Review of Banknote Distribution Arrangements: Conclusions Paper Box B: International Experience

As part of the Review, the Reserve Bank considered the experience of a number of other countries facing the consequences of lower volumes of cash in their distribution systems, including New Zealand, the United Kingdom, Canada and several European countries. Recent survey evidence suggests that the initial acceleration of lower transactional cash use in the early stages of the pandemic is persisting (Reserve Bank of New Zealand 2022; Chen et al 2022; Cubides and O'Brien 2022; Bank of England 2021; De Nederlandsche Bank 2022b). These behavioural shifts are putting pressure on the economics of cash distribution. Some countries are also experiencing material reductions in the public's ability to access and use cash, due to banks reducing their public access points and, to a lesser extent, fewer merchants accepting cash.

In order to combat the negative impacts this is having on the small but significant share of the public who rely on, or prefer to use, cash for their economic activities, central banks and governments are generally taking an approach that seeks to prevent cash access and acceptance from falling further. This is either through voluntary agreements with industry participants or legislation. For example:

  • Most Scandinavian nations – which already had very low levels of cash usage prior to the pandemic (Graph B1) – have been strengthening obligations on commercial banks to provide a minimum level of cash access to customers (Sveriges Riksbank 2022a; Royal Norwegian Ministry of Finance 2021; Bank of Finland 2022).
  • The United Kingdom Government has announced legislation that enshrines a right to access cash withdrawals and deposits within a certain distance (HM Treasury 2022a).
  • A number of European central banks – including the Netherlands, Latvia and Lithuania – have arranged voluntary agreements with banks and CIT companies to prevent cash access fees from rising and ATM networks from shrinking (De Nederlandsche Bank 2022a; Latvijas Banka 2021; Lietuvos Bankas 2021).
Graph B1
Graph 5: Currency in Circulation to GDP

Some central banks have attempted to effect change in the cash distribution system through structural reform, though this has proved challenging. For example:

  • The Bank of England recently examined the feasibility of establishing a utility model for wholesale cash distribution; however, the transition costs and coordination issues were difficult to overcome (Bank of England 2020; Bank of England 2021). Instead, under proposed legislation, the Bank of England will receive industry oversight and prudential powers over participants in the cash distribution system (HM Treasury 2022b).
  • The Swedish Riksbank, in preparation for expected changes to its legislation that will see the public sector play a greater role in cash distribution, recently opened five cash depots around the country (Sveriges Riksbank 2022b). The Riksbank is also advocating for clarification of the concept of legal tender, to support the acceptance of cash, as well as an extension of the 2019 cash access legislation to support individuals' ability to deposit cash (Sveriges Riksbank 2021).
  • The European Commission has established a working group to investigate issues and possible policy responses to support cash access and acceptance in the European Union (Euro Legal Tender Expert Group 2021).
  • Norway and New Zealand are exploring the appropriate structure of the cash distribution system and the extent of public sector involvement in the context of broader reviews into the future of money (Norges Bank 2022; Reserve Bank of New Zealand 2021).