1. Round table on “Cash circulation and non-cash payments strategy”
XXV INTERNATIONAL FINANCIAL CONGRESS
BANK OF RUSSIA
Round table on “Cash circulation and non-cash payments strategy”
Enrica Teresa Vignoli
Head of the General Cashier Directorate

2. Is it realistic the existence of a cashless payment system?
CONTENTS:
What are the strategic positions of Bank of Italy in cash management area?
Trends of cash
The Eurosystem position and goals
The cash cycle in Italy – goals of the Bank of Italy
Is it realistic the existence of a cashless payment system?
Cashless payments in Italy vs. EU
Drivers for change at EU level, the digital agenda, EU and Italian regulation 2

3. What are the strategic positions of Bank of Italy in cash management area?3

4. Trends of Cash: Circulation of Euro banknotes in the Eurozone (quantities)
End of year:
Euro banknotes in circulation (millions of pieces)
Change over previous year
2013
16,511.7
5.3%
2014
17,528.2
6.2%
2015
18,895.0
7.8% 4

5. Trends of Cash: Circulation of Euro banknotes in the Eurozone (value)
End of year:
Euro banknotes in circulation (millions of euros)
Change over previous year
2013
956,184.8
4.8%
2014
1,016,538.1
6.3%
2015
1,083,430.3
6.6% 5

6. Trends of Cash: Circulation of Euro Banknotes in Italy (quantities)
End of year:
Euro banknotes in circulation (millions of pieces)
Change over previous year
2013
3,059.6
6.8%
2014
3,214.4
5.1%
2015
3,371.2
4.9% 6

7. Trends of Cash: Circulation of Euro banknotes in Italy (value)
End of year:
Euro banknotes in circulation (millions of euros)
Change over previous year
2013
144,671.9
-1.1%
2014
142,159.1
-1.7%
2015
142,027.4
-0.1% 7

8. Stop of the issuance of 500 euro banknote
Decision of the Governing Council to permanently stop producing the €500 banknote and exclude it from the Europa series (4 May 2016).
The € 500 would remain legal tender and could continue to be used as a means of payment and store of value
Replacement by other denominations
€200 (25%), €100 (50%) and €50 (25%)
Impact on demand of other denominations 8

9. The Eurosystem position
The Eurosystem is NEUTRAL with regards to the use of cash or non-cash payment instruments
The Eurosystem has a SPECIAL RESPONSIBILITY for cash, as the only legal issuer of euro banknotes.
The Eurosystem goals on cash are to promote: EFFICIENCY, SECURITY, AND RESILIENCE of the cash cycle. 9

10. The Eurosystem goals
MONITORING RECIRCULATION AND DEVELOPING ANALYSIS OF THE CIT AND CASH PROCESSING SECTOR  security, efficiency, resilience
PERIODICAL REVIEW OF THE USE OF CASH AND CASH INFRASTRUCTURE
 resilience and efficiency
PREVENT DISRUPTIONS OF CASH DISTRIBUTION DEVELOPING BUSINESS CONTINUITY PLANS
 security, resilience
DEVELOPING MORE COST-OF-CASH EXPERTISE AND ENHANCE SOCIAL COST ANALYSIS
efficiency 10

11. The cash cycle in Italy – general overview
BANCA D’ITALIA
General Cash Department
BdI’s Branches
Recirculation 20%
CIT
(transport and cash processing)
CIT
(banknote transports)
Recirculation 42%
Banks that have outsourced cash processing
Recirculating Banks
Recirculation 38%
counters
ATM
Cash-in
Cash-out
P U B L I C
RETAILERS 11

12. Increase efficiency security and resilience
of the cash cycle
BANK OF ITALY’S GOALS:
Keep the Bank of Italy’ share in the cash cycle
Streamlining the branch network (internal efficiency)
CASH- EDI and the Cash Tracing system (external and internal efficiency/ security)
Enhance the monitoring of Cash handlers’ activity
Implementing business continuity plans 12

