Bundesbank study: The future of cash use
How will cash be used in the future? A recent Bundesbank study looks into that very question, outlining three different scenarios for cash payments in 2037.
We wanted to get a sense of the social and economic setting in which cash will be embedded in the future and be able to use that as a basis for devising possible plans of action, said Bundesbank Executive Board member Burkhard Balz, whose remit includes cash. Presenting the results of the study, Mr Balz explained that
the idea of the future scenarios is to help set the right course so that cash remains generally available and accepted as an attractive means of payment and store of value going forward.
The Bundesbank has a statutory mandate to ensure that there is always a sufficient quantity of high-quality euro cash in circulation in Germany. It keeps retailers and banks supplied with cash, withdraws counterfeit money from circulation and replaces damaged coins and banknotes. Although cashless payment instruments are playing an ever greater role these days, cash is still the most widely used means of payment in Germany – especially for smaller amounts and everyday purchases.
Potential visions of the future show how cash might be used
The scenarios constructed as part of the study are not forecasts, but rather potential visions of the future. They illustrate the consequences of possible developments and so act as an aid for decision-makers in a holistic approach to strategic planning.
The scenario “Hyperdigital payment world” depicts a highly digitalised world in which cash has all but disappeared from the everyday life of most people. Geopolitical shifts and digitalisation have provoked economic and societal changes. Digitalisation and the use of artificial intelligence are the anchor for prosperity. All areas of life, including payments, are highly digitalised. There are only a few bank branches and ATMs left, and it is no longer possible to withdraw cash at the point of sale because people barely use coins and notes to pay in shops anymore.
The second scenario, “A cash renaissance payment world”, posits a partial reversion to cash and its advantages. In response to global supply chain problems, people have increasingly turned back to buying locally and regionally. On top of this, recent experiences have upped public awareness of the need to prepare for disasters and crises. With 1 and 2 cent coins having been scrapped, price rounding rules having been introduced and payment machines being used more and more, people find it fast and straightforward to use cash. In this scenario, cash usage initially declined but then went on to stabilise in the 2030s.
By contrast, the scenario “The vanishing hybrid payment world” reflects an environment in which whether people use cash is very much dependent on their circumstances and attitudes. In the retail sector, customers are encouraged to make cashless payments. Access to cash is steadily deteriorating and the use of cash is dying out.
The preservation and use of cash should not be taken for granted
In all three scenarios, the share of cash in total transactions declines over the next 15 to 20 years compared with today. As Burkhard Balz noted, however, the results do not show cash disappearing completely in any future scenario. Nevertheless, access to and acceptance of cash is not fully guaranteed in two out of three payment environments. This would result in virtually no freedom of choice and the stabilisation function of cash in times of crisis being jeopardised. However, in a representative survey as part of the study, 93% of respondents indicated that they would prefer to decide for themselves whether to pay in cash or not. Mr Balz stated further that policymakers and all parties involved in the cash cycle would have to act to meet this desire for freedom of choice in terms of payment methods.
The study shows that the preservation and widespread use of cash should not be taken for granted.
In order to address these challenges, the Bundesbank would, amongst other things, like to strengthen its cooperation with cash handlers and its dialogue with civil society. It will invest in its efficient and future-proofed branch network and continue its academic analyses in order to keep fulfilling its statutory mandate in the future and ensure that cash remains a core physical product.
Interviews and extensive research
The study commissioned by the Bundesbank was prepared by the service provider VDI/VDE Innovation + Technik and the opinion research institution Sinus, from February 2022 to November 2023. It uses interviews with academics, cash handlers and social associations, as well as extensive literature research and a representative online survey to identify a number of key factors that could have an impact on the future development of cash. These key factors include the general acceptance of cash, for example in retail or local public transport, access to cash, for example via ATMs or at the point of sale, consumer requirements for means of payment and the distribution of various cashless means of payment.
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