March 2016 (Volume 14)

View all articles

Graham Levinsohn, Regional CEO of G4S, will be presenting the findings of a major new study by the company into the relevant cash cycles in 28 countries at The Future of Cash conference next month in Paris.

In advance of the launch of this report, which seeks to answer both what drives cash in Europe, and why it remains so popular, Currency News asked him to provide some background to the topic, and his observations on the current state of play for cash

Graham Levinsohn
Graham Levinsohn

Q: Is there a trend away from cash as a payment mechanism?

A: If you look at what is being written in much of the financial press at the moment, there is an assumption that cash is in terminal decline. However, our own research shows that the picture is much more complex. Across Europe the amount of cash withdrawn from ATMs  continues to increase, but it is also true that cash as a percentage of the overall payments landscape is slowly decreasing. Cash remains the predominant payment method across Europe, with 60% of transactions still conducted in cash.

Q: Do you expect the European Central Bank’s (ECB) decision on negative interest rates to influence cash volumes?

A: Negative rates are an attempt by the ECB to push commercial banks towards lending more money to businesses and consumers. They also have implications for cash volumes. If we look at Sweden and Switzerland, as policy rates turned negative the amount of currency in circulation appears to have risen.

Some commentators suggested banks might have locked away cash in strong boxes to hide it from negative interest-rate accounts – that doesn’t appear to have happened. I think we can expect a slight upswing in cash circulation with the ECB’s recent announcement.

Q: What factors influence cash use?

A: There are a range of other factors which influence cash use from economic growth through to e-commerce rates in countries. They are multifaceted and complex. What we do know is that cash has a series of unique attributes based on consumer preference. Chief amongst them is that cash is trusted given its status as legal tender. Cash is easily accessible and tangible, it retains anonymity and offers a direct settlement.

Q: Is cash – as a payment mechanism – too inefficient?

A: Our approach, for a number of years, has been to address the chronic inefficiencies in the cash cycle. What has become more apparent with the evolution in cash use over the past few years is that the cash cycle needs root and branch reform.

The cash supply chain is highly fragmented across Europe which creates chronic inefficiency. In most extreme cases throughout the cash cycle, cash can be counted up to 17 times. That just doesn’t work for business and it doesn’t work for banks. We have the opportunity to
modernise cash use in Europe to drastically reduce these inefficiencies.

Q: What should businesses be doing to make cash work better for them?

A: The industry needs to take steps to modernise cash. The only way this can be achieved is by shortening the cash cycle and minimising inefficiencies. This can be done by extending the Europe’s cash infrastructure and better integrating it. Through a secure and integrated cash cycle, the cash-to-bank journey is shortened. It then becomes possible to generate immediate value for deposited cash, leading to better banking and efficiency savings for businesses.

The G4S Cash Report 2016 will be launched on 11 April at The Future of Cash conference.