Netherlands Struggles with Access to Cash

At the recent ATMIA Emerging Markets and Europe ATM and Cash Summit, Roel van Anholt, from the Dutch National Bank (DNB), presented on access to cash.

As in Sweden, the Netherlands is a country dealing with the consequences of people using less cash. One part of its response is to turn to legislation. A ‘Cash Payments Act’ is in preparation that will place statutory obligations on banks to offer cash services, requiring them to offer cash infrastructure, and give the DNB new oversight and sanction powers.

The legislation will be shared for consultation, probably in quarter one 2024, and it is estimated to become law in January 2026. While this process is being followed, the Covenant signed with the banks and retail and consumer organisations will remain in force (see below).

A second focus is on the continuity of large CIT companies. DNB is looking to mitigate the risk of CIT services not being available. Again, statutory provisions are being prepared alongside the Cash Payments Act.

Finally, DNB recognises that high cash acceptance is critical for the future of cash. The European Commission is currently consulting on its ‘legal tender cash’ proposal (see page 8). This includes the requirement for the requirement for mandatory acceptance, other than a few exceptions. The European Central Bank has recently commented on this, seeking tighter wording for no ex-ante unilateral exclusions. DNB supports this position.

Cash in the Netherlands

While cash usage has fallen, there were 1.3 billion cash point of sale payments in the Netherlands (20% of the total), net issuance is still higher than pre-pandemic, the value of cash payments is rising and the preference for cash is stable (around 20%) just like the share of cash payments at POS.

That is despite banks no longer having a direct role in cash distribution. None provide either ATM or cash services in branches. The Netherlands does not have a significant amount of cash back. As a result, ATMs are vital. Geldmaat provides 3,850 ATMs and there are a further 1,250 Independent ATM deployers (IAD). 1,500 ATMs can accept deposits as well as issue cash.

Cash infrastructure has been reducing rapidly. Between 2018 and 2023 the number of ATMs fell 29%, night safes by 62%, coin deposits by 45%, coin withdrawals by 70% and bank branches by 74%.

The Netherlands has the second lowest number of ATMs per 100,000 people in the Eurosystem, 29 compared with Austria’s 144. Despite this, the geographical coverage is good, and the number of ATM withdrawals is stable. On the other hand, for consumers cash withdrawals and deposits should be accessible within a 5km radius. For businesses, there is a requirement of 20min driving distance for sealbag-deposits and for coin withdrawals. Geldmaat fulfills the requirements for both consumers and businesses.

On paper cash acceptance remains high. While cinemas, libraries, car parks, pharmaceuticals and entertainment are seeing increasing levels of ‘no cash’ signs, which concerns the DNB.

Cost of cash

The DNB does not see the absolute cost of cash as becoming more expensive for retailers. Data comparing 2017 with 2020 shows the absolute cost of cash falling from €697 to €603 million, although the cost per transaction has risen from €0.29 to €0.49 as the number of transactions has fallen from 2.4 to 1.23 billion.

Response to less cash

Like many countries are doing today, the DNB sought to encourage electronic retail payments between 2005 and 2018. In 2018, responding to less cash, it issued a payment strategy which led to discussions with the National Forum on the Payment System (NFPS) about access, acceptance and CIT risks. This led to an NFPS cash taskforce at the end of 2019.

No agreement was reached. At the end of 2020, DNB issued a position paper on the role and future of cash, and commissioned McKinsey to look at who cash is for and what size infrastructure is needed, to report by April 2021.

In June 2022 a five year agreement, the Cash Covenant, was signed, freezing existing infrastructure and fees and commissioning an independent study about how to maintain and fund the infrastructure. In May 2023 PwC reported on how to redesign the cash cycle, finding that the Cash Covenant was not sufficient and legislative reforms were needed. In July the Minister of Finance announced the legislative actions and the Cash Covenant was prolonged to cover the gap until the law is in place.

PwC Study on Cash

The key finding from the PwC report was that there was a lack of market support to meet the societal need for cash. To fill the gap, it suggested three options:

-Statutory obligations on banks

-Appoint a universal service provider

-Set up a government provider

The last option was discounted as not practical. The second option put the government in the lead but would not be possible without additional funding. It was thought to be a sub-optimal option in terms of efficiency. A statutory obligation provided the lowest government intervention, fitted to the role and privileges of banks, formalised current responsibilities and maximised cost-efficiency.

For the statutory obligation to succeed, the legislation would need to differentiate between infrastructure and service obligations, set a fee structure, include depositing cash, include coins, ensure there were sufficient ATMs to provide coverage and allow cash to operate as a back-up should electronic payments fail, to be technically resilient and offer a service level to all of society and for all denominations.

Lessons learned from DNB and Bancomat

Once cash becomes a cost centre for the private sector, there is a problem.

An indication that cash is in trouble is when banks decide to stop competing on cash services. From that moment onwards, it is a ‘race to the bottom’.

Create political awareness. Support for cash is a political issue given state resources will be involved. Legislation contains pitfalls ranging from anti-competition issues, closing loopholes, and getting the scope right. How do you ensure CIT coverage is continuous?

You can slow deterioration of the cash infrastructure through memorandum of understandings with cash stakeholders, but it will only delay the decline. Be aware of (reverse) interchange fees that may (greatly) affect market dynamics.

Maintaining cash infrastructure is easier than trying to recover it.