News in Brief

Bank of England Consults on Wholesale Cash Infrastructure

The Financial Services and Market Bill gives the Bank of England the ability to act to safeguard access to cash for businesses and individuals. Falling cash volumes have put the long-term viability of the current wholesale cash distribution system at risk.

The wholesale system allows the Bank, the Royal Mint and commercial issuers of banknotes to issue new notes and coins and to manage their movement, circulation and withdrawal through bank branches, ATMs and retailers.

The consultation sets out to ensure the effectiveness, resilience and sustainability of the wholesale cash infrastructure in a less cash environment. The Financial Services and Market Bill, which is still going through Parliament, contains complementary provisions for retail cash access that are the responsibility of the Financial Conduct Authority (FCA).

The new supervisory regime proposed requires firms buying notes and coins, those sorting, storing and circulating notes and coins, and those withdrawing unfit notes and coins from circulation, to share information with the Bank both systematically and as required.

The consultation anticipates a future unitary wholesale model similar to the Netherlands or Belgium. Should this happen, it would be subject to prudential supervision in the same way that currently applies to the systemic payment system.

G+D Expands into Digital Payments

Banknote and payment solutions provider Giesecke+Devrient (G+D) has doubled its stake in the software company Netcetera to 60%. G+D joined Netcetera as a strategic partner in September 2020 to accelerate the company’s growth in digital payment solutions, among others.

The share transfer is planned for February 2023, at which point Carsten Wengels, who heads up global sales and distribution for the digital and card-based payment business at G+D, will take over as CEO.

‘With its focus on software solutions that are essential to the success of customers and their business processes, Netcetera complements and strengthens Giesecke+Devrient’s digital portfolio,’ said Ralf Wintergerst, CEO of G+D and Chairman of the Board of Netcetera.

Opposition to Italy’s Cash Plans

Italy’s new government has proposed raising the legal limit for cash transactions from €1,000 to €5,000 and allowing merchants to refuse to accept digital payments for sums less than €60.

Currently merchants must accept electronic payments for any payment. The current rules were introduced as part of the package that went with the EU €200 billion post-COVID national Recovery and Resilience Plan.

The Bank of Italy told Parliament that the limitations on cash were to make crime and tax evasion more difficult. The Prime Minister, Giorgia Meloni, has hinted that the €60 figure may be negotiable given the EU’s opposition to this proposal.

New Cash Limits Agreed by the EU

The EU is introducing a new maximum limit of €10,000 on cash payments as part of a programme to stop money laundering. Individual countries are free to set their own lower limit.

Other products such as jewellery and goldsmithing will also be more tightly controlled and there will be stronger oversight of crypto transactions of €1,000 or more.

CBN Limits Cash Withdrawals

On 6 December, the Central Bank of Nigeria (CBN) limited how much cash can be withdrawn from ATMs. The limit, which applies to individuals and businesses, is set at 20,000 naira, about $45, per day and 100,000 naira, $225, per week.

Withdrawals directly from banks are also limited, although at higher levels, 100,000 naira per day and 500,000 naira per week, about $1,125.

The instruction from CBN put this announcement in the context of the launch of the redesigned banknotes and the cash- less policy of the CBN. Only notes with a value of 200 naira or above can be loaded into ATMs.

The Director of Banking Supervision at CBN made the comment that ‘customers should be encouraged to use alternative channels (internet banking, mobile banking apps, USSD, cards/POS, etc.) to conduct their banking transactions.’ If people or businesses need to withdraw more they can, but fees of 5% for exceeding the daily withdrawal limit and 10% for the weekly limit will be charged. Once a month, withdrawals up to five million naira for individuals or 10 million naira for businesses can be made, incurring fees, so long as documentary evidence of the purpose is provided.

Quarter of HSBC UK Bank Branches Being Closed

HSBC will shut another 114 UK bank branches in 2023. 248 have closed this year and another 288 will close by year end. The branch closure programme affects a quarter of its nationwide branches.

HSBC puts forward familiar explanations, a reduction in footfall of 65% over the last five years and 97.5% of banking transactions now being online.

When it comes to branch closures, HSBC must follow guidelines from the Financial Conduct Authority. HSBC is providing free tablet devices to selected branch customers to enable them to bank digitally, along with one-to-one coaching.

Would a Society Without Cash Money Be Able to Function?

A new type of search engine is being developed that aims to generate human-like text in response to questions. One of these is Chat GPT, which describes itself as a ‘variant of the GPT-3 language model developed by OpenAI. It is a large-scale language model that has been trained on a massive amount of text data and can generate responses to a wide range of inputs.

To test Chat GPT, it was asked ‘Would a society without cash money be able to function?’ Its reply was interesting.

‘A society without cash money would likely be able to function, but it would require significant changes to the way that transactions and trade are conducted. In a cashless society, people would need to rely on other forms of payment, such as electronic transfers or digital currencies, to facilitate transactions. This would require a high level of infrastructure and technology, as well as a certain level of trust in the payment systems and institutions that support them.’ 

‘It is possible that a cashless society could have advantages, such as increased efficiency and security, but it would also have some drawbacks, such as the potential for exclusivity and the loss of certain individual freedoms. Overall, it is difficult to predict exactly how a society without cash money would function, but it would likely require significant changes to the way that economic activity is conducted.’