Cash Helps Europe Manage Uncertainty
Cash is valuable tool for managing times of uncertainty, ensuring payments can be made by anyone, any time, with no additional costs. The European Central Bank recently suggested rising demand for physical money could be linked to this unique quality, and is committed to safeguarding it ‘well into the future’.
In a mid-June speech at the Fifth International Cash Conference ‘Cash in Times of Turmoil’, Fabio Panetta, Member of the Executive Board of the ECB, explained that increasing digitalisation would not mean the end for cash, which has a ‘crucial role’ to play in the euro area and has seen especially high demand throughout the pandemic.
The Eurosystem is committed to safeguarding cash. We are taking concrete steps to guarantee that cash continues to be available and accepted as a means of payment well into the future—including if we launch a digital euro.
Following a pandemic-driven rise in e-commerce and decrease in traditionally cash-intensive activities such as leisure, travel and cultural events, Europe saw an overall decline in cash payments during 2020. In parallel, there was a huge increase in demand for banknotes—€190 billion—between March 2020 and May 2021.
Panetta notes cash offers unique benefits that underpin its constant demand. He cites it as ‘often the only way to guarantee financial inclusion’, since it allows users to make payments with no additional costs, and can be used by anyone, from the very young to the very old. It’s also a valuable aid to financial education as children can learn about spending and saving with pocket money.
Privacy is also highlighted as an irreplaceable advantage of cash, and is particularly relevant in an increasingly digital age and as people become more aware of how much personal data is collected and subsequently monetised when paying with cashless options.
Consumers legitimately value privacy when making payments, which is best provided by cash. As the digital economy grows, consumers are increasingly concerned about how their data are collected and used.”
Furthermore, Panetta describes euro banknotes and coins as ‘the face of the European construction’, providing the most tangible and visible symbol of European integration and cooperation.
Given the many functions served by cash—at all levels of the economy—Panetta expects cash to survive the digital revolution. He sees the role of the ECB as ensuring the continued availability of cash, so people don’t have to travel too far to access it, and also its continued acceptance by businesses.
Evidence suggests that without cash, both merchants and consumers—particularly those with low income—would be significantly worse off. This may also be the case for other segments of the population.”