News in Brief

Cash Limit Proposed Across the EU

The European Union has developed plans to reduce money laundering. This includes a limit on cash payments of €10,000 (versus €3,000 as previously proposed). Member states may set a lower limit if they wish.

Inspectors will get more powers of inspection where money laundering and terrorist financing is suspected including broader powers to suspend suspicious transactions and accounts. The plan needs to be passed by the European Parliament and by leaders of each member state at the European Council.

Additional rules on crypto-asset providers, traders of luxury goods, football clubs and agents are to be included, moving beyond banks, real estate agencies and casinos.

Re-investing in Cash and Cash Systems

The year when America had the most ATMs, 470,000 ATMs, was 2019. By the end of 203, according to Euromonitor International, there were 451,000. At the same time though, the number of reverse ATMs (machines where you can put in cash and pay a mobile phone bill, utility bill or a virtual card to use online) is steadily growing. This trend appears to be driven by the growing ban on cash-free shops and the large number of people for whom the financial system doesn’t work well.

Some argue that these cashless bans are a stealth tax because they force shops to bear the cost of cash. On the other hand, why should marginalised groups have to pay prepaid card fees and banking charges?

Currently, four municipalities and nine states currently have laws requiring retailers to accept cash, New York City, Philadelphia, San Francisco, Washington, DC, Colorado, Connecticut, Delaware, Massachusetts, Montana, New Jersey, Oregon, Rhode Island and Tennessee. Five additional states — Arizona, Ohio, North Carolina, South Carolina and Missouri — recently proposed cashless business bans. North Dakota lawmakers rejected a bill.

Most of these laws say that businesses, however large or small, can’t refuse cash, charge more to accept cash payments or advertise that cash isn’t accepted.

The disruption caused by these laws lies predominantly on shops that have already gone fully digital since they need to reinvest in cash infrastructure, upgrading point-of- sale systems to accept cash and digital payments, cash management procedures and staff training, and the efficiency and security benefits of being cashless are lost.

Financial inclusion and consumer choice comes at a cost.

The Implications of Less Cash

The Head of Research at Amina Bank AG has recently written about what the death of cash means for the future. While physical cash has no counterparty risk, it is only as good as the central bank that manages it. Deposits are only as good as the health of the bank that is providing you with your bank account and your electronic payment solutions.

Electronic money is, of course, easily traceable, always linked to the account holder. It offers privacy in line with the legal restrictions put in place by the law, but not anonymity. Cash cannot be linked back to an account and efforts to trace it are laborious and complex.

The decision whether to use electronic money or physical cash is, therefore, a decision of ‘quality’, trust, and privacy. Take away cash and there is not, yet, an equivalent digital alternative.

Bitcoin, an alternative to cash?

Bitcoin does not have counterparty risk and privacy is guaranteed; however, it is not cash because its value, the price of Bitcoin, is too volatile to be used as a daily medium of exchange. Currently it is also hard to use for day to day transactions.

CBDCs, an alternative to cash?

At the moment, no. The author is a fan though, of David Chaum, a cryptographer, who wrote a working paper ‘How to issue a central bank digital currency’ in 2021 ¹. It was written in collaboration with the Alternate Member of the Government Board of Swiss National Bank, Thomas Moser and Professor Christian Grothfoff from Bern University of Applied Sciences.

This interesting combination of proposes a retail Central Bank Digital Currency (rCBDC), with strong privacy features. To guarantee that the rCBDC has no memory, the transaction is ‘blinded’ via special encryption, making it a true digital bearer instrument. If it worked, this would be a digital equivalent of cash, a much needed payment option.

Three Predictions about ATMs in 2024

Many in the ATM industry are looking to the future. At the start of February in ATM Marketplace Maya Fuentes — Senior Vice President, M&A Business Development, Paramount Management Group – made three predictions.

Much discussed, but yet to happen, is whether there is a future for Bitcoin ATMs. As the price of Bitcoin recovered and rose in 2023, so did stories that the need for convenient access to digital currency would see Bitcoin ATMs.

While Bitcoin ATMs seem like an ephemeral dream, the prediction about an acceleration in the outsourcing of ATM fleets is certainly realistic. Brinks and NCR have both presented in late 2023 at different events about this claiming savings in operating costs of 30%. With banks having fallen out of love with cash and wanting to put their development dollars into digital payments, outsourcing is happening more and more.

On a more positive note, outsourcing also allows investment in advanced ATM solutions including video banking, cash acceptance, expanded transactions and enhanced security.

Surcharge fees have never been popular, and they have been falling for a while. Bank customers want convenient surcharge-free ATMs, or at least surcharge rebates from their banks. NCR Atleos Allpoint network is one way to achieve this. American Express has joined Allpoint to give its business and consumer checking customers access to the 40,000 surcharge-free ATMs in the US. These ATMs are located in retail locations and will now carry the Amex branding during transactions.

If the ATM network is surcharge-fee, operators have lost that income. The debate is whether the additional traffic is sufficient to make up the gap.

1 - How to issue a central bank digital currency (snb.ch)