Politique Internationale — Let’s start with a somewhat abrupt question: who controls cash in France?
Erick Lacourrège — It all depends on what we are talking about. Nobody controls the demand for cash as such: banknotes and coins are sought by the public, for example, to settle purchases, repay friends, to constitute savings for a rainy day or even to set up a reserve of money for a future expenditure. It is the Banque de France that issues banknotes in euros, supplying banks with the quantities that they order to meet the needs of their clients and to supply their cash points and automatic telling machines (ATMs). The State is responsible for issuing coins that it has had minted by the Monnaie de Paris. The Banque de France then has the task of putting them into circulation in the same way as it does for banknotes. Then again, the quality of the fiduciary currency is carefully controlled: this key mission of the Banque de France is conferred on it by law. This implies at one and the same time the upkeep of the fiduciary currency and the quality of its circulation in all of France. So, the Banque de France sorts through several billion banknotes a year on high-performance machines: those that are too worn to be put back into circulation are destroyed and replaced by new notes. For the past 10 years or so, banks and cash transport companies have also been authorised to sort and return into circulation notes and coins, but only under the strict control of the Banque de France. In particular, only sorting equipment that has been duly approved is allowed for use.
P. I. — What volume is handled each year? How is the circuit organised?
E. L. — To give you an idea of the size, the withdrawals from the cash points of the Banque de France and from the Central Bank for the French Overseas Territories in the Pacific Region (IEDOM) in 2019 reached 5.4 billion notes (136 billion euros) and 1.25 billion coins (500 million euros), or nearly one note out of six withdrawn from the counter of a central bank in the euro zone. Once in circulation, these notes and coins are exchanged between the different economic actors, mainly banks, tradesmen and consumers. The public obtain the notes from credit establishments, mostly through automatic distributors but also from bank branches. Once used, the notes and coins are returned to bank branches or recovered directly by cash transport companies — as in retail, for example — before being returned to the counters of the Banque de France and IEDOM. The notes are then sorted to check their authenticity and quality. With seven notes out of 10 sorted in its tills, the Banque de France today continues to be the main actor in the upkeep of the fiduciary currency on French territory. Nevertheless, private operators have a growing place, with their participation in the recycling of notes growing continuously: it has doubled since 2015, moving from 15 per cent to a little more than 30 per cent in 2019.
P. I. — Through these different actors, can one talk of a logic for the sector? If so, to which issue should they hitch themselves collectively as their priority?
E. L. — For some years now, the actors of the fiduciary sector have been confronted by a common concern: the fall in the use of cash for purchases by the public. This phenomenon is linked to the evolution in ways of consumption and to the growth in scriptural means of payment, particularly by card and by its contactless function. The totality of the fiduciary sector must therefore adapt to respond to this global drop in the volume of notes being handled. The Banque de France is playing its full role by driving the process of modernising the trade and optimising the circuit of cash in concertation with its main partners. I chair in particular an authority on the matter, the Committee of Control of the Fiduciary Sector (CP2F) which was created in 2014 and which brings together, apart from the Economy and Finance Ministry, representatives of the banks and of cash transportation companies. The aim is to share a common potential vision and to examine the big projects that are already under way. In September 2018, a working group was set up to evaluate access to cash in continental France. In parallel, the evolution of rules and organisation of the fiduciary sector are discussed in the French Committee of Organisation and Bank Normalisation (CFONB) at the initiative of another working group run jointly by the Banque de France and a representative of the banks.
P. I. — The sanitary crisis is far from over, but what are the first lessons that you draw from it?
E. L. — One element needs to be underlined from the outset. Since the beginning of the crisis, no dysfunction has been identified and the supply of cash distribution outlets in the country has continued to be assured normally. This is proof of the capacity of resilience of the fiduciary sector that has been made possible thanks to its concerted approach to problematics. As for supply, the group of robustness led by the Banque de France brings together all the actors: cash transporters, the French Banking Federation, credit establishments, federations of commerce and public authorities. Of course, the difficult context of recent months has increased long-term uncertainties for the evolution of the use of cash for payment. Although we lack perspective, it is probable that the effects of substitution between means of payment have been accelerated during the crisis. This validates the voluntarist approach adopted by our sector even before the rise of the pandemic, aiming to establish a national cash management policy. This, founded on the shared analysis of a fall in fiduciary payments and on a common diagnosis of the stakes, will bring about an action plan in several parts including, obviously, the preservation of accessibility to cash. This project should come to a conclusion in the coming months.
