Plan to save cash: Should we force banks and shops to accept and provide cash?

Research by the Reserve Bank in 2020 indicated more than a dozen reasons why people felt it would be wrong for society to go cashless.

The Reserve Bank of New Zealand Te Pūtea Matua​ has published a blueprint to save cash.

It includes requiring retailers to accept cash, and letting banks operate a shares ATM network, and possibly even co-own a “utility agency” to distribute cash around the country.

“We are worried that if we don’t act soon, the cash system won’t be able to perform the roles required of it,” said Christian Hawkesby​, the Reserve Bank’s assistant governor.

“Falling cash use for everyday needs and the retreat from cash services by banks and retailers threaten financial and social inclusion for some, and have the potential to undermine the important role cash provides under-pinning confidence in private money in bank accounts,” he said.

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“We call this acting as a value anchor. In times of uncertainty, people seek the security of cash, knowing money can be withdrawn from bank accounts into cash provides confidence that money in bank accounts is safe too,” Hawkesby​ said.

The Reserve Bank's Future of Money: Cash System Redesign (Te Moni Anamata: He Whakahou i te Pūnaha Moni) sets out options for redesigning the cash system.

The system is threatened as banks close branches and pull out ATMs, an increasing number of shops refuse to accept cash, and members of the public continue to switch to making digital payments, according to the paper.

The number of ATMs operated by banks is falling, but not as fast as banks are shutting branches.
DOMINICO ZAPATA/STUFF
The number of ATMs operated by banks is falling, but not as fast as banks are shutting branches.

The big five banks (ANZ, Westpac, ASB, Bank of New Zealand, and Kiwibank) have nearly half​ the number of branches they had in 2011, and some rural areas had become “cash deserts”, the paper says.

Despite voting with their wallets, Reserve Bank research suggests people care about whether other people have access to cash, especially vulnerable, low-income households, which are the highest users of cash.

Despite that, demand for cash is increasing, both for households to store wealth outside the banking system, and in the informal economy, which includes criminal uses.

Adjusting for population growth and inflation, cash in the hands of the public has increased by 155 ​per cent since 1995,​ and 59​ percent since 2010​, Reserve Bank data shows.

More than half a million dollars in cash was also located along with an air pistol during an operation to crack a meth-smuggling ring.
SUPPLIED/NZ POLICE
More than half a million dollars in cash was also located along with an air pistol during an operation to crack a meth-smuggling ring.

Banks, and retailers, with have been hastening the switch away from cash, the Reserve Bank says.

“Banks have been transferring cash-related costs to their customers, who must now spend more time travelling to ATMs or bank branches or incur costs using pay-to-use ATMs,” it says.

“Banks may prefer a digital-dominant (or digital-only) relationship with customers, but that has consequences for cash availability, which in turn affects the value anchor, which, in turn, we argue underpins private money,” it says.

Ensure cash remains easily obtained and accepted could be seen as part of banks’ social licence to operate, the Reserve Bank says, and they may have to pay more of the estimated $600million​ to $900m​ annual cost of running the cash system.

That could include banks being required to pay merchants like shops for providing “cash out” services, which happens in Singapore.

This could be coupled with passing a law to require shops, and government agencies, to accept cash, possibly exempting smaller shops.

The Reserve Bank plan focuses on trying to create the most efficient cash system possible, supported by laws requiring banks to provide cash services at low cost to customers.

Efficiency would be improved if banks were allowed to co-own and operate a “utility agency” to manage the cash system, a proposal that has a parallel in Payments NZ, which was governs the country’s core payment systems, and is co-owned by the banks.

Thought needed to be given to the future of coins, which were especially costly to handle, the Reserve Bank said.

Christian Hawkesby, the Reserve Bank’s assistant governor, says action is needed now to ensure the cash system remains functional.
Ross Giblin/Stuff
Christian Hawkesby, the Reserve Bank’s assistant governor, says action is needed now to ensure the cash system remains functional.

Climate change had to be considered, the Reserve Bank said.

“Disruption caused by climate-related events can create spikes in demand for cash that are difficult to manage. Moreover, the cash system itself has a significant carbon footprint due to the need to transport cash around New Zealand,” it said.

Consultation on the Reserve Bank issues paper closes on March 7.