cash system Te pnaha moni anamata Discussion document May 2019 - - PowerPoint PPT Presentation

The future of the cash system – Te pūnaha moni anamata

Discussion document May 2019

2

Key issues - Introduction

• Use of cash is declining, but 12% still use it as preferred or primary

payment option.

• 96% of adults in NZ use cash compared to 95% who use debit cards

(2017)

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Who uses cash and cash use is changing

• Volume of cash exported rose from 6% of total issuance in 2014 to

16% in 2019

• Over the same period the volume of domestic note issuance fell 34%

and the volume of domestic repatriations fell 24%

• Data suggests tourism activities are contributing to significant

differences between North and South Islands.

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Significant changes in issuance and repatriation to/from RBNZ

A form is a banknote

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RBNZ vaulting solution

To meet RBNZ (and cash system’s) needs for the next 15-20 years and improve resilience and efficiency Potential to significantly affect cash system participants and overall outcomes for cash system

• Drivers for change
• Sub-optimal location; demand comes from upper NI, current CBD location

logistical/security challenges, on a fault line

• Ageing vault / mechanics
• Significant concentration of risk
• RBNZ will be considering
• range of options for vaulting, processing, disaster management and resilience

planning

• processes / operating model for issuance and repatriation of currency
• changes to terms of trade / practices to improve system resilience / efficiency

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Key issues with current cash system

• for discussion and feedback

Cash system includes all the activities concerned with making, storing, moving, using, destroying, and accounting for cash Challenges include technology, crime prevention/detection and risk/cost decisions re cash handling and branch/ATM networks. Issue is top of mind for a number of countries.

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Key issues with current cash system

• for discussion and feedback

Transactional use of cash is simultaneously enabled by, and critical to, the existence and functioning of the cash system 1. The cash system is a scale business

• Reducing cash use will likely lead to contraction of cash system infrastructure

with implications for resilience and usability

• High fixed costs and logistical requirements will exacerbate efficiency issues
• Potential vicious cycle of reduction causing contraction which causes

reduction.

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Key issues (continued)

2. Bulk and wholesale cash vaulting arrangements could be arranged in a way that better supports overall efficiency and resilience of the cash system

• How to ensure a new RBNZ vaulting solution improves efficiency without

comprising system resilience

• Efficiency and resilience of the system is not currently supported by

arrangements for distributed currency vaulting

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Key issues (continued)

3. No framework exists to enable effective management of the cash system

• It is not clear where responsibility for outcomes and tasks sit amongst cash

system participants

• There is no way to collectively identify change in the cash system
• There is no vehicle for cash system participants to assess and co-ordinate

responses to change

• There is no system wide approach to BCP
• There is increasing risk that the cash system will be significantly

compromised by disruption in the logistics industry

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NZ and international cash system comparisons

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The cash system in New Zealand

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NZ cash system - Operational tasks by participants

Authenticates and fitness sorts bank notes to RBNZ standards Checks bank notes to their

• wn

standards Transports currency *bulk Provides bulk currency vaulting Provides public with access to currency *as part of core business Recycles currency *bulk recycles Destroys unfit currency BCP plan critical for cash system

• peration in

crisis *all scenarios The RBNZ

  *  * Core cash system participants

Registered banks and

• ther financial

institutions

 *  

Major Cash in Transit

• perators



On behalf of commercial banks and independent ATM operators

*  * * Cash system users

Retailers

 

Staff or via courier

 

Casinos and Gaming

  

Public

   Independent ATM operators

Operated by independent ATM

• perator

Conducted by CIT

*

Filled by retailer

  

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Cash systems elsewhere

• In 2017 RBNZ engaged with nine central banks across Europe along

with Canada and Australia to better understand their cash systems.

• 8/9 central banks had commercial arrangements with cash system

participants, generally with significant impact on how system functions. Use of schemes

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Cash systems elsewhere (continued)

Central Bank activities Central Bank relationship with others

Australia Belgium (EU/Euro) Canada Denmark (EU) Finland (EU/Euro) Nethrlnds (EU/Euro) Norway Sweden (EU) UK (EU) NZ Entities eligible to purchase currency from CB

Banks Banks Banks Banks Flexible Flexible Banks Flexible Flexible Banks

Standards for cash recycling equipment set by CB

         

Formal relationship with CIT’s

         

Australia Belgium

(EU/Euro)

Canada Denmark (EU) Finland

(EU/Euro)

Nethrlnds

(EU/Euro)

Norway Sweden (EU) UK (EU) NZ Issues new currency

         

Issues recycled currency

         

Destruction of unfit/demonetised notes

      /   

Accept seasonal repatriations of surplus fit notes

         

Accept regular repatriations of surplus fit notes

         

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Cash systems elsewhere (continued)

Cash depot operation and ownership

Australia Belgium (EU/Euro) Canada Finland (EU/Euro) Nethrlnds (EU/Euro) Norway Sweden (EU) Denmark (EU) UK (EU) NZ Number of central Bank currency depots

2 reducin g to 1 3 reducin g to 1 2 2 1 5 1 2 3 1

CB depots are co-located with CIT

         

Operator of CB currency depots

CB CB CB CB CIT CB CB 1 NOKAS 4 CB CIT CB CB

• Approx. number of private

sector currency depots

? NA 10 13 8 13 7 2 20+ NA

Ownership of private sector depots

Banks NA Banks Open Open Banks Banks Banks Open NA

Operation of private sector depots / Cash Handling Activities

CIT’s CIT’s CIT’s CIT’s CIT’s CIT’s CIT’s CIT’s Depot

• wners

CIT’s

Commercial banks via joint ventures

         