Should we prepare ourselves for a cashless future? Not according to De Nederlandsche Bank (DNB). True, debit card use has been steadily increasing while fewer and fewer counter payments are made in cash; but cash continues to play a pivotal role. The growing use of debit cards is in line with the ambition to make POS payments safer and more efficient. At the same time, DNB is committed to maintaining cash as a universally useable and available payment instrument and a smoothly functioning cash chain. Debit card use continues to increase
Points of sale handle increasing numbers of debit card payments, while cash use is gradually declining. The latest research by DNB reveals that the volume of debit card payments at Dutch points of sale has increased from €81 billion in 2010 to €84 billion in 2012. At the same time, cash withdrawals at ATMs dropped from €52 billion in 2010 to €49 billion in 2012. So in terms of sales, the card has overtaken cash, but in terms of transaction numbers, cash is still the dominant means of payment: To illustrate the still pivotal role of cash: the year 2012 saw 3.8 billion cash payments made at Dutch counters, against 2.5 billion card transactions.
Meanwhile, the growing use of the debit card is in line with the ambition of the DNB-headed National Forum on the Payment System to make point-of-sale payments safer and more efficient. The efficiency gain of debit card usage, even for quite small payments, is realised in a reduction of the social costs. Even so, cash still has a number of major advantages. On average, a cash payment requires 20% less time, for instance. Also, cash is the only means of payment that is accepted virtually everywhere, while it also serves as the principal alternative in case the electronic payment chain should break down (due to, for instance, technical failure or a cyber-attack).
And as regards the ‘financial inclusion’ of the dwindling but still existing group of people who are, permanently of temporarily, without a debit or credit card: for them cash is the only means of payment at points of sale. Immediately viewable, it can be a valuable economising tool, and for the visually challenged the debit card is not always a viable alternative.
Also, the anonymity of cash offers a certain protection of people’s personal privacy. This also means, however, that cash may be used to evade taxation, although legal measures aim to counter this, such as an obligation to report suspicious transactions.
Cash must remain universally usable and available
Under the circumstances, DNB expects cash to remain indispensable for some time to come. For this reason, cash should remain generally available as an all-purpose means of payment, implying that consumers must be readily able to withdraw and deposit cash from and into their bank accounts. Retailers, in turn, should have easy means at their disposal to deposit counter receipts into their bank accounts. Retailer policies of rounding cash payments to the nearest multiple of 5 cents and refusing to accept the largest banknote denominations have made cash use more efficient and safer without, if applied flexibly, harming the general usability of cash as such. And while not frowning per se on the current experiments with cashless shops, DNB would regard any larger-scale refusal or pricing of cash payments as undesirable.
Cash chain must continue to run smoothly
In the Netherlands, DNB is responsible for the issue of euro banknotes. From that key position, DNB endeavours to ensure a smoothly functioning cash chain, driven by banks, cash-in-transit companies, cash handlers and DNB itself. Further rationalisation of the cash infrastructure is acceptable, in the eyes of DNB, as long as the safety and reliability of cash are not compromised.
For one thing, consumers must be able to trust that the euro banknotes dispensed by ATMs are genuine. For retailers and consumers to be able to easily identify notes as genuine, banknotes dispensed by ATMs must not be worn. Although the number of counterfeit euro notes has been declining in the Netherlands, it is important to stay alert. Over the next few years, DNB intends to strengthen its supervision of market parties that recirculate euro banknotes through on-site ATMs. For the public, DNB has recently developed a easy-to-use banknote checking app.
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