Flickr - Nic's events - London - 14-15 Dec 2007 - 034

economics Economics () is the social science that studies the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods and services. Economics focuses on the behaviour and intera ...

, cash is

money Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular country or socio-economic context. The primary functions which distinguish money are as ...

in the physical form of

currency A currency, "in circulation", from la, currens, -entis, literally meaning "running" or "traversing" is a standardization of money in any form, in use or circulation as a medium of exchange, for example banknotes and coins. A more general def ...

, such as

banknote A banknote—also called a bill (North American English), paper money, or simply a note—is a type of negotiable instrument, negotiable promissory note, made by a bank or other licensed authority, payable to the bearer on demand. Banknotes w ...

s and

coin A coin is a small, flat (usually depending on the country or value), round piece of metal or plastic used primarily as a medium of exchange or legal tender. They are standardized in weight, and produced in large quantities at a mint in order t ...

s. In

bookkeeping Bookkeeping is the recording of financial transactions, and is part of the process of accounting in business and other organizations. It involves preparing source documents for all transactions, operations, and other events of a business. Tr ...

and

financial accounting Financial accounting is the field of accounting concerned with the summary, analysis and reporting of financial transactions related to a business. This involves the preparation of financial statements available for public use. Stockholders, s ...

, cash is

current asset In accounting, a current asset is any asset which can reasonably be expected to be sold, consumed, or exhausted through the normal operations of a business within the current fiscal year or operating cycle or financial year (whichever period is ...

s comprising currency or currency equivalents that can be accessed immediately or near-immediately (as in the case of

money market account A money market account (MMA) or money market deposit account (MMDA) is a deposit account that pays interest based on current interest rates in the money markets. The interest rates paid are generally higher than those of savings accounts and tra ...

s). Cash is seen either as a

reserve Reserve or reserves may refer to: Places * Reserve, Kansas, a US city * Reserve, Louisiana, a census-designated place in St. John the Baptist Parish * Reserve, Montana, a census-designated place in Sheridan County * Reserve, New Mexico, a US vi ...

for payments, in case of a structural or incidental negative

cash flow A cash flow is a real or virtual movement of money: *a cash flow in its narrow sense is a payment (in a currency), especially from one central bank account to another; the term 'cash flow' is mostly used to describe payments that are expected ...

or as a way to avoid a downturn on financial markets.

Etymology

The English word "cash" originally meant "money box", and later came to have a secondary meaning "money". This secondary usage became the sole meaning in the 18th century. The word "cash" derives from the

Middle French Middle French (french: moyen français) is a historical division of the French language that covers the period from the 14th to the 16th century. It is a period of transition during which: * the French language became clearly distinguished from t ...

''caisse'' ("money box"), which derives from the

Old Italian Italian (''italiano'' or ) is a Romance language of the Indo-European language family that evolved from the Vulgar Latin of the Roman Empire. Together with Sardinian, Italian is the least divergent language from Latin. Spoken by about 85 m ...

''cassa'', and ultimately from the

Latin Latin (, or , ) is a classical language belonging to the Italic branch of the Indo-European languages. Latin was originally a dialect spoken in the lower Tiber area (then known as Latium) around present-day Rome, but through the power of the ...

''capsa'' ("box")..

History

In Western Europe, after the

fall of the Western Roman Empire The fall of the Western Roman Empire (also called the fall of the Roman Empire or the fall of Ancient Rome, Rome) was the loss of central political control in the Western Roman Empire, a process in which the Empire failed to enforce its rul ...

, coins, silver jewelry and

hacksilver Hacksilver (sometimes referred to as hacksilber) consists of fragments of cut and bent silver items that were used as bullion or as currency by weight in antiquity. Use Hacksilver was common among the Norsemen or Vikings, as a result of both t ...

