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The Future of CashBeyond Corona
Webinar – 19 May 2020
House-keeping
• We love interaction but attendee mics and cams are switched off
• Please submit questions in Q & A panel
• You can chat in Chat panel• Session is recorded• Enjoy
CashEssentials is as an independent initiative, which aims at offering a platform for debate about the payments and monetary ecosystems, to
conduct and foster high-quality research on cash and its future.
Understanding
CashUsageby
GuillaumeLepecqand
FranzSeitz
www.cashessentials.org September 2019
The Evolution of Cash is not Linear
Source: Jobst C, And Stix H, The cash comeback: Evidence and possible explanations
Cash in Circulation/Nominal GDP
5
Forget Forecasting – Let’s Become Futures LiterateFutures literacy is a capability. It is the skill that allows people to better understand the role that the future plays in what they see and do. People can become more skilled at ‘using-the-future’, more ‘futures literate’, because of two facts. One is that the future does not yet exist, it can only be imagined. Two is that humans have the ability to imagine. As a result, humans are able to learn to imagine the future for differentreasons and in different ways. Thereby becoming more ‘futures literate’.
Our PanelHead of Innovation and Payments, European Savings and Retail Banking Group.
Chairman, Banknote Ethics Initiative; Former Head of Banknotes, EuropeanCentral Bank
Economist, Weiden TechnicalUniversity of Applied Science
Senior Consultant, Demos Helsinki
Diederik Bruggink Antti Heinonen
Petteri Lillberg Franz Seitz
7
Agenda
Introducing Futures LiteracyFive tensions in the new world
Petteri Lillberg
What will drive the future of cash in the nextdecade?
Diederik BrugginkAntti HeinonenFranz Seitz
A Futures Table – An example Petteri Lillberg
Q & A All
Conclusion Guillaume Lepecq
Senior Consultant, Demos Helsinki
Petteri Lillberg
Petteri Lillberg is a Senior Consultant at Demos Helsinki, focusing on strategy, foresight and societal impact across industries and organisations.A noted columnist and international speaker, Petteri holds an M.Phil from Cambridge University. He also serves at the board of Unicef Finland.
Demos Helsinki is an independent think tank, working together with the public sector, private sector, and NGOs. We want to impact the ongoing global transformations actively and aim to build sustainable and fair post-industrial societies.
9
Why Futures Literacy?
1. If no representations about future exist, then there would be only reactions ratherthan actions
2. We think about the future so that we can make sense of it and make betterdecisions in the present moment.
3. There is no single future, but instead a large number of possible futures to navigateamong. Engaging in Futures Literacy helps to identify which of them are possible, probable and desirable and create own agency.
A futures table is a tool for imagining radical futuresand exploring the largest uncertainties.
A Futures table is a precisely defined frameworkabout the future. It´s a framework which containsthe most important aspects of change.
It is on purpose polarised to allow discussingmeaningful alternative development directions. Byshowing them we can identify our own agency increating a desired futures.
The key tool for today
Futures table shows key tensions that reveal alternative
development directions
VARIABLE 1 VARIABLE 2 VARIABLE 3 VARIABLE 4
VALUE A VALUE A VALUE A VALUE A
VALUE B VALUE B VALUE B VALUE B
VALUE C VALUE C VALUE C VALUE C
5 key tensions
We cannot know how these tensions will develop in the future, but we can imagine radically opposing outcomes and increase our understanding what kinds of futures the different combinations of outcomes create, and what are the choices we can make.
Sustainability and Inclusion
Economic growth
vs.
Planetary boundaries
Economy
Recovery led by national regimes
vs.
Regional and global institutions
Technology
Digital platforms and data as public policy tools
vs. Platforms and data as commercial, privately-held domains
Money
Centrally issued and diversified means of payment
vs. Privately issued and fragmented means of payment
Society
Surveillance
vs.
Right to anonymity
Head of Innovation and Payments, European Savings and Retail Banking Group.