P. I. — Can these substitution effects call into question the accessibility to cash?
E. L. — Within the context of the decline in the use of cash as a means of payment, the question of accessibility arises, of course. The issue is crucial: the ability to have access to withdrawal points for all the French wherever they are situated in the country. The working group I mentioned, set up in 2018 by the Banque de France, has already published two reports, in 2019 and then in 2020. Each time, a very meticulous examination of the situation was carried out. Starting with the stock of the 50,000 ATMs and private access points — that is, stores where cash can be obtained directly — several indicators were established. The cartography — of the accessibility to cash for the population on all the continental territory — resulting from this leaves no grey areas. The latest work shows that this accessibility is satisfactory. In the last few years, some ATMs have perhaps disappeared but this phenomenon is limited. For the most part, the ATMs removed were in towns that were already well supplied. Given the size of our country, its geography and its diversity in terms of population density, not all regions are equipped at the same level. It nonetheless appears that nearly 99 per cent of the population live today in a locality situated at less than 15 minutes by car from an ATM.
In parallel, private access points constitute a solution allowing a good level of accessibility. This network continues to grow: 10 per cent more in 2019 with 25,000 points listed. The growth is strongest in the most populated districts but this private access is also developing in places where ATMs are less present. Among the solutions offered by shopkeepers, “cash-back” allows the withdrawal of cash when paying for a purchase with a credit card. This possibility, which is fairly new, was introduced in 2018. For the moment, it seems still be little used in France, unlike in Germany: on the other side of the Rhine, according to a study, nearly one quarter of the population have resorted to this, be it just as a straight withdrawal of funds or a cash-back linked to a purchase. This service seems to be appreciated by customers, since the share of such transactions is increasing.
P. I. — To what point could a lower recourse to cash generate cost-cutting?
E. L. — Of course, cash has a cost, like all other means of payment. This economic issue is becoming all the more acute as the flow of notes and coins handled is tending to diminish. Transport, and also the handling and the treatment of notes make for a not insignificant expenditure, of which a good share is borne by shopkeepers and also by banks. In France, the French Banking Federation estimates that the cost of managing cash amounts to about 2 billion euros a year for the banking sector. The Banque de France and its network of cash outlets are also concerned. Those are the tangible arguments in favour of a lower use of cash. But, when you get to the level of the consumer, they immediately carry less weight.
Cash is in effect the only costless means of payment that does not require a current banking account. It is therefore well adapted to populations that are in a fragile financial situation, for whom it is often the only means. And it is not the costs arising from the time spent getting to a point of cash withdrawal that will modify this perception. It is by the way worth noting that banks are systematically expected to offer a service of deposit and withdrawal of cash in their different physical outlets: this is part of the basic services fixed by the legislator with, as a backdrop, the dual requirement to accord the right to an account and a specific offer for fragile clients. We should not in addition minimise the importance of a physical and tangible currency in promoting financial discipline: cash facilitates the awareness of budgetary constraints.
P. I. — Your argument sounds almost like an appeal in favour of cash …
E. L. — I simply note that cash is a particularly robust and resilient payment instrument whose use neither requires technical infrastructure nor access to telecommunications networks. Even in time of crisis — natural disasters or breakdowns — and God knows if the times are susceptible to uncertainties, it remains accessible. Of course, this sturdiness has a cost, but it is indispensable to the – good – functioning of our society.
