Abandoning cash is far too important to be left to banks

It is high time we had a debate on the use of cash. This is the point of view of the Central Bank, as relayed to the Ministry of Finance. The regulator was expressing genuine fears that our options for using cash are being limited day by day.

If the banks have what they want, we’ll stop using cash, won’t bother using ATMs and switch to digital payments – that’s the essence of what the Central Bank says in its subject to departmental retail banking scrutiny, introduced in response to the planned withdrawal of Ulster Bank and KBC from this market.

“For commercial reasons, retail banks have reduced their branch networks and services, as well as their involvement in direct cash distribution through the ATM network,” the Central Bank told the department.

Yes, banks don’t like cash because it’s expensive to transport it across the country, ATMs are expensive to maintain, and there’s always a security risk when you have dealing with cash.

Cash is expensive, but should we be willing to give up our use of cash, just because the banks push us in that direction?

Or will the cut in the cost of living make us rediscover our love of notes and coins, as is happening in the UK?

Britons are returning to cash to keep tighter control over their spending as the cost of living rises. Personal cash withdrawals in July were up more than 20% from a year earlier.

Cash Action Group president Natalie Ceeney said it showed people find it easier to budget with cash. “People will take out money and physically put it in jars, saying ‘here’s what I have for bills, here’s what I have for food and here’s what’s left’.”

The Central Bank of Ireland says cash use is down because people were encouraged to pay with cards at the height of the pandemic, but its use is expected to pick up a bit again.

“Although the use of cash as a mode of payment may recover, it is unlikely to return to pre-pandemic levels,” the central bank said.

However, the submission admits that cash usage has fallen to around two-thirds of its pre-pandemic level, dropping from almost €20 billion in withdrawals in 2019 to just €13 billion in 2021.

“Nevertheless, cash remains an important means and choice of payment for consumers in the Eurozone, including in Ireland,” the document states.

Dr Olive McCarthy, a senior lecturer at University College Cork’s business school, said the use of cash is not going away anytime soon. “I think the money is here to stay. Mabs [the Money Advice and Budgeting Service] says cash is vital for those on a tight budget.

She said how well cash use will recover, now that the worst of the pandemic appears to be behind us is hard to say.

“We have no real precedent for any of this, so it’s hard to know what’s going to happen.”

She also said the phenomenon of banks selling ATMs made it more difficult to access cash.

“My local shopping center recently closed three of its four ATMs (all three were operated by Ulster Bank) and there are now long queues for the last (operator owned) ATM. I wonder if people realize how much data digital payments generate about us,” Dr McCarthy said.

By the end of 2022, only 25% of the country’s ATM networks will be owned by the banking system, up from 100% in 2015.

Bank of Ireland and AIB have together sold 1,200 ATMs to unregulated operators over the past three years.

This situation “poses challenges to access to cash for consumers”, the Central Bank said.

The buyers of these ATMs have promised not to impose any additional fees (on top of what your bank charges to withdraw money from an ATM) for using these machines. But that is subject to change.

And access to cash through bank branches is also becoming more difficult.

Although AIB has reversed its decision to withdraw cash services and ATMs from 70 branches, there are already no cash services in a number of branches of the various banks.

AIB and Bank of Ireland have closed 100 branches between them, while the departure of Ulster Bank and KBC will mean the closure of another 75 branches.

Banks have also been accused of using underhanded tricks to encourage us to stop using cash and instead use digital payments and online banking.

Not answering the phone, understaffed branches leading to long queues and taking hours to fix broken ATMs are some of the ways banks try to drive us away from using cash, says the Financial Services Union.

Credit unions are hoping to fill the void, according to the Irish League of Credit Unions, while post offices are seen as having a huge role to play in making it easier to use cash.

The Central Bank, in its submission to the Ministry of Finance, says other countries have made legislative changes and implemented other interventions to ensure continued access to cash and branch services.

This has seen subsidies paid in Spain and parts of the UK to retain ATMs in rural areas.

“It is desirable that a social policy discussion takes place in the coming period on some of the critical issues that arise here, including how costs should be allocated in the context of a rapidly changing sector while ensuring fair competition and a level playing field,” the central bank said.

A discussion is needed about who should be responsible for cash access and availability.

Among the questions posed by the regulator are: Should it be traditional retail banks? What about newly licensed banks with web-based business models?

What “social contract” obligations should banks be considered to derive from their unique privilege of being allowed to engage in private money creation due to their “fractional reserve” relationship with central banks?

It’s hard to track your spending if you’re just tapping a card, while the vulnerable, the less digitally savvy, and the unbanked need access to cash.

Cash is still king, but its reign has weakened. As a society, we have to figure out what its role will be in the future and how to ensure that people will always have access to it, despite what the banks want.

About Joan Ferguson

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