13. The Cash-IT & CTS projects Exchange of coin stocks btw CH
Bank y
CIT x U A
A2A on SWIFT A A
Exchange of coin stocks btw CH
BRF
POC
CIT x A
CRF
lodgement
withdrawal
CASH TRACING SYSTEM
Bank y U
STORAGE
STORAGE
Packaging
OPENING
SORTING
Reconciliation 13

14. The monitoring of Cash handlers
Critical area: 30 %
Critical area: 19 %
Score
Judgement 1
Satisfactory 2
Mostly satisfactory 3
Partly satisfactory 4
Partly unsatisfactory 5
Mostly unsatisfactory 6
Unsatisfactory
YEAR
2012
2015
No. of CITs: 68 39 14

15. COBAN: Crisis management Committee
Business Continuity
COBAN: Crisis management Committee
crisis procedures 15

16. Is it realistic the existence of a cashless payment system?16

17. Prospects of cash
CASH WILL BECOME LESS RELEVANT due to an unavoidable bigger share of payments made with innovative solutions. Not to forget that cash is expensive for society.
BUT CASH IS HERE TO STAY 17

18. Number of per capita cashless transactions in Europe (2014)
Source: ECB, sdw
Italy’s lag possibly due to:
Lower financial literacy
Greater shadow economy 18

19. Non-cash payments: Italy/EU
More recently also IT non cash payments have registered higher growth rates than in the past, especially in comparison with the EU payment statistics.
Number of non cash payments – annual growth rate
2015
Italy
2.7%
5.6% 9% EU
4.1%
3.7%
Source: ECB, BIS 19

20. Cashless payments by instruments in Italy20

21. Relative importance of cashless payment instruments in Italy (2015)21

22. Drivers for change at European level
Efficiency
Technology
Integration
Safety
Competition
Single Market
Authorities aim for integration and competition as preconditions for the achievement of the effective European Single Market
Market operators look for efficiency and innovation 22

23. 1. Digital agenda for Authorities in the single market
Higher efficiency and safety
Higher confidence, higher transparency, faster transactions
More integration, more innovation, more competition: positive spillovers on economic growth
European strategy 2020
(promoting the econonomic growth based on knowledge and innovation) 23

24. 1. EU Regulation
PSD2: revision of payment service directive 2007/64/EC (PSD)
IFR: interchange fee regulation for card-based payment transactions
Goals: increasing the use of electronic payment instruments and competition between payment service providers and payment instruments 24

25. 1. Recent ad hoc national legislation in Italy
«Legge di Stabilità 2016»
Extension of the obligation (existing for debit cards) to accept credit cards payments at POS (new «POS decree»)
Lower fees to accept cards payments below € 5
Interchange fee regulation: caps of 0.3% of transaction value for credit cards and 0.2 for debit cards
New cash transaction limits: from € 1000 to € 3000 except for money transfer and PA payments 25

26. 2. What solutions does the market offer?
Wallet: a virtual space for the storage of data on payment instruments ; users that pay on e-commerce websites select the preferred channel .
Faster/instant 24/7/365 payments:
Fund transfers, “face-to-face” or “at a distance”, at any time of the day, immediate debiting and crediting for both, the payer and the payee.
No need for specific devices at the point of acceptance ; a mobile phone or a computer are enough.
Payment cards installed on a telephone device: cards data are registered on a telephone device and also make contact-less payments possible by offering the same functionalities as card payments.
Blockchain - distributed ledger technology - virtual currency (bitcoin) 26

27. Future prospects of payment instruments
Increase of innovative instruments due to technological developments that make them more similar to cash
Yes but in what time?
Difficult to predict. In Italy there could be a sudden jump in the trend
What to do? How do we react?
Need to merge knowledge to monitor the market on cash and non cash instruments and not to be
caught unprepared 27

28. Thank you for your attention!