1. DENARIA’S OBJECTIVE

Denaria aims to inform society about the relevance of cash as an essential good for the common interest, especially important for financial and social inclusion, because it allows all people to access and use their own money in the way that they freely choose, without being conditioned or limited by personal circumstances, such as age, origin, abilities, or geographical location.

 

2. BUT WHAT IS CASH AND WHAT ARE ITS CHARACTERISTICS?

Cash is a frequent and normal method of payment that should always be an option for consumers to freely choose. It enjoys a series of characteristics that make it especially relevant:

• Its use implies no discrimination.
• It always guarantees complete privacy.
• For the user, cash is also an excellent way to control personal spending. As shown in the survey by Denaria, 73% of those interviewed consider cash to be the method of payment that most helps to control spending and not fall into debt.
• It is more secure in transactions than using digital methods.
• It guarantees financial inclusion for the most vulnerable people and societal groups.

Cash is also a strategic good in crisis situations used to protect rights and liberties within the economic and financial security framework. It serves as back-up when electronic payments are unavailable, such as in emergency situations that include system failure, natural disasters, blackouts, or war. In these extreme situations, external dependence may be a factor of elevated systemic risk and cash allows strategic independence with respect to large private tech companies.

Due to all of the above, cash is a public good that should be protected. The Denaria survey reveals that 8 out of 10 people interviewed believe cash is a public good and 78% believe it is an essential method of payment. These two aspects of cash increased its positive valuation compared to the prior year.

 

3. CASH CONTINUES TO BE IN HIGH DEMAND IN SOCIETY

Due to all these characteristics, cash continues to be one of the most used and most in demand methods of payment for society, especially among vulnerable collectives such as youth, the elderly or those at risk of financial exclusion.

As shown in the national survey on the use of cash (1), promoted by the Bank of Spain, cash is the method of payment most widely used by 35.9% of citizens, that is to say, almost 17 million people. These numbers are much higher in the case of over 64 year-olds (53%) and young people between the ages of 18 and 24 (60.3%).

Along these same lines, the survey on the use and access to cash in Spain, undertaken by Plataforma Denaria, underscores that 9 out of every 10 people interviewed support the use of cash in the face of increased electronic payments. Moreover, for 46.3% of those surveyed, cash is their usual form of payment, an increase of 5 points compared to the year before.

In this respect, 71% of those surveyed believe that society in general should defend cash by using it. This perception has increased 6% in comparison to 2021 and it is the main form of defense for cash as a method of payment, followed by the Government of Spain and the Bank of Spain with 60%.

 

4. DESPITE ITS IMPORTANCE, ACCESS TO CASH IS DECREASING

Despite the heavy use of cash by the immense majority of the population and businesses, there has been a progressive decrease in the number of cash access points. That is to say, while demand is still very high, the supply of cash is being noticeably reduced. This will eventually affect consumer habits. This marked decrease since 2008 has been to the benefit of the electronic payment infrastructure:

• The number of bank branches has decreased almost 50% while ATMs have been cut by one fifth.
• From the perspective of payment infrastructure, there are 2.2 million devices that allow the use of bank cards in physical spaces (cashiers and payment terminals at points of sale) as compared to 71,000 cash access points (ATMs and bank branches). Individuals and businesses only have at their disposal a negligible part of the money infrastructure for access to physical legal tender, while access to electronic payments with cards or other digital methods is much more readily available.
• Not only do businesses pay fees on every sale made with a bank card, but they also have fixed costs such as the Point of Sale Terminal that costs approximately 100€ per year. The cost for electronic payments borne by businesses reached more than 700 million euros in 2021.

According to the Denaria survey, 57% of those interviewed consider it to be increasingly difficult to access cash in Spain, mainly among those over age 45 and inhabitants of cities with populations of over 100,000. And 93% believe that the closure of bank branches affects both the access to cash and its use.

This tendency to limit the physical infrastructure of cash especially affects the elderly, who can manage their spending and maintain their independence by using cash. The obstacles to taking out cash or its digitalization make them more dependent on others and slow down active ageing (the process of optimizing opportunities for health, participation, and security in order to enhance the quality of life as people age – WHO). It is a question of continuing to be socially, economically, culturally, spiritually, and civically active, not just physically so.

In this same way, limiting the physical cash infrastructure does notable damage to those with mental disabilities since using cash is their only form of economic interaction.

