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The cash and non-cash payments in the digital transformation

Statement on the meeting of the Committee of the Federal Association of German Banks for foreign banks – The cash and non-cash payments in the digital transformation


1 welcome
Dear Mr. Raettig,

Ladies and gentlemen,

Political changes in Brexit, Green Finance and digitization – the European financial sector has many influences from areas beyond the monetary policy core.

Both private banks and central banks face the challenge of understanding the long-term implications of these developments.

Think about the changing international environment and the digital transformation: these two are hardly to be separated from each other today. They reinforce themselves rather.

Digitalisation promotes globalization. Conversely, integrated goods and capital markets can help digital processes spread faster.

In a complex situation, the look at the essential is recommended: Ceteris paribus says the economist, when he considers the importance of a possible influencing factor taken for itself.

This way of thinking is essentially based on Alfred Marshall, who in his standard work Principles of Economics has explained the importance of market influences using the example of fishing. [1]

In isolation, we can analyze what the use of faster boats means for the amount of fish caught. However, we assume that conditions such as the water temperature or the flow velocity of the water do not change. Such conditions that the fisherman can not influence directly are taken for granted.

Central banks influence the general conditions of commercial banks – be it through monetary policy measures or in areas of regulation. We are subject to a clear mandate. This in turn removes our framework.

For example, when it comes to green finance , we need to analyze the importance of climate risks to financial stability. As an institution as well, we can make a contribution to climate protection within the framework of our mandate. However, it is not the task of the central bank to actively pursue climate policy. That’s a matter of democratically legitimized politicians.

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2 Meaning of cash in Germany
Ladies and gentlemen,

Ceteris paribus – a look at the essentials: A central task of central banks is payment transactions. The Deutsche Bundesbank has a leg in both the door to the digital and the analog world.

Households should be free to decide how to pay at the counter. That requires adequate infrastructure in both worlds.

Commercial banks in Germany, among other things, make an important contribution with their dense network of ATMs. The cash cycle in Germany is intact.

Cash is a popular means of payment in Germany. The cash payment share in the retail sector is extremely high – even in international comparison.

Not least in a low interest rate environment, cash also plays an important role in value preservation.

Three out of four banknotes in circulation in Germany land under the proverbial mattress.

Commercial banks have also noticeably filled their safes in recent years.

According to our estimates, the cash holdings of credit institutions in Germany are likely to have increased by over 22 billion euros since 2015.

3 Payments in the Digital Transformation
However, Marshall’s ceteris paribus approach may reach its limits if the prevailing conditions change rapidly and abruptly.

The digital transformation has triggered some waves directly affecting payments:

Options for contactless payment are now self-evident.

With the next wave of innovations, distributed ledger technologies and stable coins could become more important. In particular, stable coins should not suffer from the sometimes pronounced value fluctuations of crypto-tokens, such as bitcoin.

The rapid succession of innovations suggests that digital payment options should continue to evolve.

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This directly affects cash and non-cash payments and thus core business areas of central banks and commercial banks.

Innovations can strengthen competition and increase the diversity of payments. A new form of payment does not necessarily have to replace an existing one.

Stable coins could play an important role in cross-border, non-cash payments, depending on their design.

However, private stable coins may also carry risks, such as the financial system. Politicians and central banks are aware of this.

For example, there is a risk that non-cash payments will shift to potentially under-regulated areas. This must be prevented.

A G7 working group concluded that stable coins should not be allowed until all risks involved are limited.

With euro banknotes, we already have a cross-border means of payment with clear unique selling points. The variety of analogue and digital means of payment with different characteristics strengthens the financial inclusion and offers a protection against technical defects, cyber attacks or crisis situations.

The Libra debate highlights the desire for digital and universal means of payment.

To deduce from this the introduction of digital central bank money would, in my opinion, go too far. Such a paradigm shift could be associated with significant risks. Numerous questions in the design are open.

Rather, the discussion should be a wake up call for private providers to provide attractive payment options.

Central banks can contribute by strengthening their infrastructure. On the one hand, this concerns an adequate cash infrastructure and, on the other hand, we have to think about the further development of digital payments.

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For example, I am thinking of the area of real-time credit transfers in the euro area.

In addition, the German Bundesbank is committed to an independent European solution in digital payments, integrating existing efficient systems.

4 final
Ladies and gentlemen,

A troubled waters may complicate the fishing described by Marshall. But we are also at the beginning of development here. Further wave movements in payments are to be expected.

Central banks are fundamentally open to the further development of digital payment systems.

This concerns the existing digital systems, but also the blockchain technology and the regulatory environment with regard to stable coins.

We are monitoring the further developments in cash and non-cash payments and are in dialogue with actors from the banking industry and politics.

Therefore, I am particularly looking forward to the subsequent discussion with you and your – certainly international – view of payments in the age of digitization.

Many thanks.


A. Marshall (1920), Principles of Economics.


Statement on the meeting of the Committee of the Federal Association of German Banks for foreign banks – The cash and non-cash payments in the digital transformation

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