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

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) 2

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 3 differences between North and South Islands.

Significant changes in issuance and repatriation to/from RBNZ 4 A form is a banknote

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 5 • changes to terms of trade / practices to improve system resilience / efficiency

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. 6

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. 7

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 8

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 9

NZ and international cash system comparisons 10

The cash system in New Zealand 11

NZ cash system - Operational tasks by participants Authenticates and Checks bank Transports Provides Provides public Recycles Destroys BCP plan unfit critical for cash fitness sorts bank notes to their currency bulk with access to currency currency system notes to RBNZ own currency currency operation in *bulk *bulk standards standards vaulting crisis *as part of core recycles business *all scenarios The RBNZ   *   *  Core cash system participants Registered banks and  *    other financial institutions Major Cash in Transit  *   *  *  operators 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 Conducted by CIT 12 independent ATM operator    Filled by retailer

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 13

Cash systems elsewhere (continued) Central Bank activities Australia Belgium Canada Denmark Finland Nethrlnds Norway Sweden UK NZ (EU/Euro) (EU/Euro) (EU/Euro) (EU) (EU) (EU)           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 Central Bank relationship with others Australia Belgium Canada Denmark Finland Nethrlnds Norway Sweden UK (EU) NZ (EU/Euro) (EU) (EU/Euro) (EU/Euro) (EU) Entities eligible to purchase currency Banks Banks Banks Banks Flexible Flexible Banks Flexible Flexible Banks from CB           Standards for cash recycling equipment set by CB Formal relationship with CIT’s           14

Cash systems elsewhere (continued) Cash depot operation and ownership Australia Belgium Canada Finland Nethrlnds Norway Sweden Denmark UK NZ (EU/Euro) (EU/Euro) (EU/Euro) (EU) (EU) (EU) Number of central Bank 2 3 2 2 1 5 1 2 3 1 currency depots reducin reducin g to 1 g to 1           CB depots are co-located with CIT Operator of CB currency CB CB CB CB CB CB 1 CB CIT CB CB depots CIT NOKAS 4 Approx. number of private ? NA 10 13 8 13 7 2 20+ NA sector currency depots Ownership of private sector Banks NA Banks Open Open Banks Banks Banks Open NA depots CIT’s CIT’s CIT’s CIT’s CIT’s CIT’s CIT’s CIT’s CIT’s Operation of private sector Depot depots / Cash Handling owners Activities           Commercial banks via joint 15 ventures