Globally, the volume of cash in circulation continues to rise. It’s a sign of its ongoing importance, particularly in times of uncertainty and crisis. For a well-functioning economic system and its stability, the continuous supply of cash is fundamental. Therefore access, availability, and acceptance of cash to people and businesses is essential.
At the same time, certain developments affect the cash demand and supply, meaning the ability to adapt efficiently to changing conditions in the cash cycle is growing more important. The pivotal factor here is resilience.
A resilient cash cycle remains stable even in the face of unforeseen and severe events and demonstrates flexibility in accommodating fluctuations in cash demand. Achieving this requires transparent information flow across process steps, appropriate resources, and close collaboration among all participants within the cash cycle. This includes central banks, commercial banks as well as cash-in-transit companies.
One prerequisite of a resilient cash cycle is a strong ‘breathing’ cash infrastructure that ensures business continuity and the availability of cash, even in the event of critical incidents. A crucial aspect of such an infrastructure is what is known as ‘cash visibility’. In other words, providing transparent information across the cash-cycle processes, including, for example, which occurrences in which regions have a particular impact on cash demand. This allows the participants of the cash cycle to forecast the impact of certain developments and to respond accordingly with flexibility and foresight in the cash supply.
Take, for example, an environmental disaster that hugely increases demand for cash. Central and commercial banks can ultimately benefit from increased data-based information around the impact of previous disasters. Predictions can be made on the levels of cash needed, the denominations required and how it should be distributed and processed regionally.
With this level of planning, cash cycles can absorb sudden shocks and availability restrictions can be avoided. Machine learning algorithms can provide the edge when commercial banks need to predict cash demand for cash centres and cash points, while also leading to additional opportunities for resource optimisation. Financial professionals, including corporate treasurers, can gain peace of mind from a reliable and consistent flow of cash. This also helps to ensure that cash remains a trusted means of payment, both in the business and consumer world.
Cash payments should always be an option, while also remaining attractive for retailers. Delivering on this means upholding the efficiency of cash management
There’s little doubt that payment options have proliferated since the pandemic and cashless payment transactions have increased at the point of sale. As the most inclusive and universal means of payment, cash continues to ensure the greatest participation in payments for everybody. If, for example, older or disadvantaged people, especially in rural areas, find it difficult to access cash because it’s not available, it is discriminatory.
Restricted access can never be in the interests of consumers. Cash payments should always be an option, while also remaining attractive for retailers. Delivering on this means upholding the efficiency of cash management.
Further automation in cash processing, digitalisation, and standardisation within the cash cycle are steps that can be taken to achieve this. In addition, alternative solutions like cashback at merchants' checkouts can bridge gaps in cash supply and offer benefits for retailers.
The path towards a zero-carbon business landscape is increasingly prevalent within governments, central banks, commercial banks, cash-in-transit operators, and the wider business community. A future-proof cash cycle is not only resilient in anticipating changing conditions in the cash supply, but it also meets the requirements of a sustainable provision and handling of cash.
Balancing sustainability and resilience within the cash cycle poses some challenges. Measures promoting resilience might conflict with sustainability goals. Standardisation emerges as a positive influence on both fronts.
Some solutions have already been created and are being put to good use among commercial banks and cash centres. For instance, standardised, sealable trays for transporting banknotes improve distribution efficiency, reduce waste, and contribute to sustainability. Although tensions persist between resilience and sustainability, technical innovations and collaborative efforts among cash-cycle stakeholders pave the way forward.
In a world grappling with climate change and geopolitical uncertainties, cash remains a universal and inclusive means of payment. Strengthening the resilience and sustainability of the cash infrastructure can benefit all stakeholders in the cycle thanks to process improvements, standardisation, enhanced interoperability, and data exchange, ensuring it has a key role to play in the future.
Wolfram Seidemann is CEO of Giesecke+Devrient Currency Technology