Diederik Bruggink
Diederik Bruggink holds responsibility at the twosavings and retail banking associations for all innovation and payments topics from a worldwideperspective. In that role, he analyses the multiple dimensions of the payments market, proposing and assisting in agreeing member positions with respect to their payments’ and related businesses. He alsoadvocates the associations’ positions on paymentswith policymakers, regulators, standardisation bodies, industry associations, and enabling a constant member dialogue on developments, with a particular focus on innovation. He is one of the key authors of the first three editions of the World Payments Report, makes regular appearances at industry conferences and serves as a member of the editorial board of, and regulator contributor to, the Journal of Payments Strategy & Systems. He is also a Board Member of the European Payments Council (EPC) and within the EPC he is also the Chair of the Cash Efficiency Working Group.
DisclaimerThe views and opinions expressed in this presentation are those of the author and do not necessarily reflect the official policy or position of the ESBG or its Members.
© 2020 – European Savings and Retail Banking Group / BRU
In 2018, nearly 142 billion cashless transactions were made in the EU at a 7,6% CAGR
Source: European Central Bank – Statistical Data Warehouse
13
26,68 28,14 29,62 30,88 32,71
21,67 23,05 23,52 24,84 25,13
3,61 3,32 3,02 2,69 2,40 2,08 2,38 2,83 3,39 4,011,63 1,75 1,72 1,68 1,58
50,34
55,70
62,19
69,15
76,02
0
10.000
20.000
30.000
40.000
50.000
60.000
70.000
80.000
2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018
Credit transfers Direct debits Cheques E-Money Other Cards
Mill
ions
of t
rans
actio
ns(T
otal
s in
char
t are
in b
illio
ns)
Number of Cashless Transactions in Europe (2014-2018)
BE BG CZ DK DE EE IE GR ES FR HR IT CY LV LT LU HU MT NL AT PL PT RO SI SK FI SE UK
© 2020 – European Savings and Retail Banking Group / BRU
In 2018, nearly 142 billion cashless transactions were made in the EU at a 7,6% CAGR
Source: European Central Bank – Statistical Data Warehouse
14
5,2% 3,8%
17,9%
10,9%
54%
26,68 28,14 29,62 30,88 32,71
21,67 23,05 23,52 24,84 25,13
3,61 3,32 3,02 2,69 2,40 2,08 2,38 2,83 3,39 4,011,63 1,75 1,72 1,68 1,58
50,34
55,70
62,19
69,15
76,02
0
10.000
20.000
30.000
40.000
50.000
60.000
70.000
80.000
2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018
Credit transfers Direct debits Cheques E-Money Other Cards
Mill
ions
of t
rans
actio
ns(T
otal
s in
char
t are
in b
illio
ns)
Number of Cashless Transactions in Europe (2014-2018)
BE BG CZ DK DE EE IE GR ES FR HR IT CY LV LT LU HU MT NL AT PL PT RO SI SK FI SE UK
© 2020 – European Savings and Retail Banking Group / BRU
In 2018, nearly 110 billion cashless transactions were made in the EU at a 7,6% CAGR
Source: European Central Bank – Statistical Data Warehouse
15
5,4% 3,7%17,9%
11,4%
49%
22,74 24,0925,38 26,62
28,03
18,00 19,14 19,44 20,61 20,78
2,97 2,76 2,54 2,29 2,05 2,08 2,38 2,83 3,39 4,011,63 1,75 1,72 1,68 1,58
34,56
38,42
43,14
48,35
53,24
0
10.000
20.000
30.000
40.000
50.000
60.000
2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018
Credit transfers Direct debits Cheques E-Money Other Cards
Mill
ions
of t
rans
actio
ns(T
otal
s in
char
t are
in b
illio
ns)
Number of Cashless Transactions in Europe (2014-2018)
BE BG CZ DK DE EE IE GR ES FR HR IT CY LV LT LU HU MT NL AT PL PT RO SI SK FI SE
© 2020 – European Savings and Retail Banking Group / BRU
Average number of transactions per person per day, by instrument of payment
