Whose Responsibility Is the Future of Cash?

Ongoing industry transformation is only set to extend as the economic landscape continues to flex, digital innovation accelerates and satisfying end user demands becomes pivotal to success. Historically industry change has been led by regulation and industry requirements, but in today’s environment consumer expectations are setting the pace for change.

Ultimately end users want freedom of choice when it comes to payment options and as part of the industry shift, we are also seeing an increased preference for flexibility. We are all aware of the changing role of cash within society, and how digital payment options have now been added into the mix. However despite the increasing scope of payment options, maintaining access to cash for all citizens is still crucial. Research shows that 71% of consumers use all banking touchpoints available[i], indicating that accessibility of services across all channels is still important for the majority of today’s society.

Challenges have been highlighted of moving to a cashless society too quickly, most notably the inability to be financially inclusive for each and every person who has a right to flexible banking and payment services. For those who are located more remotely, those who do not have access to digital options, or those who simply want the choice of payment options - maintaining access to cash is essential. As well as ensuring financial inclusion, evidence shows that offering a hybrid approach to services in this way also drives trust and loyalty amongst consumers[ii].

Following high profile electronic outages, cyber-attacks and during times of civil and economic unrest, cash has also been shown to be the back-up option we all rely on in times of crisis. With this in mind, the question arises about who is responsible for protecting and suppling adequate cash services?

Ownership of the cash ecosystem

With an accelerated push towards a cashless model in many countries, we can see how setting the pace for such a transition is a delicate balance. The Nordics for example has been particularly advanced in its drive to reduce cash in its ecosystem over recent years, resulting in some cash systems teetering on the brink of collapse. Recognising that the balance might have gone too far, local Governments intervened and there is now varying legislation in place to ensure that major financial service providers continue to provide adequate levels of cash services.

The UK Government is now following this lead with the recent announcement that access to cash will be protected by legislation - ensuring that consumers can continue to choose how they bank and have convenient access to the services they need.   

In Norway we see how it is the central bank, Norges Bank’s responsibility to provide cash to the financial institutions and in turn the financial institutions responsibility to provide cash services to the general public. However in order to achieve this model, the central bank has shifted its operational model, transferring more of the supply chain to financial institutions and therefore increasing the associated cash handling costs.

Ultimately this leads to the debate about who should be paying for maintaining access to cash services for end users. If legislation mandates that the industry must continue to deliver inclusive payment options, should the industry be financially supported in order to achieve this? Particularly with the ever increasing pressure on financial institutions to become more efficient and streamline operational costs.

What’s the answer for the future?

The answer lies in enhancing the efficiency of cash distribution and the overall cash payments system. In order to maintain consumer choice there is a need to rethink channels, with simplification and agility becoming increasingly important to unlock industry progression. Building a cash model for the future requires a new way of thinking, and an openness to different ways of working. For example, we are now seeing many organisations outsourcing elements of the payments eco-system in order to achieve cost savings.

In fact, an overall increase in industry collaboration is driving more efficient operations within the financial services sector. Many organisations are partnering up with specialists to manage dedicated parts of their business, allowing in-house staff to focus on key growth areas and customer service differentiation. Of course, how much control an organisation is willing to give up can be a point of debate and trust often plays a key role in the decision about whether to manage operations in this way.

With this pivot towards different ways of working together, it seems logical to also apply this approach to cash. The whole industry has a certain responsibility to maintain access to cash. Whether that is financial institutions rationalising distribution models and embracing data to manage cash more effectively, or technology providers delivering innovation to reduce cash handling costs.

Responsibility also extends beyond financial services, with distribution just one part of the equation. Retail and hospitality industries must ensure continued acceptance of cash to allow for the effective cycle of notes within society. Recognising the importance of a complete cash eco-system, the Bank of Finland has recently proposed legislation to ensure ‘the availability of cash, the acceptability of cash as a payment instrument and the possibility to deposit cash’[iii].

Whether used for budgeting, convenience or just as a payment method consumers feel more confident with, the emotional trust and economic value associated with cash goes far behind just the physical note in all industries. Only by working together can a future-ready model be created and conserved.

[i] NielsenIQ International Retail Banking & Technology Survey commissioned by Diebold Nixdorf, 2021

[ii] Forrester’s Customer Experience Benchmark Survey, US Consumers, 2022. Forrester’s Customer Experience Index Online Survey, France, Germany, Italy, Spain, and UK, 2021.

[iii] Bank of Finland, March 2022