Cash will not abandon the market so easily despite digital payments increasing and people using banknotes and coins less frequently. Are cash payments being abolished?
ECB Executive Board member Piero Cipollone explains why cash remains essential and how the ECB works to ensure it remains readily available and user-friendly.
He explains that euro banknotes and coins will continue to play a crucial role as a reliable means of payment and store of value both within the eurozone and abroad.
“Currently, 30.4 billion banknotes are in circulation, with a total value of €1.6 trillion. After stabilising when we raised interest rates – which made holding large amounts of savings in cash less attractive for people – these figures are increasing again, at an annual rate of 2.3% in volume and 1.7% in value. To put this in perspective: banknotes worth almost €5,000 for every eurozone citizen are circulating today,” he notes.
He points out that demand for cash during crises, such as the 2008 financial crisis, the European public debt crisis and the COVID-19 pandemic, underlines their importance, particularly in turbulent times.
The ECB and national central banks maintain adequate banknote reserves and effective distribution channels to ensure they are ready to respond to these sudden increases in demand.
The ECB Executive Board member notes that good access to cash is fundamental to ensuring their smooth operation. The proposed regulation on cash legal tender emphasises the need for proper geographical distribution of infrastructure to ensure availability of banknotes and coins throughout the eurozone.
“However, the reduction of bank branches due to banking sector consolidation, combined with the decrease in the number of ATMs, poses significant challenges,” he notes.
He indicates that besides banks, retailers in certain eurozone countries also offer limited cash withdrawal services, known as cashback or cash advances, for recycling surplus cash.
“From the consumer’s perspective, these services are convenient but cannot replace the basic cash services provided by banks. First, cashback allows withdrawal of only small amounts (usually up to €100 or €200) and does not allow people to deposit cash into their bank accounts. Second, and equally important, retailers are not obliged to offer cashback services, and even when they do, this still depends on the availability of surplus cash from previous transactions”.
He emphasises that it is essential to ensure an adequate level of access to cash services throughout the eurozone.
Specifically, local provision of cash services by banks and integrated ATM networks remain essential – mainly because these are critical for individuals and retailers to withdraw banknotes and coins from bank accounts and deposit cash into them, thus maintaining cash circulation within the community.