Source: ECB Occasional Paper Series, “The use of cash by households in the euro area”, No 201 / November 2017
16
1,7 1,7
1,6
1,5
1,4 1,4 1,4
1,3 1,3 1,3
1,2 1,2
1,1
1 1
0,9
0,8
0,7
0,8
0,5
0,3
0,2 0,2
0,1
0,2
0,3
0,2
0,3 0,3 0,3 0,3
0,6
0,3
0,4
0,2
0,4 0,4
0,5
0,6
0,5
0,0
0,2
0,4
0,6
0,8
1,0
1,2
1,4
1,6
1,8
IT ES GR MT CY PT AT IE SK SI Euro area LU LT LV DE FR SE FI NL EE
Cash Cards
© 2020 – European Savings and Retail Banking Group / BRU
COVID-19 Impact on card transactions
Source: Mastercard International Investor Relations. Note: Growth trends of metrics are versus the comparable year ago period. 17
Cross border volume
-40%-35%-30%-25%-20%-15%-10%
-5%0%5%
10%15%
14/03/202
0
21/03/202
0
28/03/202
0
04/04/202
0
11/04/202
0
18/04/202
0
25/04/202
0
02/05/202
0
Switched volume
Switched volume US Rest of World
-30%-25%-20%
-15%-10%-5%0%
5%10%15%20%
25%
14/03
/2020
21/03
/2020
28/03
/2020
04/04
/2020
11/04
/2020
18/04
/2020
25/04
/2020
02/05
/2020
Switched transactions-60%
-50%
-40%
-30%
-20%
-10%
0%
14/03
/2020
21/03
/2020
28/03
/2020
04/04
/2020
11/04
/2020
18/04
/2020
25/04
/2020
02/05
/2020
Cross border volume
© 2020 – European Savings and Retail Banking Group / BRU
COVID-19 Impact on card transactions
Source: Visa Inc Investor Relations. Note: Growth trends of metrics are versus the comparable year ago period. 18
© 2020 – European Savings and Retail Banking Group / BRU
Poll
• Since the Corona crisis hit your region, has the number of payment transactions (cash and cashless) you personnaly make changed?• During the crisis I made less payment
transactions• During the crisis I made the same number
of payment transactions• During the crisis I made more payment
transactions• n = 183
19
147; 80%
23; 13%
13; 7%
© 2020 – European Savings and Retail Banking Group / BRU
Poll
• Since the Corona crisis hit your region, how has the way you pay personal transactions changed?• During the crisis the share of cash
transactions of total transactions decreased• During the crisis the share of cash
transactions of total transactions remained the same
• During the crisis the share of cash transactions of total transactions increased
• n = 167
20
127; 76%
26; 16%
14; 8%
© 2020 – European Savings and Retail Banking Group / BRU
COVID-19 Payment-related observations
• At announcement of lockdowns: increase in cash withdrawals.• Promotion of cashless payments.• Promotion of contactless payments, increase of contactless limits.• Decrease in cash withdrawals (reports of down to 50% of pre-COVID-19 levels).• Decrease in card transactions (reports of down to 70%-80% of pre-COVID-19
levels).• Shift to remote transactions, chargebacks, refunds.• Impact on customer behavior when restrictions will be relieved yet unclear.
21
Chairman, Banknote Ethics Initiative; Former Head of Banknotes, EuropeanCentral Bank
Antti Heinonen
Antti Heinonen has been the chairman of the Banknote Ethics Initiative since its inception in 2013. He was the chairman of the Central Bank Counterfeit Deterrence Group, reporting to G10 Governors, between 2008 and 2012 and the Director, Banknotes at the ECB from 1998 until 2008. He chaired the Banknote Committee of the European System of Central Banks for more than 10 years and the Eurosystem Cash Changeover Co-ordination Committee in 2001 and 2002. Prior to joining the ECB he was the chief cashier for the Bank of Finland. He holds degrees in economics and mathematics from the University of Helsinki, and has written several books on banknotes and their history.
