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Some 23 organisations across the Netherlands’ payments ecosystem have agreed on a set of principles to ensure cash use remains possible in the face of ever-growing digitisation.
The agreement, named the Cash Covenant, has been signed by the country’s major banks, the Dutch Payments Association, the hospitality industry and petrol stations, as well as by providers of cash services and De Nederlandsche Bank (DNB), the central bank.
Sigrid Kaag, the Dutch finance minister, presented it to the country’s parliament on February 8, and it will be in place for the next five years.
The new agreement was reached amid the declining use of cash payments in the Netherlands and a cash infrastructure that is under pressure.
For example, bank branches provide increasingly fewer cash services and the number of ATMs is declining.
Even for retailers, unit costs of cash transactions are rising as result of declining usage.
According to the DNB, about 60 percent of all shopping was paid for in cash a decade ago, while just prior to the pandemic it had fallen to just 32 percent.
However, partially due to fears of COVID-19 contagion risk from the use of banknotes, the lockdown and changing digital preferences, this figure nosedived to just 13 percent during the pandemic, although it has since risen again to a little over 20 percent.
As part of the agreement, there are to be no fee increases on cash services until mid-2023.
Besides laying down specific agreements for the next five years, the covenant also marks the start of a new study that will explore how the public interest in cash is best safeguarded in the longer term.
In particular, how a future in which cash is only used sparingly can be funded and how best to organise the market infrastructure for cash.
The study will identify various options and should be completed within ten months of the covenant’s signing. After which time, the finance minister will advise lawmakers and decision-making can take place.
Falling cash usage has become a major concern for policymakers in many parts of the world, as consumers continue to veer towards digital payment options.
In its 2020 retail payments strategy, the European Commission indicated its commitment to cash, stating that “while promoting the emergence of digital payments to offer more options to consumers, the commission will continue to safeguard the legal tender of euro cash”.
Concrete interventions from the EU’s institutions have been limited thus far, but member states have taken things into their own hands. For example, policymakers in Sweden made an amendment to the Act on Payment Services requiring banks to provide access to cash services.
And in December 2021, major UK banks including NatWest, Barclays and HSBC agreed to join forces and share services to help people and businesses to continue to be able to access cash.
Banks involved in the initiative, which has been spearheaded by the Access to Cash Action Group, have to inform the ATM LINK network if they decide to close a branch.
