The Role of Central Banks in Protecting Access to Cash

Central Banks play a critical role in protecting access to cash in the economy. Here are some ways in which they do so:

Ensuring availability of cash: Central Banks work to ensure that cash is available to the public by managing the supply of banknotes and coins in circulation. They also work with commercial banks to distribute cash to ATMs, bank branches, and other locations where it can be easily accessed by the public.

Promoting financial inclusion: Central Banks promote financial inclusion by ensuring that cash remains a viable payment option for those who may not have access to digital payments or banking services. This includes vulnerable populations such as the elderly, low-income households, and those living in rural or remote areas.

Monitoring access to cash: Central Banks monitor access to cash to ensure that there are no undue barriers preventing people from using cash. They may conduct surveys or research to identify areas or groups that are underserved by cash access and take steps to address these issues.

Regulating payment systems: Central Banks also regulate payment systems to ensure that they are accessible, secure, and reliable. This includes regulating the fees that banks and other payment providers charge for using cash and other payment methods, as well as ensuring that payment systems are accessible to all members of society.

Educating the public: Finally, Central Banks also educate the public about the importance of cash and the risks associated with over-reliance on digital payments. They may provide information on how to use cash safely and responsibly, as well as how to protect oneself from fraud and other risks associated with digital payments.

Central Banks are facing increasing pressure to create a next-generation payment system that incorporates the features users appreciate about cash, such as universal acceptance, ubiquity, and anonymity.

Furthermore, the shift away from cash usage and toward digitization of financial services in both developed and emerging economies has exacerbated financial inclusion challenges. Central Bank Digital Currencies (CBDCs) could provide central banks with the ability to play a direct role in facilitating access to financial services for the unbanked population, who may be hesitant to connect with commercial banks or may be neglected because they do not have enough revenue potential. By enabling accounts to be held directly on the central bank ledger, CBDCs could also allow account holders to access and conduct transactions with their balances via digital wallet applications that are connected to their central bank account via APIs.

Please join us at our first Advocacy Council Meeting next month, when this will be one of the topics we will be discussing. Overall, the role of Central Banks in protecting access to cash is critical to ensuring that cash remains a viable payment option for all members of society. They must work to promote financial inclusion, monitor access to cash, regulate payment systems, and educate the public on the importance of cash as a payment option.