Annual growth rates of banknotes in circulation vary significantly
0
10
20
30
40
50
60
- 10 < -10 < -5 -5 < 0 0 < 5 5 < 10 10 < 15 15 < 20 20 < 25 > 25
year 2018
Number of currencies
Annual growth rate of banknote circulation in value terms %
One size does not fit all (even in the future)
0
10
20
30
40
50
60
- 10 < -10 < -5 -5 < 0 0 < 5 5 < 10 10 < 15 15 < 20 20 < 25 > 25
year 2018
year 2016
Number of currencies
Annual growth rate of banknote circulation in value terms %
Economist, Weiden TechnicalUniversity of Applied Science
Franz Seitz
Professor Franz Seitz teaches Economics with a special focus on Monetary Policy and Financial Markets at Weiden Technical University of Applied Sciences. He is author of numerous articles in national and international journals. His main fields of research are monetary theory and policy, financial markets and banking as well as payments markets, especially cash in circulation. For many years now, Professor Seitz is acting as a consultant in different projects for central banks, commercial banks and financial as well as non-financial corporations.
Cash at the POS
Source: ECB (2018)
0
4
8
12
16
20
24
2012 2013 2014 2015 2016 2017 2018 2019
Canada China JapanSweden Switzerland UKUS euro area
Cash relative to GDP (%)Cash relative to GDP (%)
Worldwide, cash in circulation relative to GDP was about 10% in 2018, compared to 8% in 2011!
Source: BIS, National Central Banks
Cash: different motives
outside euro area other euro area countriesstore-of-value transaction balances
5-10%
20-25%
45%
25%
The case of Germany
5-10%
20-25%
45%
25%
The case of Germany§ domestic transaction demand§ availability of alternative means of
payment (payments instruments innovation)
§ hoarding and opportunity-costs
§ mistrust in the financial (banking) system§ size of the shadow economy§ precautionary demand and (financial and
economic) crises related demand§ disasters§ uncertainty§ foreign demand Source: author’s calculations
Head of Innovation and Payments, European Savings and Retail Banking Group.
Diederik Bruggink
Diederik Bruggink holds responsibility at the twosavings and retail banking associations for all innovation and payments topics from a worldwideperspective. In that role, he analyses the multiple dimensions of the payments market, proposing and assisting in agreeing member positions with respect to their payments’ and related businesses. He alsoadvocates the associations’ positions on paymentswith policymakers, regulators, standardisation bodies, industry associations, and enabling a constant member dialogue on developments, with a particular focus on innovation. He is one of the key authors of the first three editions of the World Payments Report, makes regular appearances at industry conferences and serves as a member of the editorial board of, and regulator contributor to, the Journal of Payments Strategy & Systems. He is also a Board Member of the European Payments Council (EPC) and within the EPC he is also the Chair of the Cash Efficiency Working Group.
© 2020 – European Savings and Retail Banking Group / BRU
Instant payments – the new normal?
• As per the Commission, instant payments can assist the ambitions of strengthening the international role of the euro and achieving European sovereignty in payments.• Instant payments launched in 2017, critical mass expected by 2020. Adherence
and Reachability perceived as issues.• In Commission’s view, by the end of 2021 a full rollout of instant payments
should have been established, meaning that from then everyone should be able to use instant payments everywhere and in all situations.• Action Plan on FinTech including a Strategy on an Integrated EU Payments
Market (non-legislative proposal) expected by Q3 2020.