 

5. THE RISKS OF LIMITING THE USE OF CASH

 I. Loss of privacy

One of the main points supporting the use of cash is the protection of personal information. According to the Denaria survey, for 72% of those interviewed, this is one of the primary problems derived from the use of digital payments.

Access to personal information by third parties is a growing concern in today’s society and paying in cash is a guarantee of privacy since no data is generated that can be bought or sold.

II. Limiting free choice

The freedom of choosing methods of payment is an unwaiverable right for the consumer that is being limited with every restriction to the use of cash. In this sense, there are still many establishments that do not accept cash; both private (such as airlines) and public (such as regional transportation offices, municipal athletic installations, parking lots, etc.).

Many states and cities have regulated as mandatory the acceptance of cash in order to, among other reasons, support general economic activity. Spain has done so in the Royal Decree Law 24/2021 which modifies the consumer and user defense law.

III. Financial exclusion of vulnerable collectives

Clearly, any difficulty accessing cash due to unforeseen circumstances may be a factor for social exclusion, but so are other situations such as increasingly long distances to bank branches or obstacles in the ability to use digital systems.

According to the Denaria survey, four out of every five people interviewed believe that financial exclusion exists in Spain, regardless of age or preference in methods of payment.

Plataforma Denaria intends to fully cooperate on the path of financial inclusion for all citizens, especially the most vulnerable, such as the elderly, those with disabilities and residents in the rapidly depopulating rural areas of Spain, among others.

In Spain there is a problem of access to physical money, which risks condemning a part of the population and the territory to an economy without cash. The Spanish National Markets and Competition Commission (CNMC) report on the removal of ATMs (July 2022) recognizes the importance of the use of cash in our country and the existence of financial exclusion in rural zones and among vulnerable collectives.

According to the report, the present situation is characterized by a series of factors:

• A reduction in the number of ATMs in Spain. A decrease of 23% in the last 15 years due to the closure of bank branches and digitalization. More than 3% of the Spanish people live in areas with no ATMs in their municipal districts.
• Rural areas with no cash withdrawal services. Although Spain is one of the European countries with the most extensive ATM systems, 55% of Spanish municipalities (containing 3% of the population) have no ATMs at all.
• Competition improves financial inclusion by stimulating offers for more and better services.
• Low entry of alternative systems. The mobile “ofibuses” (office/bus) are only used by one operator with little or no interest on the part of others, for now, to use them. Nevertheless, according to the recent agreements between financial entities and the government, there is interest in developing this service.
• Cashback and cash-in-shop systems are more developed in other European countries and may help to increase access to cash. The fees for these systems are comparable, according to the study, to the fees charged for bank card transactions.

The study’s conclusions highlight the following needs:

• Adopt public procurement and subsidy grant policies that encourage competition. Public support is recommended for access to cash systems in rural areas through public bidding and grant programs that do not disrupt competition.
• Develop a legal framework that promotes initiatives such as cashback and cash-in-shop, common in nearby countries, that allow cash to be withdrawn at local establishments. A specific legal framework can lead to improved legal security and facilitate the better establishment of services, combined with public measures to motivate not only the introduction of Point of Sale Terminals in retail shops, but also facilitate the development of cashback and cash-in-shop services, which would contribute to expanding the number of payment options for individuals.
• Establish financial education programs to help improve access to cash and other forms of payment and to financial services in general; for those groups unaccustomed to using different financial services, in particular, digital services. These initiatives should be directed to training and the acquisition of digital skills for the most vulnerable groups in rural areas, with the goal of guaranteeing access to cash and better management of personal finances.

Due to the generalized problems created by financial exclusion and given that these problems cannot be resolved through increased digital connectivity, specific measures must be taken to ensure the distribution and access to cash for all.

IV. Impact on small business

It is impossible to imagine a city or town without local commerce, the most important aspect of local economies, the most readily available and vital to the elderly, dependents, the disabled or children and youth.

The hospitality industry and local businesses play an essential role in every neighborhood or municipality. Paying in cash is key for this sort of economic activity, both for clients and employees, always keeping in mind digital payment fees charged or the socioeconomic importance of the age-old habit of tipping.

The debate about cash access points, focused up until now primarily on vulnerable persons, also affects small retail, which regularly carries out two operations at these cash access points: exchanging bills and making cash deposits. According to the Bank of Spain, 80.9% of hospitality and local businesses go to a bank branch to obtain change and 40.2% say they do so once a week, this being the most frequent case.

