ESTA Offer the ERPB an Alternative Perspective on Cash

The European Retail Payment Board (ERPB) issued a questionnaire about acceptance and access to cash in April 2021. In mid-April the European Secure Transportation Association (ESTA) withdrew from the ERPB working group on the basis that the ERPB’s investigation about cash usage was too narrow. ESTA has issued its own report and provided that to the ERPB in the hope that it will take its rather broader perspective in to account.

ESTA starts its report by listing the advantages of cash.

• It is instantly available,

• It can be stored independently from anyone,

• It can be used without control of anyone, without fees, without restriction,

• It does not require any infrastructure to be used,

• It works without intermediaries,

• It allows property rights to be established independently from any third party,

• It provides protection against any intrusion

• It is the only means that allow non-banks to withdraw their deposits from banks without having to spend them if they do not want it.

It also adds one which is seldom included in such lists,

• There has never been any antitrust procedure against cash emitters. Consumers holding cash have no reasons to fear that they are misused for any illicit profit made behind their back.

Where the problem lies

ESTA argues that the demise of cash is driven by the actions of some key players.

• Cash is made available to the public by organisations who profit from people not using cash but using their alternatives instead.

• Central banks are not acting to preserve cash.

• Sweden’s decline in cash usage was accelerated by actions of the central bank and the banking association. Sweden had two changes in banknote series and one coin changeover in a relatively short time period. The change overs were executed in such a way as to reduce the cost to the bankers while making the public’s experience more difficult and expensive. In 2016 only 40% of bank branches offered cash services and Sweden had fewer ATMs than other European countries. The nine month changeover window was short and after that notes had to be exchanged through the central bank.

• In a speech at the Future of Cash conference in 2016 Norges bank’s Leif Veggum commented that banks have a ‘self-interest in phasing out cash.’ The Bank of Finland has commented that the number of bank branches offering cash services is declining rapidly, branch operating hours are often quite limited and banks charge fees on cash withdrawals and deposits.

• The reduction in cash services is happening at an industry level resulting in consumers having not options.

• Card operators have been sponsoring cashless retailers. ESTA regards this as predatory marketing, and so anti-competitive.

ESTA also see a number of problems with a change over to a non-cash environment.

• Contactless payments are, effectively, anonymous. As a result, consumers are liable for any misuse until they have informed their bank of the loss of their card or device. With higher contactless payment limits, the risk to the consumer rises as well, reducing the liability of the payment service provider.

• The payment system for card payments is well established. Interoperability has been achieved. ESTA question what the future is for e-payments where interoperability has not been established. This brings a number of risks to simple, easy payments. Risks that don’t exist for cash.

The response to the ERPB goes on to suggest three actions to safeguard the availability and acceptance of cash: 

1. Require the acceptance of cash as legal tender

2. Establish the right to pay in cash

3. Guarantee the provision of change money

Final thoughts

ESTA believes that any examination of how to keep cash accessible and accepted requires a broader approach than just looking at cash stocks and the management of the cash cycle. The long term ability of cash to provide a cost benchmark to ensure the public does not have to accept the fees and charges of non-cash payments is a significant societal benefit. For this reason has offered the ERPB’s working group this alternative perspective.

To go beyond this simple summary, please click here to view the full report.