Cash is not just a store of value or a transaction, it’s a means of mutual human connection – in other words, a handshake. So said Mark Gould, Chief Payments Executive at Federal Reserve Financial Services, in his keynote address at the Currency Conference in Bangkok in May.
‘You can’t email a handshake, and that is the problem with all things digital’, he said. Digital has many strengths but its lack of a human touch limits what it can achieve.
When you ‘tap and go’ at a digital payment terminal, you may or may not look the vendor in the eye and exchange a word.
When you hand over cash it is rare that you don’t. Sometimes you may prefer the former, but generally humans thrive on interaction. What sort of world do we prefer to live in?’
Across the conference, strengths and weaknesses of different payment options kept coming up. For example, the Bank of Namibia made the point that when you withdraw cash in Namibia you pay a fee, thereafter every transaction with that cash is free. With digital payments there is a fee with every transaction.
Crunchfish, a Fintech working on payment systems, made the comment that digital payments only work when everything works. They said this because their specialism is offline payments, but the fact remains that cash works, assuming you have some, when everything else does not.
Rufaida Hamilton, Head of Payments for Standard Bank in South Africa, was tasked with presenting a ‘murder mystery’ about who had ‘killed’ cash. While she made the case for cash having been ‘murdered’, she did question whether Mark Twain’s quote about ‘the report of my death was an exaggeration.’ Certainly, the newest generation, Gen A, appear to be storing cash but paying digitally. According to Hamilton, cash remains a safety net and needed for financial inclusion. More interestingly, there is evidence of a return to the ‘physical’, almost a counter-culture event. Cash is seen as an expression of independence and personality.
While this did not come up on the stage, in discussion the apparent fragmentation of civil society with compromise between those with different views apparently ever harder to find or accept, the role of the banknote as a unifying force was discussed. While the concept of a banknote being the ‘calling card of a nation’ is overused, in fact it is one part of daily life that is used by the rich and by the poor, in cities and the country, across every community and part of society. It is one of those ‘unseen’ unifiers that connects us all.
Burkhard Balz, Board Member of the Deutsche Bundesbank, spoke about Germany’s National Cash Forum and the steps Germany is taking to ensure the future of cash. The Bundesbank regards cash as being at a crossroads and that there is the need to take action to maintain cash. The Australian cash distribution problems were offered as an example of how when failure happens, it happens fast and has a big impact.
Part of the presentation dealt, therefore, with how to ensure cash remains. Whether it should be a private or public monopoly.
Cash should be a profit centre so that the private sector engages, but what happens people won’t pay? What happens in regard to other universal services when a sector of society can’t afford them?
This led to a series of questions. Should cash be declared a utility and/or should cash infrastructure be nationalised? Could a low digital transaction tax fund cash infrastructure? Should banks that don’t offer cash services be targeted? Should there be cross subsidies? Should there be minimum pricing structures for cash?
This tied into a presentation by Anak Somkanae of the Bank of Thailand (BOT), which provides nine consolidated cash centres that support 120 small cash hubs.
They are owned by the BOT, along with the high speed sorters that are used in them, but the private sector operates them.
An interesting example of BOT meeting the capital costs but allowing market discipline to ensure the cash centres are operated efficiently.
The Digital Currency Conference (DCC), which overlapped with and then ran on from the Currency Conference, gave context for the role of cash. there was an interesting panel that discussed the rise of stablecoins and their role in fragmenting the concept of money and the payment system. While stablecoins support the ‘singleness of money’ concept (all forms of money within an economy should be interchangeable at par and maintain a consistent value) in primary markets, they do not in secondary markets.
Fintech companies were, originally, not taken seriously. The second generation of Fintechs started to have an impact but today’s 3rd generation Fintechs, Square, Stripe, Venmo etc., and the digital/challenger/neobanks such as Revolut, Nubank, N26, Atom bank etc. are changing the payment and banking landscape fundamentally.
Add in real time payments, think Pix, UPI etc. stablecoins and, possibly, CBDCs.
Add in digital wallets, QR codes, satellite systems such as Starlink that mean everywhere can be always online, AI, quantum computing, and the rate and degree of change is unlikely to slow.
Mark Gould’s opening resonated with the audience and is the experience of us all. However, the facts on the ground mean that we need to adjust the cash infrastructure to reflect reality alongside taking action on access and acceptance of cash.
As he concluded, ‘who knows what the future holds for cash, but central banks need to be prepared for whatever the next decades throw our way’.
With nearly 420 delegates from 164 organisations (including around 200 delegates from 60 central banks and 50 delegates from 20 printworks), the Currency Conference continues to lead the industry in bringing together senior central bankers and leaders in the currency sector.
The next Currency Conference will take place in Berlin, Germany, in May 2027.
