Finally, we could be getting towards an answer to the big question – Is New Zealand becoming a cashless society? Will cash be banned in New Zealand?
On the flip side, another related question being posed right now is: Should New Zealand banks be forced to provide access to cash?
The COVID-19 pandemic has led to a surge in cashless payments in shops and retailers throughout Aoteroa. But even before COVID-19, the Reserve Bank of New Zealand was questioning the future of cash in New Zealand:
“The future of cash in New Zealand is uncertain ... despite an increasing trend in the overall cash in circulation, New Zealand is becoming a society that uses little cash …”
The RBNZ says they are reaching out to the community and: “encouraging Cash Conversations – He Kōrero Moni about the future of cash in New Zealand.”
The central bank also set up an inquiry into the future of the cash system in New Zealand, accepted submissions from the public and has published two discussion papers already. Not surprisingly there is plenty of concern about the prospects of a cashless New Zealand.
If cash was to disappear “without regard to the wider benefits of cash in society” the RBNZ so many people would be disadvantaged that “this would be considered a market failure …”
So the RBNZ has asking for a “a stewardship role in the cash system, providing system-wide oversight and coordination.”
They want that role to ensure the following four objectives are met:
About 75 per cent of public submissions to the RBNZ agreed with these four objectives. Some of the people who disagreed just didn’t want anything to change. The discussion paper says:
“Several [submissions] raised that cash was required for tourists and vulnerable members of society. A number raised concerns about cash being available at ‘reasonable cost’, asserting it should be free.”
The result of the RBNZ’s research and consultations around the future of cash in New Zealand has been to conclude they need to do more to protect the cash system. So, the bank has asked for new powers that, “though not currently required, may be needed in the future to respond flexibly to changes in the cash industry.”
Specifically, the Reserve wants:
To these ends the RBNZ has now established a “Money and Cash Department.”
In July 2020, the Deputy Governor of the RBNZ, Geoff Bascard gave a speech entitled: “Banking the economy in post-COVID Aotearoa”
The Deputy Governor addressed the issue directly revealing the central bank was looking at options for a digital New Zealand dollar. He also put some fears to bead about the future of cash:
“For now, the Reserve Bank is reviewing how best to support, steward, and facilitate access to physical cash and we will continue to engage with the banking sector in order to effectively meet customer demands.
“For example, we have recently created a new department, the money and cash department to think broadly about a future that serves the money and cash needs of New Zealanders.
“This includes smarter ways of cash distribution, as well as innovative solutions to emerging risks,” said Geoff Bascard.
So, to answer the original questions, the future of cash in New Zealand is currently being supported and possibly enhanced by the Reserve Bank of New Zealand.
Shops may not be legally required to accept cash but banks may be forced to provide access to cash withdrawals. The government and regulators seem to be well tuned to the needs of people who rely on cash.
While cards, online and cashless payments systems will continue to evolve, cash is not likely to disappear completely in New Zealand.
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The essential role of cash in the economy is recognised in last week’s Reserve Bank of Australia Payment System Board update. However, unlike the RBNZ, the RBA does not propose concrete actions to protect the cash economy.