DNB’s McKinsey Study Lays Out the Future of Cash

The Dutch National Bank (DNB) spoke at the recent ICCOS seminar about the McKinsey study commissioned to consider the cash infrastructure the Netherlands will need for the next 10 years. With cash transactions having recovered to 20% of transactions, down from 32% pre-pandemic, the Netherlands is preparing for a less cash society.

Olaf Sleijpen outlined the strengths of cash – peace of mind against emergencies, ease of use, control over spending, public money providing privacy, comfortable way to pay, suitable for all people.

McKinsey identified cash as a back-up for electronic payments, a necessary option for vulnerable people and a general, public means of payment. For the DNB these roles determine the size and the cost of the cash infrastructure. If these roles change, so should the infrastructure.

The paper then goes on to consider how and when those roles may change and how to respond to that. It starts by challenging the private sector to come up with back-ups to electronic payments other than cash. Until those back-ups are in place and being used, cash remains relevant and needed.

With effective, accepted back-ups in place, the DNB sees the response as a shared responsibility. Whatever happens, the future must be inclusive of those who find the digital era challenging or who simply prefer a public means of payment. Achieving an efficient solution will require a co-operative rather than a competitive market approach, albeit overseen by the DNB.

In the final phase using cash is a choice and people no longer depend on it for payments. At this point cash is a universal service. The DNB sees a bigger role for public institutions in safeguarding accessible, available and affordable cash. The National Payments Forum will have to address this but whatever is decided, it will be a shared future. The DNB is working on a covenant with all members of the National Payments Forum based on the McKinsey study. It will cover the next five years for how cash will function in the first two phases of change. The covenant is an alternative to regulation and the DNB hopes agreement is imminent.