Fact check: Future of cash in Germany until 2037

In a study, the Deutsche Bundesbank has drawn up three future scenarios for cash up to 2037. They range from an almost cashless society, to a possible renaissance of cash, to a coexistence of cash and digital payments. While around 60% of transactions in Germany currently take place with cash, digitalization and consumer behavior could significantly change this use. The Bundesbank emphasizes the importance of an adaptable cash policy and is preparing for various developments in order to maintain cash as a safe and trustworthy means of payment.

The current situation of cash use in Germany

In Germany, cash remains the preferred payment method despite the trend towards digitalization and the effects of the corona pandemic. In 2022, around 60% of transactions were still carried out in cash. This indicates that cash is deeply anchored in the German payment culture, although a significant decline can be observed compared to previous years. The reasons for this are varied and include aspects such as the convenience, security and anonymity that cash offers.

The role of the Bundesbank in the cash supply

The Deutsche Bundesbank plays a central role in the provision and management of cash. As the country's central bank, it has the legal mandate to ensure an adequate supply of high-quality cash at all times. Cash, in the form of banknotes and coins, is called central bank money and is considered the safest means of payment. It is central to citizens' trust in the financial system and serves as a safe and stable benchmark in the economy.

Monitoring the use of cash by the Bundesbank

The Bundesbank carefully monitors the use and distribution of cash. This includes monitoring trends in cash usage and ensuring that sufficient sources of cash, such as bank branches and ATMs, are available. This monitoring is crucial both to meet the needs of the population and to ensure the efficiency and security of the cash system.

The challenges of declining cash use

A decline in cash usage could lead to an increase in the cost of cash infrastructure and jeopardize its role as an emergency means of payment.

Three scenarios for the future of cash until 2037

In its study, the Bundesbank developed three detailed scenarios for the future of cash up to 2037. These are based on various assumptions about technological developments, social trends and economic policy decisions.

• Scenario 1: An almost cashless society In this scenario it is assumed that cash will only make up 15% of total transactions in 2037. This reflects a world where digital payment methods are taking over. The reasons for this could be diverse, such as widespread acceptance and preference for card and smartphone payments, the introduction of the digital euro, the increasing integration of AI technologies into finance and increasing consumer security awareness over physical money. In this scenario, cash could be used primarily as a form of store of value or for specialized transactions, while everyday life becomes increasingly dominated by digital payments.

• Scenario 2: The return of cash In this scenario, cash remains a popular and widely used means of payment. Despite an initial decline, the cash share is stabilizing again. This could be influenced by various factors, such as increased skepticism towards digital payment methods, driven by privacy concerns and fear of cyberattacks. In this scenario, consumers and businesses could see a “return” to cash, with it being seen as a safe and trustworthy payment method. Regulatory measures and political decisions could also promote the continued existence of cash, for example by strengthening the acceptance of cash in retail and ensuring access to cash sources.

• Scenario 3: Cash and digital means of payment coexist This scenario paints a picture of a society in which cash and digital means of payment coexist. The use of cash here would depend heavily on people's individual preferences, socio-economic background and living conditions. While a portion of the population would continue to prefer cash for everyday transactions, another portion would use digital payment methods. This could lead to a differentiated payments landscape, with some regions and populations paying primarily digitally while others continue to rely on cash. In this scenario, cash would play an important role in certain segments of the economy, although its overall importance would decline.

Digitalization and its impact on cash

The advancing digitalization in the financial sector, particularly the introduction and spread of digital currencies, has the potential to fundamentally change the use and perception of cash. Digital currencies, such as the digital euro under discussion, offer a number of advantages, such as fast and secure transactions, improved transparency and lower transaction costs. In addition, they enable seamless integration into digital platforms, which could increase efficiency in e-commerce and online banking.

The rise of online shopping, contactless payments and mobile banking apps has already led to a shift away from cash. This development could be further strengthened by the digital euro, as it would enable direct access to central bank money in digital form. This would not only increase convenience for consumers, but could also increase trust in digital payment methods.

Significance of the Bundesbank study for the future of cash

The study conducted by the Bundesbank plays a crucial role in shaping the future of cash. By analyzing various scenarios, it provides important insights and guidance for policymakers, financial institutions and other financial sector actors. The study takes into account not only economic and technological aspects, but also social and cultural factors that can influence the use of cash.

The results of the study can help develop strategies to keep the cash system efficient, secure and accessible while leveraging the benefits of digitalization. In addition, it can help understand the impact of changes in cash policies and infrastructure on different population groups and take appropriate measures to ensure a smooth transition to an increasingly digital payments world.

The Future of Cash – An Open Book

The future of cash remains an open question influenced by a variety of factors. Technological innovations, political decisions, changes in consumer behavior, and global economic and financial trends will all play a role. While digital payment methods continue to grow in popularity, cash retains its importance in many areas, whether out of habit, privacy concerns or simply the fact that it is a universally accepted and reliable payment method.

In this dynamic environment, it is important that policymakers, financial institutions and consumers closely monitor developments and respond flexibly to changes. The Bundesbank study provides a valuable basis for this. Ultimately, the future of cash will depend on the ability of all stakeholders to adapt to changing conditions and consider both the benefits of digitalization and the importance of cash.

frequently asked Questions

Could cash disappear by 2037? It is uncertain whether cash will disappear completely by 2037. The Bundesbank's three scenarios show different development paths.

How does digitalization influence the future of cash? Digitalization could reduce the use of cash through the introduction of new payment methods, such as the digital euro.

What does a decline in cash use mean for society? A decline in cash use could lead to a decrease in availability and increased costs of cash supply.

What responsibility does the Bundesbank have with regard to cash? The Bundesbank's task is to ensure an adequate supply of high-quality cash.

What does the cash renaissance scenario imply? This scenario suggests a stabilized use of cash, driven by a renewed confidence in physical means of payment.

Are the Bundesbank’s scenarios realistic? The scenarios are hypothetical models that show different visions of the future of cash. They should serve as a basis for strategic decisions.

Conclusion

The question of whether cash will disappear completely remains open and depends on many factors. The Bundesbank study shows that different futures are possible, depending on how technologies and consumer behavior develop. While some experts and online communities warn of a disappearance of cash, often citing concerns about data protection and financial autonomy, the Bundesbank's scenarios suggest that cash could still play a role, at least in the near future. It is important to take such warnings seriously, but also to recognize that the movement towards a cashless society or the continued existence of cash is not linear or predictable. Ultimately, the future of cash depends on a combination of technological developments, political decisions, economic trends and consumer preferences.

Source: bundesbank.de

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