(silver objects hacked into pieces) were for centuries the only form of money, until

Venetian Venetian often means from or related to: * Venice, a city in Italy * Veneto, a region of Italy * Republic of Venice (697–1797), a historical nation in that area Venetian and the like may also refer to: * Venetian language, a Romance language s ...

merchants started using silver bars for large transactions in the

early Middle Ages The Early Middle Ages (or early medieval period), sometimes controversially referred to as the Dark Ages, is typically regarded by historians as lasting from the late 5th or early 6th century to the 10th century. They marked the start of the Mi ...

. In a separate development, Venetian merchants started using paper bills, instructing their

bank A bank is a financial institution that accepts deposits from the public and creates a demand deposit while simultaneously making loans. Lending activities can be directly performed by the bank or indirectly through capital markets. Because ...

er to make payments. Similar marked silver bars were in use in lands where the Venetian merchants had established representative offices. The

Byzantine Empire The Byzantine Empire, also referred to as the Eastern Roman Empire or Byzantium, was the continuation of the Roman Empire primarily in its eastern provinces during Late Antiquity and the Middle Ages, when its capital city was Constantinopl ...

and several states in the

Balkan The Balkans ( ), also known as the Balkan Peninsula, is a geographical area in southeastern Europe with various geographical and historical definitions. The region takes its name from the Balkan Mountains that stretch throughout the who ...

area and

Kievan Rus Kievan Rusʹ, also known as Kyivan Rusʹ ( orv, , Rusĭ, or , , ; Old Norse: ''Garðaríki''), was a state in Eastern and Northern Europe from the late 9th to the mid-13th century.John Channon & Robert Hudson, ''Penguin Historical Atlas of ...

also used marked silver bars for large payments. As the world economy developed and silver supplies increased, in particular after the colonization of South America, coins became larger and a standard coin for international payment developed from the 15th century: the Spanish and Spanish colonial coin of 8 reales. Its counterpart in gold was the Venetian

ducat The ducat () coin was used as a trade coin in Europe from the later Middle Ages from the 13th to 19th centuries. Its most familiar version, the gold ducat or sequin containing around of 98.6% fine gold, originated in Venice in 1284 and gained wi ...

. Coin types would compete for markets. By conquering foreign markets, the issuing rulers would enjoy extra income from

seigniorage Seigniorage , also spelled seignorage or seigneurage (from the Old French ''seigneuriage'', "right of the lord (''seigneur'') to mint money"), is the difference between the value of money and the cost to produce and distribute it. The term can be ...

(the difference between the value of the coin and the value of the metal the coin was made of). Successful coin types of high nobility would be copied by lower nobility for seigniorage. Imitations were usually of a lower weight, undermining the popularity of the original. As feudal states coalesced into kingdoms, imitation of silver types abated, but gold coins, in particular, the gold ducat and the gold

florin The Florentine florin was a gold coin struck from 1252 to 1533 with no significant change in its design or metal content standard during that time. It had 54 grains (3.499 grams, 0.113 troy ounce) of nominally pure or 'fine' gold with a purcha ...

were still issued as trade coins: coins without a fixed value, going by weight. Colonial powers also sought to take away market share from Spain by issuing trade coin equivalents of silver Spanish coins, without much success. In the early part of the 17th century,

English East India Company The East India Company (EIC) was an English, and later British, joint-stock company founded in 1600 and dissolved in 1874. It was formed to trade in the Indian Ocean region, initially with the East Indies (the Indian subcontinent and Southe ...

coins were minted in England and shipped to the East. In England over time the word ''cash'' was adopted from

Sanskrit Sanskrit (; attributively , ; nominally , , ) is a classical language belonging to the Indo-Aryan branch of the Indo-European languages. It arose in South Asia after its predecessor languages had diffused there from the northwest in the late ...

कर्ष karsa, a weight of gold or silver but akin to the

Old Persian Old Persian is one of the two directly attested Old Iranian languages (the other being Avestan language, Avestan) and is the ancestor of Middle Persian (the language of Sasanian Empire). Like other Old Iranian languages, it was known to its native ...

