Cash Report 2011 Table of contents Foreword 2 1 Introduction 4 n Management Summary n Approach and methods 2 The cash domain in the Netherlands 8 n What is money? n Money is trust n How much money is in circulation? n Is the volume of cash in the Netherlands growing? n How often is cash used? n The cash-cycle n Discussion bodies n Laws and regulations 3 Cash and the consumer 20 n The consumer decides n Cash is anonymous n Cash is certainty n Cash is direct n Cash is tangible n Cash is (un)safe n Cash is expensive 4 The stakeholders and their position in the cash-cycle 32 n Banks and credit card companies n Retail establishments n Public sector n Cash sector 5 The future of cash 40 n The cashless society n Scenarios for the future Appendices 44 Bibliography List of interviewees Organisations* Titles* Acknowledgements 49 Publication details * Note: Organisations and titles in the text marked with an * are taken on page 48. CASH REport 2011 ENv1.1 For centuries, cash has been the most seeking – a new balance in the propor- important means of effecting payment tion of cash and electronic payments. transactions. Not until the 20th century The two main drivers in this process did serious competition arrive in the are efficiency (including in costs) and form of cheques, various electronic sub- safety. Ultimately, however, it is the cus- stitutes and debit and credit cards and, tomer who decides how to pay. since the beginning of this century, with a variety of electronic and other contact- From a social standpoint, the Nether- less means of payment. Accordingly, the lands has much to gain from a pay- relative share of cash used in retail trans- ments system that is robust, efficient, actions has experienced a decline over safe and as inexpensive as possible. The the last decade. Whether and to what key question, as we see it, is this: What extent this trend will continue is virtually shape should such a system take in or- impossible to predict. der to meet the demands of the future? Moreover, are the various stakeholders Various indicators suggest that a wholly – most importantly the major banks, the cashless society is unrealistic. Rather, De Nederlandsche Bank (DNB)*, retail we seem to be moving towards – or establishments, central government and 2 › 3 sector partners – capable of jointly reali- sing such a payments system? ‘Cash is here to stay, which means we also need to have a plan in place The payments system in the Netherlands is a current focus in various discussions for dealing with it.’ platforms, which involve most of the Jos van der Stap, forenamed stakeholders, and in which a National Coordinator on Robbery, Korps Landelijke Politiediensten (KLPD) range of stakeholder interests are at play. The banking world is pushing for a transi- tion from cash to electronic payments, as evidenced in both banks’ day-to-day safer and more efficient. This Cash Report services and the information they put out seeks to provide a unbiased description to the public. Retail establishments are of the positions of all stakeholders in the struggling to strike the difficult balance cash domain. To this end, we have left between safety, costs, competitive position suitable representatives of leading stake- and consumer convenience. The central holders in the cash domain to speak in government, for its part, has diverse stakes their own words, limiting ourselves to in payment transactions, reflecting its diver- elucidating how their views tie together sity of public roles, and therefore cannot as based on our own desk research. claim any single, unambiguous position. Consumer demands play only a very This document seeks to lay a factual limited part in policy formation, despite foundation for a more integral discussion the fact that they, for reasons elucidated in between all stakeholders on the most this Cash Report, are still making full use of desirable scenario – not least from the cash payments and are likely to continue public perspective – for our future cash to do so. transactions. The simple fact is that as long as there are cash transactions, both the individual consumer and society as a whole are served by ensuring that cash is as safe and efficient a means of payment as possible. Since cash circulates in a chain cycle, such assurance can only exist when Gert Askes all links in the chain are coordinated and Managing Director G4S Cash Solutions willing to continue investing in its main- The Netherlands/Belgium tenance. Banks, retailers, the government and the cash sector must step up their Paul van der Knaap joint efforts to develop a shared vision Director Solutions G4S Cash Solutions and strategy for making the cash-cycle The Netherlands/Belgium 4 › 5 1 Introduction 1.1 Management Summary This document seeks to provide an ‘It is a proven fact that people’s unbiased description of the position of patterns of expenditures depend on each stakeholder in the cash domain and discusses the various interests at play in the form their money takes.’ this domain and how they tie together. Henriette Prast, Professor of Personal Financial Planning Tilburg University Section 2 provides an overview of facts and figures, including how much money is in circulation, the frequency of electronic and cash payments and the average value of transactions. Though there is a clear safe. To conclude this section, we explore rise in the total volume of PIN transac- the question of whether cash currency tions, the volume of cash transactions is costs society more than cashless funds; as not yet showing any real signs of decline. it turns out, a question to which is there This indicates that the total volume of is no simple answer. transactions is continuing to grow in this country. This section also provides a de- Section 4 describes the position of vari- scription of the cash-cycle: cash changes ous cash domain stakeholders as regards hands constantly and has a life cycle that cash and the use of cash. Seeking to starts with production and distribution save costs, the major national banks are and eventually ends with destruction. pursuing a definite policy of discouraging the use of cash and promoting the use of Section 3 addresses the question of why electronic payment methods. And yet this cash continues to be the most common policy is not actually supported by any form of payment despite the success of hard data as it is almost impossible to paying by PIN card. Here we must look ascertain whether a cash payment costs to several unique attributes of cash such a bank more, as much or less than an as the fact that it is anonymous, tangible electronic payment. For retailers, cash is and allows ‘direct settlement’. The use both a blessing and a curse. Where major of cash also offers a number of definite retailers would prefer, for safety reasons, advantages from the consumer perspec- to do away with cash in their shops tive, including the possibility of budgeting altogether, small and medium-sized enter- expenditures. A common misconception prises (SMEs) tend to opt for cash or a is that the use of cash is perceived as un- combination of cashless and cash funds – either because they fear falling foul of Last but not least, Section 5 deals with customers, losing revenue or, occasio- the future of cash, premised on the nally, because cash payments are simply idea that it is unlikely that cash will ever convenient. And whilst other retail esta- entirely disappear. There are simply too blishments are not against cash in theory, many advantages to using cash, and too individual views differ widely. This section many drawbacks to relying – exclusively also discusses the position of the central or in part – on electronic payments. government, for which cash represents We may well ask whether the decline in an irreplaceable source of revenue. At cash transactions should even be seen the same time, it is in the government’s as a favourable development. In point of interest that as many payments as pos- fact, no payments system in the world – sible are made electronically. After all, including a funds transfer system – can electronic cash flows are more control- be sustained without backup. In the case lable and therefore simplify processes of transfer transactions, that backup is like taxation, combating black money cash. Not only can the critical systems and tracking down criminal monies. The that support cashless transactions be section concludes with a discussion of affected by major or minor malfunc- the position of the cash sector, which is tions but the security of data or other striving to build the safest and most cost- components can also be at stake. In efficient possible cash-cycle. The sector is such circumstances, cash will prove expected to undergo rapid development invaluable. Equally true, however, is that in the period to come, with existing ser- cash comes with certain drawbacks vice providers placing an increasing focus that need to be minimised in order to on chain management and evolving into keep the costs for society and for each total solutions providers. Before that can individual stakeholder as low as possible happen, however, a number of legislative, and to guarantee the safety of cash regulatory and other obstacles will first users. Since cash circulates in a chain cycle, need to be removed. such assurance can only exist when all links in the chain are coordinated and willing to continue investing in its main- tenance. The Cash Report 2011 ends by ‘Business owners are keen to deal with advocating an approach of envisioning cash in a way that’s safe and cost-efficient.’ possible scenarios and of cooperation between all parties involved in the cash- Els Prins, Secretary for Copyright, Payments and Criminality, MKB Nederland cycle in order to shape a shared vision of the future of cash in the Netherlands and keyed to realising the safest and most efficient cash domain.