Cash Cycle Recirculation and Local Recycling

The backdrop to this paper is the European Central Bank's Product Environmental Footprint study, which found that 82% of the environmental impact of banknotes happened post-issue; hence a paper dedicated to exploring cash recirculation and local recycling from every angle.

While the starting assumption of the paper is that it is the job of central banks to reduce this environmental impact, the conclusion is more nuanced than that.

We describe a broad range of opportunities for central banks, directly or indirectly, to mandate, incentivise or guide behaviour, albeit some of the levers can lie with other government agencies (eg. licensing cash-in-transit (CIT) companies by the police). As the handling of cash moves away from commercial banks and cash centres, there is a sense that the reach of central banks is weaker. To what extent is that true?

Every cash cycle is unique because the business cases are different due to how stakeholders interact. Understand the culture of the central bank, the strength of the regulatory regime and what is required, alongside how each stakeholder makes money, and that determines who is doing what and how willingly. If change is needed, understanding these dynamics is needed. We provide an overview of four types of cash cycle and their characteristics, and it will be interesting to see how these evolve over time.

Today payments are changing, and, with that, long stable cash cycles are also on the move. In addition to changing cash transaction volumes, in many countries higher interest rates have both altered cash demand and the cost of owning/ providing cash. Off-balance sheet relief schemes are now more valuable and, with the advent of Smartsafes, could be extended even into the retail sector, particularly if CITs are unable to pass on their cash ownership costs to retailers.

While the central bank case studies in this paper provide detail about how they are addressing problems to make the cash cycle efficient and to reduce its environmental impact, the industry case studies may point more to the future and how cash is evolving.

Evidence from Auriga, Bantas, Brinks, Diebold Nixdorf, NCR Atleos, and a high-level look at what is changing in Asia, point towards:
▶ New business models built on more capable cash handling machines designed for low lifetime environmental impacts
▶ New relationships with retailers and cash management companies
▶ Massive exploitation of data to use less cash and to move it less
▶ Collaboration across organisations to have the right infrastructure etc.

This is a long paper replete with detail right through to the last Annex. Pick and choose what to read but, whatever your challenge, you are likely to find either others have gone before you or new thinking.

We look forward to your feedback.