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Declining use of cash a problem for society

Rob Stock rob.stock@stuff.co.nz

The Reserve Bank of New Zealand Te Pu¯ tea Matua has published a blueprint to save the cash system.

It includes requiring retailers to accept cash, and letting banks operate a shared ATM network, and possibly even co-owning 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.

‘‘In times of uncertainty, people seek the security of cash, knowing money can be withdrawn from bank accounts into cash provides confidence that money in bank accounts is safe too.’’

A Reserve Bank report has set out options on 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 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 per cent since 2010, Reserve Bank data shows.

Banks and retailers 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.’’

Ensuring 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 $600 million to $900m annual cost of running the cash system.

That could include banks being required to pay merchants such as shops to provide ‘‘cash out’’ services. 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.

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

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

‘‘. . . if we don’t act soon, the cash system won’t be able to perform the roles required of it.’’

Christian Hawkesby Assistant governor, Reserve Bank

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2021-12-01T08:00:00.0000000Z

2021-12-01T08:00:00.0000000Z

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