News in Brief

Cash Accepted by About Half of E-Commerce Merchants

The Reserve Bank of Atlanta has made some observations about the Merchant Risk Council’s 2023 Global Ecommerce Payments and Fraud Report. The type of payments accepted has increased with 37% of the surveys’ respondents adding digital wallets, 25% buy now pay later, 23% mobile commerce payments, 19% bank transfers/direct debit, 17% cryptocurrency and 16% local digital payments, eg. PIX in Brazil.

About 50% of e-commerce merchants accept cash and 30% cash on delivery.

Given that how people pay incurs costs and risks for e-commerce merchants, 90% of merchants seek to influence how people pay. The top five methods to influence payments choice were: 

1.Promote preferred payment methods

2.Offer preferred payment methods before the checkout page

3.Provide incentives (such as a discount or rewards) to use preferred payment methods

4.Pre-select preferred payment methods

5.Surcharge for non-preferred methods. 

These methods work best if consumers are shopping directly at the merchant’s e-commerce site. However, 77% of merchants also use a third-party marketplace, where they generally are unable to influence payment choice. The third-party platform may also of course, seek to influence how people pay.

UK Bank Closures Threaten Viability of Cash

For 65% of 650 independent businesses surveyed in the UK in August, cash still accounts for 20% of sales revenue. The survey was carried out by the British Independent Retailers Association (BIRA).

Coins are an issue for retailers, and this was reflected in 37% of them setting prices to avoid receiving copper 1 and 2 penny coins.

87% have to acquire coins and notes from bank branches. 38% of retailers said they would only stop accepting cash if there was a closing down of a bank branch or Post Office in their area.

This is a significant issue given the rate of closure of branches in the UK. Lloyds Banking Group is closing 155 branches by the end of 2023 and a further 75 in 2024. Virgin Money has announced plans to close 30% of its branch network, Barclays 180 branches, NatWest 143 branches, and HSBC 114 branches.

The CEO of BIRA made the comment that banks and the regulator can ‘not rely on retailers offering cash back as the alternative.’ 

Inflation Linked to ATM Numbers

A new study analyses the impact of financial inclusion on the effectiveness of monetary policy in developing countries.

Based on a panel data set of 10 developing countries during 2004-2020, the study revealed that the financial inclusion measured by the number of ATM per 100,000 adults had a significant negative effect on monetary policy, whereas the other measure of financial inclusion, ie. the number of bank accounts per 100,000 adults, had a positive impact on monetary policy, which is not statistically significant.

The study found that foreign direct investment (FDI), the lending rate and the exchange rate had a positive impact on inflation, but only the effect of the lending rate is statistically significant.

The study concluded that the governments of these developing countries should strive to increase the level of financial inclusion as it stabilizes price levels by reducing inflation in the economy.

KBBNS Partners for Cash Cycle Innovation

Koenig & Bauer Banknote Solutions (KBBNS) is continuing its strategy of innovating with partner companies. In January this year it signed a partnership with Sonect to support access to cash, in May a strategic partnership with Gietz, in June a joint development agreement with friSense Technologies Limited to explore new products for further automation of cash circulation, and in August a partnership with Aflatoun for financial inclusion.

It has now given more details about its joint development agreement with friSense. In addition to developing new products for automating cash circulation, they will work together on connecting physical banknotes and digital ecosystems, and the optimization of process integrity and data capture.

The companies believe that if banknotes can be linked into the digital ecosystem, it will create valuable data for cash cycle stakeholders and enable significant positive change in the way cash is accessed, moved and managed in society.

ESTA’s View of the EC Legal Tender Proposals

The European Security Transport Association (ESTA) has responded with preliminary comments to the European Commission’s (EC) draft regulation on the legal tender for cash, the introduction of the digital euro and the revision of PSD2 into a new PSD3 and two new regulations.

ESTA has looked at the three proposals together because they deal with cash, commercial bank money and a central bank digital currency. It has four headline comments.

First, organisations will not be allowed to refuse to accept a digital euro, but it has been left to member states to define whether cash can be refused.

Second, the distribution of a digital euro is precisely defined and strictly mandated in legislation while, again, the distribution of cash is largely left up to the member states.

Third, the digital euro is protected by the legislative scheme against unfair/predatory competition from the financial institutions’ payment instruments whilst cash is not.

Finally, the revision of PSD2 aims at ensuring a better choice of payments instruments for the consumers, via a promotion of new forms of commercial electronic money but does not include cash in the choice to be guaranteed by law to consumers.

The different treatment of cash compared with the alternatives leaves cash vulnerable since it does not protect it from the factors which have led to its current demise.

Use of Cash Stable in Latvia

Latvijas Banka has reported that the ratio of non-cash to cash payments in Latvia was 73% to 27% respectively in August 2023.

The use of non-cash payments has increased since February 2023. Half a year ago, the ratio of non-cash to cash payments was 67% to 33% respectively, a year ago, in August 2022, it stood at 71% to 29%) 

In August 2023, the average number of payments per capita in a week was 13.8 (compared to 14.3 and 12.6 in February 2023 and August 2022 respectively), including 10.1 non-cash payments and 3.7 cash payments.

The share of the public supporting the discontinuation of the small denomination coins, ie. 1 and 2 cent coins has reached 49% compared with 46% who said these coins should remain in circulation. Support for discontinuation was 41% in February 2023, and 51% in February 2022.