30
© 2020 – European Savings and Retail Banking Group / BRU
Different consumer preferences exist when it comes to retail payments
Source: European Central Bank – Statistical Data Warehouse
31
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
BE BG CZ DK DE EE IE GR ES FR HR IT CY LV LT LU HU MT NL AT PL PT RO SI SK FI SE UK EU
Relative Share of Cashless Transactions in the EU (2018)
Credit transfers Direct debits Cheques E-Money Other Cards
© 2020 – European Savings and Retail Banking Group / BRU
Remarkably, over the same time period the demand for cash (banknotes) is showing an increase as well
Source: European Central Bank – Statistical Data Warehouse
32
0
200.000
400.000
600.000
800.000
1.000.000
1.200.000
1.400.000
2014 2015 2016 2017 2018
Euro banknotes in circulation (millions)
9,40%
9,50%
9,60%
9,70%
9,80%
9,90%
10,00%
10,10%
10,20%
2014 2015 2016 2017 2018
Euro currency in circulation as percentage of GDP
CAGR 5,2% CAGR 1,2%
© 2020 – European Savings and Retail Banking Group / BRU
At the same time natural cash distribution points –branches and ATMs – are decreasing
Source: European Central Bank – Statistical Data Warehouse
33
0
50.000
100.000
150.000
200.000
250.000
2014 2015 2016 2017 2018
Number of bank offices (euro area)
290.000
295.000
300.000
305.000
310.000
315.000
320.000
325.000
330.000
2014 2015 2016 2017 2018
Number of ATMs (euro area)
CAGR - 5,2% CAGR - 1,9%
© 2020 – European Savings and Retail Banking Group / BRU
Access to cash will likely become a policy issue during 2020 under pressure of consumer associations
As per EU consumer associations:Cash is a public good which calls for public measures by the EU: • All physical traders are obliged to accept payments in cash. • Consumer access to cash is free of charge. • There is a minimum availability and balanced geographical distribution of ATMs. • ‘Cash withdrawals in shops’ are promoted, as a complementary option to the use
of ATMs.
Source: Bureau Européene Unions de Consommateurs Paper: CASH VERSUS CASHLESS: Consumers need a right to use cash
34
© 2020 – European Savings and Retail Banking Group / BRU
What to expect?
• Impact on customer behavior when restrictions will be relieved yet unclear.• In markets that gradually open up again the number of cash withdrawals and
card transactions are showing slight increases.• Will customers be locked-in current digital payment wallets?• What will be the impact of longer lower volumes on the actors in the cash
business?• Will there still be (investment) appetite to invest in new digital payment
methods?• Consumers will be the judges initially.
35
Chairman, Banknote Ethics Initiative; Former Head of Banknotes, EuropeanCentral Bank
Antti Heinonen
Antti Heinonen has been the chairman of the Banknote Ethics Initiative since its inception in 2013. He was the chairman of the Central Bank Counterfeit Deterrence Group, reporting to G10 Governors, between 2008 and 2012 and the Director, Banknotes at the ECB from 1998 until2008. He chaired the Banknote Committee of the European System of Central Banks for more than10 years and the Eurosystem Cash Changeover Co-ordination Committee in 2001 and 2002. Prior to joining the ECB he was the chief cashier for the Bank of Finland. He holds degrees in economicsand mathematics from the University of Helsinki, and has written several books on banknotes and their history.
Cash grant is a form of universal social protection
“Cash grants and other forms of universal social protection can play a huge role in tackling inequality and protecting vulnerable people, and they are critical in response to this crisis”.
Source: OXFAM MEDIA BRIEFING 09 APRIL 2020
Economist, Weiden TechnicalUniversity of Applied Science
Franz Seitz
Professor Franz Seitz teaches Economics with a special focus on Monetary Policy and Financial Markets at Weiden Technical University of Applied Sciences. He is author of numerousarticles in national and international journals. His main fields of research are monetary theoryand policy, financial markets and banking as wellas payments markets, especially cash in circulation. For many years now, Professor Seitzis acting as a consultant in different projects for central banks, commercial banks and financial as well as non-financial corporations.
