A member of the European Central Bank’s (ECB’s) executive board has emphasized the benefits of cash as legal tender, saying there is not yet any “viable alternative” to banknotes in many situations.
Speaking at Deutsche Bundesbank’s annual symposium, Yves Mersch highlighted cash’s privacy, security and accessibility as important factors in its favor that will see it continue to be a key part of the economy for many years to come, despite the challenge of digital alternatives.
“The easy accessibility to cash, especially for the elderly, the socially vulnerable or minors, allows people to participate in society and, for example, allows children to learn how to handle money,” Mr Mersch stated. He noted that socially vulnerable people in particular rely on cash, as it does not have the barriers associated with other forms of payment, such as the need to apply for credit.
He also noted the fact that cash “always works” is one of its biggest benefits. As it is not dependent on any underlying systems, it can continue even in the event of systems or power failures.
Mr Mersch added that despite these positives, several countries are looking at alternatives to cash. In the last year, he said five members of the eurozone – Cyprus, Bulgaria, Belgium, Portugal and Denmark – consulted the ECB for advice on measures to limit the use of cash.
There are several reasons behind this, with some pointing to the cost of cash compared with digital payment methods, while others believe its anonymity will help facilitate criminal activity.
Mr Mersch dismissed these concerns, however, saying that no statistical link can be found between cash use and criminal activity, and cash “must not be made the scapegoat”.
He concluded by saying that printed banknotes will retain their role in society within the eurozone for “a very long time to come”. While alternative payment systems are continuing to grow, they will only ever complement cash, rather than replace it. Therefore, the eurozone must make efforts to safeguard the future of banknotes.