Cash: important for a fairer economy – Central Bank

An interesting economic story over the past year has been the growth of grassroots support for cash payments. In the context of the Covid-19 pandemic and the now debunked rumors that coins and banknotes could be important vectors of transmission of the virus, it may seem surprising that public support for cash is increasing. in addition to hear.

In the we, a new obligation for each store to accept cash comes under pressure from consumer organizations and actions from bipartisan lawmakers. Although many Americans have embraced greater use of electronic payments and online shopping, most payments made in the we are always made in cash. The effort by consumers to protect their ability to pay in cash is as vigorous as any debate about monetary policy, not least because it is an issue that directly affects nearly all citizens. Either way – pun intended – these problems are two sides of the same coin.

Part of the surge in interest in cash payments is due to soaring inflation. As supply chains stretch and signs saying ‘people are wanted’ start to appear across the board. we, the scarcity of supply and talent produce inflationary pressures, both at home and abroad. In the financial sector, this is fueling the debate on monetary policy. In the real economy, as the public braces for higher prices, millions of Americans are trying to find a way to budget for their increasingly expensive weekly store. A common recommendation from debt counselors to households trying to grow their money on a daily basis is to budget everything in cash, as physical money is easier to visualize and psychologically harder to spend.

Another reason for the policy of the right to pay in cash is that different parts of society use cash for different purposes. Although many rich and well-educated people continue to use cash – out of habit – as a store of value or as insurance against emergencies, these groups are more likely to use digital payments. Their support for a cash payment mandate is generally based on an individual’s right to make purchases in complete anonymity. On the other hand, the under-banked and unbanked of the we are estimated by the Federal Reserve to constitute around 18% of the adult population, but, in some social groups, up to 40% use cash out of necessity – it is their only means of payment. For these groups, if businesses are induced by electronic payment companies to refuse cash, this will result in further economic discrimination and exclusion.

In response, organizations such as Consumer Action and the Consumer Federation of America (CFA) draw attention to the impacts of a business refusal to accept cash. In a joint letter to we lawmakers, Linda Sherry of Consumer Action and the CFASusan Grant said that “the economic upheavals caused by the pandemic have fallen most directly and hardest on low-income populations; people in inner city neighborhoods and in rural areas; the unemployed and underemployed; old people; and racial and ethnic minorities. It is crucial that people can get basic necessities in their local stores and restaurants without being turned away. because they want to pay in cash. “

These organizations, which are forming alliances with others concerned about the erosion of privacy resulting from all payments having to be made electronically, are coming forward to support the right to use cash. These calls are getting louder and louder as the business models of digital payment providers evolve from collecting transaction fees to analyzing and selling consumer data.

Technology can help

Tod Niedeck, Motto of the Crane

Recently, Swedish banknote designer Karin Mörck-Hamilton told a seminar with central banks that “how banknotes are recognized by machines today is at least as important as how they appear. to humans ”. One would expect a ticket designer to focus on the artistic merit of the tickets and their function of expressing the identity and aspirations of the nation. Therefore, Mörck-Hamilton puts cash automation on a par with public engagement is instructive. The act of paying, whether by credit card, debit card, smartphone, or cash, still comes at a cost to consumers and businesses, but the enormous growth of modern self-checkout terminals is reducing the cost of paying. cost of cash by increasing the speed and accuracy of transactions, while improving security and increasing sales.

According to Robert Morrow, point-of-sale cash validation expert at Crane Payment Innovations – whose terminals are used in more than 100 countries – automated “bill acceptors” are no longer confined to car washes and ATMs. automatic, but are now an integral part of many of the world’s largest retailers. Modern payment terminals systematically accept all denominations of banknotes, including $ 100 and € 200 without any human supervision. Many also issue change using smaller denomination banknotes taken from other purchases. These machines can recognize almost all genuine banknotes, regardless of their condition, and ensure that no counterfeits are accepted. This growing automation of cash acceptance may be one of the factors driving the growth in cash use during the pandemic.

Almost a decade ago, against the backdrop of an economic history dominated by surges in high inflation, the Fed set an inflation cap at 2%. Then it seemed unlikely that we would see a long period of low inflation and it also seemed that the ability to pay in cash would continue to be assured. The Covid-19 amplified economic challenges and inequalities, but it also revealed opportunities to foster economic equality and inclusion. One of these opportunities is to use the move to an average of 2% of the inflation mandate of the central bank of the world’s largest economy to better take into account the impact of monetary policy on the real economy. . Another is the use of technology and legislation to protect the use of cash at the point of sale, to avoid exacerbating the financial woes felt by some of the most vulnerable people in society.

Michael J. Birnbaum