Single Euro Cash Area
15 June 2009
One of the less-publicised components of SEPA is the SECA concept, the Single Euro Cash Area. SECA was introduced because the physical distribution of cash in the Euro area is done on a country-by-country basis, and this causes inefficiencies in border areas. A town in Austria might be close to a cash distribution centre in Germany, but cannot be supplied from there. Instead, cash may have to be transported a long distance from a centre in Austria. Any solution to this problem requires the co-operation of police and security forces, central banks, banks, insurance companies, security carriers, etc. This part of SECA may have little relevance to Ireland which has no land borders with the Eurozone.
SECA also has another agenda which is much more relevant to Ireland. On a per capita basis, Ireland is the highest user of cash (notes and coin) in the Eurozone, using twice as much as the average. Latest estimates place the cost of cash-handling at 0.58% of GDP in a high-cash country (Belgium), compared with 0.12% in a low-cash country (Finland), and so there is a major benefit to be sought through reduction in cash usage.
Towards this end, some interesting concepts are being put forward within SECA and elsewhere.
Among these are:
- Legal Tender. The concept of legal tender confers on cash a form of preferred status. Legislation could be developed which would rank electronic payment pari passu (“with equal rights”) with cash, or further, make electronic payment the default legal tender. While this move would have little practical effect, it sends a signal to users.
- High-value notes. High-value notes facilitate high-value cash transactions. Withdrawing them from circulation or limiting their circulation might have some effect
- ATMs. Lowering the payout amount from ATMs, and/or reducing the number of ATMs would certainly have some effect in terms of making cash less easily available
- POS terminals. Increasing the visibility of POS terminals, and particularly, increasing the number of non-cash terminals would help. In particular, it is noticeable that there are no card-only unattended filling stations in Ireland, although they are commonplace in other countries.
- Bank Charges. A very large percentage of personal Cash transactions, both lodgement and withdrawal, are free. In some countries this percentage is 100%. The costs are borne by retailers. Clearly a re-balancing of charges would have a major effect – but would any bank dare to do this? Would they be permitted?
SECA is the forum through which these concepts are being openly floated. It is however, no coincidence that the discussion should intensify at this time. Operating costs at banks are under close scrutiny, and we can expect moves in this direction soon.
Adapted from EPC sources. For full details click here