P. I. — Is a world without cash possible?
E. L. — Perhaps and even without doubt, but this situation will not come to pass for a long time! I am in the habit of saying that everything is mortal … but cash will stay in our lives for the foreseeable future and this future will probably be counted in decades. At first and above all, cash is still the means of payment that is the most used in shops, in France and in the euro zone. According to the latest available data, Eurosystem analyses show that, depending on the places, consumers still pay for their everyday purchases mostly in cash. It may be that the pandemic will bring a reduction, but the level of cash settlements will remain significant for a long time. The use of notes and coins is therefore today still a long way from becoming anecdotal, despite whatever media echoes might be heard here and there.
In addition, the demand for notes paradoxically remains very strong. It has even grown in the course of the past few months under the effect of the crisis: the annual growth in notes that we are putting into circulation is now into double figures, with +10.5 per cent at the end of September 2020. We even saw in March 2020 an historic peak in demand for notes from all the central banks of the euro zone in the proportions close to those observed in October 2008 during the financial crisis: more than 36 billion euros in one month. This apparent paradox finds an explanation in the multiplicity of uses of cash: the note is now as much a savings instrument as a payment instrument, maybe even more so. This concerns as much the residents of the euro zone as the non-residents, with a similar occurrence in the whole world. The international demand for notes in euros has become very strong: the share of euros in circulation held outside the euro zone is today estimated at about a third. Neighbouring regions, such as the countries of eastern and central Europe, Russia or Turkey, are testament to these flows.
P. I. — In a general way, do politicians and economists share your positions?
E. L. — In France, the public authorities are firmly committed alongside the Banque de France and the totality of the fiduciary sector to the project of “The National Policy of Cash Management” launched by Banque de France. The aim is to guarantee the liberty of the use of cash: it is not a matter of favouring one means of payment over another and even less to influence the behaviour and preferences of the public. Everyone must be free to settle purchases in cash if he or she so wishes, which implies the need to safeguard equal quality, equal security and equal accessibility. On its side, the National Strategy for Scriptural Means of Payment of 2019, jointly driven by the Banque de France and the Economy and Finance Ministry, rests equally on the principle of neutrality and of free choice of means of payment, indispensable principles to allow the reconciliation of the promotion of electronic means of payment and the maintenance of the universality of cash. Cash must remain easily accessible to all those who need to use it, in particular fragile populations.
As for economists, it is likely that, for most of them, the question does not even arise! Trust in the currency is the key element for the stability of monetary systems and notes and coins are, to this day, the only physical materialisation of the central currency, accessible to citizens and benefiting from the guarantee by the collectivity. It is still true that, in the framework of debates on the efficiency of negative interest rates, some economists defended the idea of the abolition of cash. It is the case of Kenneth Rogoff in 2016 in his work The Curse of Cash. In parallel, other academic analyses have argued in favour of eliminating, as a start, high-denomination notes. In reality, the audience for these analyses seems very limited, given the public’s attachment to cash and the difficulty of imposing on the social body changes touching on payment preferences and saving habits. On the other hand, the call to scrap notes with a high facial value was heard: the 500-euro note, which was suspected of facilitating illicit activities, was abolished from the range of euro notes and has not been issued by Eurosystem since April 2019.
P. I. — Is the digital euro the way of the future?
E. L. — The innovation is real when it comes to means of payment other than cash or credit cards. Notable progress has been achieved on digital currency, notably at the initiative of big private operators. Central banks have also taken on the subject, to which the work of Eurosystem and the Banque de France bears witness. The European Central Bank published an important report in 2020. To resume, it is necessary to make a distinction between the two levels in central banks’ digital currency projects: within the framework of the first level, the digital euro can be used for transactions involving mass trade, for example, or for big interbank operations involving institutional actors. As for the second level, the digital euro can be used to settle daily purchases, that is retail trade. The first level is by far the most advanced. For retail trade, we are in it for the longer term. It is important to clarify that this digital euro which may see the light of day cannot be a substitute for cash. It would allow the use of currency in a form other than cash and would coexist with other means of payment that are cash, cards and other electronic devices. The euro being the currency of 19 countries, this project will be run by Eurosystem with the Banque de France playing an active role.