several books on banknotes and their history.

Cash grant is a form of universal social protection

“Cash grants and other forms of universal social protection can play a huge role in tackling inequality and protecting vulnerable people, and they are critical in response to this crisis”.

Source: OXFAM MEDIA BRIEFING 09 APRIL 2020


Franz Seitz

Professor Franz Seitz teaches Economics with a special focus on Monetary Policy and Financial Markets at Weiden Technical University of Applied Sciences. He is author of numerousarticles in national and international journals. His main fields of research are monetary theoryand policy, financial markets and banking as wellas payments markets, especially cash in circulation. For many years now, Professor Seitzis acting as a consultant in different projects for central banks, commercial banks and financial as well as non-financial corporations.

Implications for the future role of cash and payments

Is there a lower threshold? What does it mean?

Cash demand, crises and central bank digital currencies

The role of negative interest rates

The role of central banks

-1

0

1

2

3

4

5

6

7

12

16

20

24

28

32

36

40

44

00 02 04 06 08 10 12 14 16 18 20

EONIA (%; left scale) vault cash(€ bn.; right scale)

Vault cash of banks in GermanyVault cash of banks in Germany


Petteri Lillberg

Petteri Lillberg is a Senior Consultant at DemosHelsinki, focusing on strategy, foresight and societalimpact across industries and organisations.A noted columnist and international speaker, Petteriholds an M.Phil from Cambridge University. He alsoserves at the board of Unicef Finland.

Variables set the framework and direction for major areas of change:

Tensions have variables

Economic recovery Technology MoneySociety Sustainability

and Inclusion

Trajectory of Global warming

Distribution of wealth

Surveillance vs. Anonymity

Back to normal vs New Normal

Recovery leadership

Supply chain resilience and security

Governance of platforms

Digital data ownership

Issuance of Money

Payment instruments

Tensions Sustainability& Inclusion

Society EconomicRecovery

Technology Money

Variab-les

Trajectory of Global

Warming


Social priorities

Surveillance vs

freedom

Security and resilience of

supply chains

EconomicRecovery

Governanceof platforms


Issuance of Money

PaymentInstruments

VALUE 1 Mitigation

VALUE 2 Adaptation

VALUE 3 Uncontrolled

VALUE 4 Denial

Futures Table – An example

Tensions Sustainability& Inclusion

Society EconomicRecovery

Technology Money

Variab-les

Trajectory of Global

Warming


Social priorities

Surveillance vs

freedom

Security and resilience of

supply chains

EconomicRecovery

Governanceof platforms


Issuance of Money

PaymentInstruments

VALUE 1 Mitigation Fragment-ation

Transfor-mation

StateSurveillance

Stregnthen BCP

Global recovery lead by few competitive

regimes

States controls

platforms

Individuals owntheir data

Central Bank Digitalonly

VALUE 2 Adaptation Increasing inequality

Individual rights

Surveillance capitalism

Relocate Sourcing &Production

Regional governance

leads comeback

Regulatedplatforms

States control data

Commercial Bank

Fragmen-tation

VALUE 3 Uncontrolled Efforts to reduce inequality within

countries

Economic growth

Regulatedsurveillance

Diversify sourcing

Local recoveries

Unregulatedplatforms

Privatecorporations

sell data

BigTech Diversification

VALUE 4 Denial Efforts to reducedivide betweenrich and poor

countries

Equality No surveil-lance

Sovereignty isback

Post-WW2 global

institutions lead recovery

Platformscontrol states

Data is the new currency

Anyone Cash

Futures Table – An example

45

Question

What other factors will influence the future of cash? Open question. Respond in the chat.

47

Some Take-Aways• Covid has impacted consumer payment

behaviour but future behaviour is unknown

• Recession could lead to a shift to cash as a

budget management tool

• Demand for a trusted, secure and universal form

of money

• Consumers view cash as a public good

• Cash in circulation likely to increase but

transactional demand could continue to decline

• Need to rethink the cash cycle to ensure access,

acceptance and resilience

• Policy options: regulation or subsidisation

Next Steps

• The future of cash is not written.

• This FL project is ongoing and open

source

• Recording will be available in 24 hours

• Second Webinar on 9th of June

– Scenario-Planning exercise

• Third Webinar 30th of June

• Follow us on www.cashessentials.com

• [email protected]

@Cash_Essentials

http://www.cashessentials.com/

http://agis-consulting.com

CashEssentialswww.cashessentials.org

[email protected]

http://www.cashessentials.org/

Documents

The Future of Cash Beyond Corona · ‘using-the-future’, more ‘futures literate’, becauseof twofacts. One isthatthe future doesnot yetexist, itcanonlybeimagined. Twoisthathumanshave