V. Possible consumer scams

It is worth noting, that for the moment, it is not possible to access physical money without it having previously been bank money. Thus, its origin is highly traceable. The Central Bank, the Bank of Spain, does not directly distribute the money it emits. It assigns this role to commercial banks, with the ensuing dependency of supply offered by the bank in order to access physical money. Since a time in which physical money was the predominant form of all transactions, we have reached a point where the proportion today is 98% bank money compared to 2% physical money. This phenomenon has been amplified by the increasing entry of digitalization in bank management. Europe, and Spain in particular, are dependent on card payment companies and technologies and this creates systemic vulnerabilities.

Cash continues to provide guarantees against growing fraud in technology, and with cryptocurrencies or fraud in non-monetary payment methods that are used in money laundering and tax evasion, as well as in organized crime income. This is a growing challenge to national security as shown in the 2021 National Cybersecurity Strategy.
The latest European Commission report on the gap in collecting the VAT (value added tax) shows that the more cash is used, more VAT is collected.

In fact, according to the survey by Plataforma Denaria, the low risk of user fraud is one of the main reasons to keep using cash, according to 75% of those surveyed.

VI. Vulnerability in emergency situations

The European Central Bank declares that cash serves as support and back-up to the monetary system in case of electronic payments being temporarily unavailable, such as in the case of extreme weather events or due to conflicts like the one we are sadly seeing in Ukraine.

Cash is considered to be critical infrastructure in crisis situations in order to preserve rights and freedoms within the economic and financial security framework. Bills and coins are essential resources, a strategic reserve. Cash has been recognized as such in many countries. Moreover, Europe, and Spain in particular, are dependent on card payment companies and technologies and this creates systemic vulnerabilities.

Cash is always secure, even in times of pandemics, despite the circulation of false messages about possible contamination that have been routinely refuted by institutions such as the WHO and the ECB. According to the survey by Plataforma Denaria, 69% of those surveyed feel that cash should be maintained because it is the only method of payment that always works.

DENARIA wants to raise awareness of the importance of cash as critical infrastructure, especially in emergency situations because depending on outside forces (technological and electronic payment methods) during crisis contingencies can elevate systemic risk. Guaranteeing a supply of cash to the population is a question of State. Denaria wishes to present to parliamentary groups the need to regulate access to cash and its distribution as a form of strategic reserve, in the Bill to reform the National Security Law of 2015, presently being considered by Parliament.

 

6. INSTITUTITONS THAT SUPPORT THE IDEALS OF DENARIA

Cash is a symbol of freedom, unity, justice, and European identity. Its importance is so great for Europeans that the ECB, through its Euro Retail Payments Board (ERPB) report has urged the revision of the evolution of cash and the guarantee that it will continue to be an inclusive, efficient, and sustainable method of payment for all consumers.

This data aligns with the Survey on the use of cash by the Bank of Spain. Its latest edition (2020) shows that cash is the most regular form of payment for over one third of the population and the most popular form of payment for those aged 18 to 24 and over 64. The percentage increases to 37.5% in municipalities with less than 100,000 inhabitants (95% of all Spanish municipalities). People who prefer this form of payment cite motivating factors such as speed and convenience for their opinions.

Along these same lines, a study by the European Central Bank on consumer payment behaviors in the euro zone demonstrates the important role of cash in everyday transactions: 72% of point of sale transactions (representing 47% in terms of value) and 83% of person to person transactions (57% of value) are made in cash.

 

7. INTERNATIONAL METHODS

Other countries have already made advances in regulating money access, providing legal guarantees for access to cash and taking measures such as establishing maximum distances between bank branches and where consumers live:

• Since 2020, in Sweden, banks must provide cash services that are geographically accessible to all citizens.
• In the UK, cashback without making a purchase is legally allowed in certain establishments and there is a proposal in the Upper Chamber of Parliament to designate the cash network as a “Critical National Infrastructure”, urging regulation of a “Universal Service Obligation” for the provision of cash.
• In the Netherlands, there can be a maximum distance of 5 km without ATMs, in Sweden, the distance is 25 km and, in the UK, when an ATM is removed, leaving more than a 1 km distance to the next nearest ATM, it is mandatory to study the consequences for financial exclusion, of such an action.

The European regulatory framework is straightforward: both the Directive for access to digital services as well as the Directive to access a payment account determine that banks must ensure that clients are able to make cash transactions in bank offices, in the entire territory of operation and especially in the client’s place of residence. Customers must not be obligated to use digital methods to access or use money deposited in a bank account.

