Investing in Cash for the Future.

Against the now familiar calls of a digital payment revolution, it seems that in many countries, cash is holding strong. The European Central Bank reported growth in demand for cash during the pandemic with the total value of Euro bank notes increasing from €1.3tn (US$1.5tn) at the end of 2019 to €1.4tn (US$1.7tn) at the end of 2020. According to the ECB’s findings one of the key reasons for this increase is consumers’ views that cash is useful for “precautionary purposes” and they have continued to hold and use it through the COVID-19 pandemic. In the euro area, consumers made 109 billion cash payments worth €1,722 billion and 38 billion card payments with a value of €1,633 billion in a year.

Indeed the European Central Bank’s findings show that a significant proportion of European citizens still prefer cash – in Germany 43% prefer cash compared to 31% preferring cashless. In Austria 42% compared with 31%, in Cyprus 48% against 16% and Malta 37% compared to 33%.[1]

In the UK specifically, the value of banknotes in circulation increased from £3.96 billion in 2020 to £4.54 billion in 2021. Vaultex is are also seeing a 13% increase in cash volumes since the start of 2021.  With the introduction of the new £50 polymer note, marking the last in the series of polymer upgrades in the UK, it shows the Bank of England’s continued faith in and support of cash.

In Saudi Arabia, the Saudi Central Bank has announced a new banknote of SR200 denomination to mark the fifth year of launch of the Kingdom’s Vision 2030. Vaultex Consulting continues to support cash management projects in the kingdom and wider Middle East region with organisations keen to optimise and future proof their cash management infrastructure.

A similar commitment to cash can be seen in Russia, with a planned upgrade to their notes in 2022. The three year project plans to address bank note security, again demonstrating that cash is here to stay. The project is taking place despite more of the country moving towards digital payments and the central bank recording more cash free transactions in 2020 than ever before.

In Nigeria, recent studies have shown that despite digital payment options being available and encouraged through educational campaigns, over 90% of the population still prefer cash. Not only is it used in the purchase of goods and payment of services, deliveries even from online purchases are made in cash when they are handed over to the buyer. The central bank and government therefore will have to factor in this reluctance to digital payments when planning. If cash is here to stay, then central banks need to look at the most cost effective and efficient way to process it. There are a number of ways that Vaultex Consulting can help, including looking at operational changes such as using data effectively, and automating parts of the cash management process. We can also help change national operating models and existing infrastructures within the countries to make the various components of cash management more efficient. Vaultex Consulting has conducted several high-profile assignments across the globe and are currently delivering advisory services to central banks in Eastern Europe and Central Asia. Read more about our case studies here>>