12 Months an Editor - the Only Certainty is Change

This is a reflection on 12 months as Editor of Cash & Payment News™ (CPN), writing about the payment environment and the role of cash. With the impact of the pandemic providing the backdrop, a number of themes are evident.

The ‘cash paradox’

The ‘cash paradox’ is the apparently unstoppable rise in the volume and value of cash in circulation in the majority of countries in the world, while the number of cash transactions falls. The reduction in cash usage last year combined with the flight to cash has drawn the attention of the media, politicians, central banks and the industry. The result has been research and articles seeking to understand what has happened and the implications.

It appears that some of the cash held is because people have been unable to spend it – face-to-face transactions having reduced as well as many retailers actively discouraging its use. Equally, governments have driven a digital agenda, both generally and around payments, influencing behaviour.

The gap between the digital ‘vision’ and reality is large since considerable friction (the user experience) still exists, making the digital experience difficult at times – holding for a call centre, having to download innumerable apps to be able to transact, the rise of cybercrime etc.

Despite that, the existence and number of those who continue to use cash has also become clear.

With economic recovery underway, there is evidence that a major reduction in cash usage has taken place in most economies.

Perhaps unsurprisingly 35% of Cash & Payment News (CPN) articles have been about how cash usage has changed around the world.

Technology responses to the pandemic

The pandemic has seen the rise in the use of QR codes for payments and an increase in mobile payments, whether by wallet or phone. Adoption of new ways of paying has been widespread.

The other side of the story has been the remarkable response of the cash industry. The ATM community has moved fast to allow access to cash via contactless methods, and the adoption of contactless cash handling equipment by retailers has happened quickly.

Cash cycle participants have worked together with central banks to maintain the flow of coins and banknotes, adopting new processes, reporting and approaches. 10% of CPN articles have been focused on ‘Cashtech’.

Access to cash

In advanced economies a steady theme has been initiatives to maintain the ability to withdraw and deposit cash. In addition to handling cash more efficiently, there has been the adoption of a ‘utility’ approach to cash sorting and ATM management, legislation and ensuring a national network of ATMs and cashback facilities.

Alongside this has been a steady stream of news about the rise in electronic payment charges and fees, increases in digital crime and the widespread and large-scale closure of bank branches. The response to the last of these has included the creation of banking hubs and Cashtech companies that connect those with cash to those who need cash.

Just over 10% of CPN stories have been about these changes.

Noise about CBDCs

Central Bank Digital Currencies (CBDCs) have become mainstream in the last year and now take up 13% of CPN.

Most interest is in retail CBDCs since wholesale CBDCs are more straightforward, mimicking the work of reserve accounts and settlement activities.

The ambition for CBDCs varies in line with the priorities of the country and central bank. Unsurprisingly, the Bahamas is trying to achieve something rather different compared with China (financial inclusion rather than bringing digital payments under government control). Switzerland favours tokenisation, emphasising the importance of privacy, while Sweden talks about offering a replacement for cash available to all (and much more).

Not all the coverage is positive, with the Centre for Economic Policy Research (CEPR) and others raising serious questions about the need for and goals of CBDCs.

While all insist that CBDCs will co-circulate with cash rather than replace it, we

watch this space with interest, seeking to understand the policy and technical and domestic and international implications, whether retail or wholesale. CBDCs are becoming a subject in their own right.

The environment goes up the agenda

Environmental stories remain in the minority, but they have started to appear. Much of the efficiency agenda is, of course, linked to the environment. The evidence is clear that the environmental impact of cash lies largely in its distribution and circulation rather than its production.

There is much more that can be done (indeed, is being done) to reduce this environmental load, and we suspect that in the run up to the UN Climate Change conference in November more will appear.