Any solutions must inevitably guarantee bank support for everyone and the consideration of cash as a basic and universal good. Solutions must be applied with urgency due to the elevated and growing impact on social cohesion and also economic efficiency, all within a context of increasing geopolitical and economic uncertainty.

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DENARIA: Proposals for defending the use of cash

A. In matters of accepting cash

There have been noticeable problems in Spain when attempting to pay in cash in certain establishments, businesses, or even public administrations. Our proposals in this area are the following:

• Effective application of the regulation that compels the acceptance of cash as a method of payment (in effect since the past 28th of May).

Article 82 of the Royal Decree Law 24/2021, modifies the Consolidated Text of the General Law for the Defense of Consumers and Users to establish a new infraction in article 47:

ñ) the refusal to accept payment in cash as a method of payment within the limits established by the tax and prevention and fight against fiscal fraud regulation.

Initially classified as a minor infraction, in certain cases such as repeat offenders, the offense will be considered major.

• • Infractions will be penalized with the following fines in the maximum and minimum amounts:
    • Minor offenses: between 150 and 10,000 euros, with the possibility of exceeding these amounts up to between two and four times the value of the illegal profit obtained.
    • Major offenses: between 10,001 and 100,000 euros, with the possibility of exceeding these amounts up to between four and six times the value of the illegal profit obtained.
• Increase the present limit of 1,000 euros in cash payment when one of the payers is a businessperson or professional (limit imposed by the Law 11/2021 on measures for the prevention and fight against fiscal fraud). We propose returning to the situation before the Law was enacted, and to re-establish the threshold of 10,000 euros, in accordance with the recommendations of the EU authorities.
  • Along these lines, a judgement by the European Central Bank (March 2022) severely criticizes this excessive restriction affecting the entire population, especially the most vulnerable and recommends the threshold of 10,000 euros.
  • The ECB also advises that such a low 1,000 euro minimum leads to unwanted adverse effects on the legal tender status of bills denominated in euros.
  • Declares that such a low limit allowed for cash payment is an affront to the freedom of citizens to choose the method of payment they consider to be most convenient.
  • Warns that not all citizens have the ability to access digital payment methods by using credit cards or NFTs and that these types of payment systems can also have errors and failures.
  • Finally, we conclude that the ability to pay in cash is important for certain social groups that, for various reasons, prefer to use cash instead of other methods of payment, that cash usage facilitates the inclusion of the entire population in the economy and that it is a fundamental method of payment for the elderly, immigrants, those with disabilities and any person with limited access to digital services.

 

B. In matters of availability or access to cash

In Spain, there is a problem of access to cash which is a risk factor in social exclusion for part of the population. Denaria considers it essential to maintain a viable physical infrastructure that includes, at a minimum, essential bank services such as access to cash.

Access to cash withdrawal and deposit sites must be guaranteed so that cash may continue to be an inclusive, efficient, and durable method of payment for consumers. Legislation must ensure the right of citizens to withdraw and deposit cash in their local surroundings.

Our proposals in these matters are the following:

• Define the cash network as a Critical Nacional Infrastructure through pertinent legislation establishing universal cash access services, similar to those that exist in telecommunications, energy, the internet, or postal services.
• Consider cash to be a special interest element for National Security through pertinent legislation in the National Security arena.
• Develop a national map of cash access requirements based on geographic, social, cultural, economic, and other factors.
• In accordance with this map, elaborate a plan that ensures a sustainable and viable cash access infrastructure based on the principal of public-private partnership.
• To improve access to cash for all, encourage the establishment of a maximum distance between ATMs. This measure is already regulated in other European countries (Sweden, the Netherlands, the UK …).

Note: according to the ECB report (Report of the Euro Retail Payments Board on Access and Acceptance of Cash, year 2021), consumer organizations at the European level agree that there should not be a greater distance than 5 km between two ATMs, always keeping in mind geographical circumstances and population density.