Implications for the future role of cash and payments
Is there a lower threshold? What does it mean?
Cash demand, crises and central bank digital currencies
The role of negative interest rates
The role of central banks
-1
0
1
2
3
4
5
6
7
12
16
20
24
28
32
36
40
44
00 02 04 06 08 10 12 14 16 18 20
EONIA (%; left scale) vault cash(€ bn.; right scale)
Vault cash of banks in GermanyVault cash of banks in Germany
Senior Consultant, Demos Helsinki
Petteri Lillberg
Petteri Lillberg is a Senior Consultant at DemosHelsinki, focusing on strategy, foresight and societalimpact across industries and organisations.A noted columnist and international speaker, Petteriholds an M.Phil from Cambridge University. He alsoserves at the board of Unicef Finland.
Variables set the framework and direction for major areas of change:
Tensions have variables
Economic recovery Technology MoneySociety Sustainability
and Inclusion
Trajectory of Global warming
Distribution of wealth
Surveillance vs. Anonymity
Back to normal vs New Normal
Recovery leadership
Supply chain resilience and security
Governance of platforms
Digital data ownership
Issuance of Money
Payment instruments
Tensions Sustainability& Inclusion
Society EconomicRecovery
Technology Money
Variab-les
Trajectory of Global
Warming
Distribution of wealth
Social priorities
Surveillance vs
freedom
Security and resilience of
supply chains
EconomicRecovery
Governanceof platforms
Digital data ownership
Issuance of Money
PaymentInstruments
VALUE 1 Mitigation
VALUE 2 Adaptation
VALUE 3 Uncontrolled
VALUE 4 Denial
Futures Table – An example
Tensions Sustainability& Inclusion
Society EconomicRecovery
Technology Money
Variab-les
Trajectory of Global
Warming
Distribution of wealth
Social priorities
Surveillance vs
freedom
Security and resilience of
supply chains
EconomicRecovery
Governanceof platforms
Digital data ownership
Issuance of Money
PaymentInstruments
VALUE 1 Mitigation Fragment-ation
Transfor-mation
StateSurveillance
Stregnthen BCP
Global recovery lead by few competitive
regimes
States controls
platforms
Individuals owntheir data
Central Bank Digitalonly
VALUE 2 Adaptation Increasing inequality
Individual rights
Surveillance capitalism
Relocate Sourcing &Production
Regional governance
leads comeback
Regulatedplatforms
States control data
Commercial Bank
Fragmen-tation
VALUE 3 Uncontrolled Efforts to reduce inequality within
countries
Economic growth
Regulatedsurveillance
Diversify sourcing
Local recoveries
Unregulatedplatforms
Privatecorporations
sell data
BigTech Diversification
VALUE 4 Denial Efforts to reducedivide betweenrich and poor
countries
Equality No surveil-lance
Sovereignty isback
Post-WW2 global
institutions lead recovery
Platformscontrol states
Data is the new currency
Anyone Cash
Futures Table – An example
45
Question
What other factors will influence the future of cash? Open question. Respond in the chat.
47
Some Take-Aways• Covid has impacted consumer payment
behaviour but future behaviour is unknown
• Recession could lead to a shift to cash as a
budget management tool
• Demand for a trusted, secure and universal form
of money
• Consumers view cash as a public good
• Cash in circulation likely to increase but
transactional demand could continue to decline
• Need to rethink the cash cycle to ensure access,
acceptance and resilience
• Policy options: regulation or subsidisation
Next Steps
• The future of cash is not written.
• This FL project is ongoing and open
source
• Recording will be available in 24 hours
• Second Webinar on 9th of June
– Scenario-Planning exercise
• Third Webinar 30th of June
• Follow us on www.cashessentials.com
• glp@agis-consulting.com
@Cash_Essentials
CashEssentialswww.cashessentials.org
guillaume.lepecq@agis-consulting.com
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