Why cash alone won’t cut it: Practical strategies to increase resilience in European payment infrastructure

Abstract

At a time when, as the European Card Payment Association puts it, ‘economic relationships between nations can quickly sour’,1 the issue of resilience in payment systems has become both more important and more urgent in the strategic plans of governments, financial institutions and businesses alike. Some European governments have tended to look at cash as the key to resilience in retail payments, advising citizens to hoard (non-interest-bearing) cash at home — but is this the best strategy? This paper examines both natural and man-made disasters to see what lessons we can learn about the use of cash as a backup to electronic payment systems. The paper concludes that rather than rely on cash alone, the best way to increase the overall resilience of both national and regional payment systems in general, and pan-European payments infrastructure in particular, is through the use of multiple, independent electronic payment systems alongside some cash. The paper further concludes that the addition of ‘offline’ payment capabilities would substantially increase resilience, and that this should therefore be a focus of interest for strategists in the field. The paper suggests four areas where European strategic planners might focus: aiding domestic schemes to evolve adjacent functionality (specifically, digital identity); accelerating the take-up of account-to-account payments; advancing the use of stablecoins; and advocating for the development of offline central bank digital currency. This article is also included in the Business & Management Collection which can be accessed at http://hstalks/business.