• Design policies in collaboration with Provincial Councils and other Public Administrations such as local governments and Autonomous Communities, through systems of cooperation with financial entities and other agencies, and with the participation of the Spanish Federation of Municipalities and Provinces (FEMP), to secure the cash access infrastructure by placing ATMs in rural and depopulated zones, but also in urban areas affected by the closure of bank offices and ATMs.
• Encourage agreements for the installation of cash machines with non-financial operators, rural development networks or service networks present in the entire national territory, in the way already begun with the Postal Service, which allows basic financial operations (cash withdrawal and deposit, among others), in rural and depopulated areas. It would be very convenient to extend this measure to other networks with broad national reach, such as pharmacies, convenience stores, gas stations, etc.
• Promote multi-brand or no-brand ATMs, where different financial entities share in their operating profits and costs. A group of banks would set up the ATMs in less attractive areas; examples include the “Multibanco” network in Portugal, “Automatia” in Finland or “Geldmaat” in the Netherlands.
• Enter into agreements with non-financial entities for the establishment of ATMs; cash transportation companies could play a vital role in this endeavor. There is precedent in Castilla-La Mancha.
• Design a Financial Inclusion Program that supports the introduction of ATMs in low populated areas. A clear example exists in the UK, where an inclusive financial program offered by LINK (an association formed by 34 companies: banks and card companies such as Visa or Mastercard). “Interchange fees” are tripled at the ATMs that form part of this program, which encourages placing ATMs in less attractive zones.
• Continue to move forward with the provision of financial services by deploying mobile units to personally attend to clients, the so-called “ofibuses”.
• Apply innovate measures that are already being developed in other EU countries, such as cashback (withdrawal of cash at establishments without having made a purchase), or cash-in-shop (cash withdrawal in addition to the purchase of a good or service), as ways to reduce the lack of access to cash in Spain. Currently, these measures account for 3% to 4% of cash withdrawals in the EU.
• Eliminate certain Public Administration recommendations encouraging the non-use of cash, that were developed during the Covid pandemic.

 

C. In matters of Financial Inclusion

Denaria believes it is essential to improve financial inclusion for the most vulnerable, especially the elderly, those with disabilities or immigrants. Our proposals in these matters are the following:

• Develop a risk and financial exclusion map based on geographic, socioeconomic, cultural etc. factors, to serve as the foundation for rolling out solutions that guarantee the right of access to cash and other financial services, with an integral, viable and sustainable infrastructure.
• Develop bank access technologies that are simple, comprehensible, inclusive, and secure and that allow users to make transactions at ATMs that are similar to those made at a bank office or branch.

For example, advances in biometrics and identification technologies allow the verification of card or account holders without the use of passwords; other viable alternatives could be using voice commands or dictation systems instead of keypads or touchscreens.

• Increase support staff at bank locations to specifically help those unaccustomed or unable to make digital transactions; in this sense, it would be useful to find ways of collaborating with elderly-care and other senior centers.
• The expansion of business hours with bank teller access in order to avoid time restrictions for account deposit or disbursement, without fees or extra charges.
• In order to increase security for the most vulnerable groups, the creation of special insurance to protect against ATM theft. Also, establish security mechanisms to protect bank users from online scams and fraud.
• The expansion of financial agent networks without permanent facilities, that personally tend to clients.

 

D. In matters of financial education

Denaria considers financial education to be a fundamental tool for the financial inclusion of those less skilled in the financial and digital areas so that citizens may make informed and appropriate decisions.

Along the lines of the collaboration agreement signed by the Ministry of Economic and Digital Transformation Affairs, the Bank of Spain and the CNMV, our proposals are:

• Expand financial skills content in the design of school curricula so that primary and secondary students are taught skills to become financially literate. The aim of this proposal is to adequately prepare citizens to make financial decisions in an increasingly complicated and dynamic setting, and to learn to appropriately manage money and resources both in the short and long terms and to manage financial risks.
• Promote a financial and digital education network that allows all of society to obtain the skills necessary to operate in the most confident way with new technologies within today’s modern realities.
• Within the framework of the National Plan for Digital Capabilities, encourage the adoption of basic digital skills with special emphasis on the most vulnerable groups to help with their financial inclusion.
• Promote digital literacy programs to impart practical knowledge to all citizens but especially the most vulnerable collectives, that allow them to attain basic digital and financial skills.
• The promotion of and/or participation in events, debates, workshops, meetings, classes, publications, seminars, webinars, research studies, conferences, and in general those formative and informational activities that contribute to a better financial education, considerations about the future of the economy, money and payments, the freedom of choice and the acceptance of cash.
• Produce periodical studies and surveys on the use of different methods of payment in Spain and their determining factors (speed, privacy, possible fraud, etc.).

 

[1] Data from 2020 (the latest survey published), affected by the evolution of the pandemic.