The Single European Cash Area: Towards a more efficient European cash society

Abstract

Since the introduction of the euro, the use of cash as a means of payment in the euro area has been declining. But this trend is being identified in other countries also, such as the US and the UK. Nevertheless, cash continues to represent a huge number of payment transactions. Though consumers still think cash is costless, the problem with cash is its relative inefficiency, reflected by its high (but hidden) social costs. It involves a major cost especially for banks and merchants. It is thus not surprising that, to reduce these costs, the euro cash cycle is undergoing fundamental changes. Substantial cost savings in processing and handling cash are possible by creating a level playing field in the European Union, a so-called Single Euro Cash Area (SECA). This, however, necessitates reforming the present complex wholesale cash distribution and collection infrastructures within the eurozone. This paper focuses on how to realise the SECA, what requirements are posed by the banking sector, and what steps should be taken by all parties involved.