𐎣𐎼𐏁 karsha, unit of weight (83.30 grams). East India Company coinage had both

Urdu Urdu (;"Urdu"
''

Bombay Mumbai (, ; also known as Bombay — the official name until 1995) is the capital city of the Indian state of Maharashtra and the ''de facto'' financial centre of India. According to the United Nations, as of 2018, Mumbai is the second- ...

, known as Bombain. In 1677 this was sanctioned by the Crown, the coins, having received royal sanction, were struck as silver rupees; the inscription runs "The rupee of Bombaim", by the authority of Charles II. At about this time coins were also being produced for the East India Company at the

Madras Chennai (, ), formerly known as Madras ( the official name until 1996), is the capital city of Tamil Nadu, the southernmost Indian state. The largest city of the state in area and population, Chennai is located on the Coromandel Coast of th ...

mint. The currency at the company's Bombay and Bengal administrative regions was the rupee. At Madras, however, the company's accounts were reckoned in ''pagodas'', ''fractions'', ''fanams'', ''faluce'' and ''cash''. This system was maintained until 1818 when the rupee was adopted as the unit of currency for the company's operations. Ancientchinesecoins

Paper money A banknote—also called a bill (North American English), paper money, or simply a note—is a type of negotiable promissory note, made by a bank or other licensed authority, payable to the bearer on demand. Banknotes were originally issued ...

was first used in China in the

Tang Dynasty The Tang dynasty (, ; zh, t= ), or Tang Empire, was an Dynasties in Chinese history, imperial dynasty of China that ruled from 618 to 907 AD, with an Zhou dynasty (690–705), interregnum between 690 and 705. It was preceded by the Sui dyn ...

500 years prior to it catching on in Europe. During his visit to China in the 13th century, Marco Polo was amazed to find that people traded paper money for goods rather than valuable coins made of silver or gold. He wrote extensively about how the Great Kaan used a part of the Mulberry Tree to create the paper money as well as the process with which a seal was used to impress on the paper to authenticate it. Marco Polo also talks about the chance of forgery and states that someone caught forging money would be punished with death. In the 17th century, European countries started to use paper money in part due to a shortage of precious metals, leading to less coins being produced and put into circulation. At first, it was most popular in the colonies of European powers. In the 18th century, important paper issues were made in colonies such as

Ceylon Sri Lanka (, ; si, ශ්‍රී ලංකා, Śrī Laṅkā, translit-std=ISO (); ta, இலங்கை, Ilaṅkai, translit-std=ISO ()), formerly known as Ceylon and officially the Democratic Socialist Republic of Sri Lanka, is an ...

and the bordering colonies of

Essequibo Essequibo is the largest traditional region of Guyana but not an administrative region of Guyana today. It may also refer to: * Essequibo River, the largest river in Guyana * Essequibo (colony), a former Dutch colony in what is now Guyana; * Esseq ...

Demerara Demerara ( nl, Demerary, ) is a historical region in the Guianas, on the north coast of South America, now part of the country of Guyana. It was a colony of the Dutch West India Company between 1745 and 1792 and a colony of the Dutch state fro ...

and

Berbice Berbice is a region along the Berbice River in Guyana, which was between 1627 and 1792 a colony of the Dutch West India Company and between 1792 to 1815 a colony of the Dutch state. After having been ceded to the United Kingdom of Great Britain ...

John Law John Law may refer to: Arts and entertainment *John Law (artist) (born 1958), American artist *John Law (comics), comic-book character created by Will Eisner *John Law (film director), Hong Kong film director * John Law (musician) (born 1961), B ...

did pioneering work on banknotes with the ''Banque Royale''. The relation between

money supply In macroeconomics, the money supply (or money stock) refers to the total volume of currency held by the public at a particular point in time. There are several ways to define "money", but standard measures usually include Circulation (curren ...

and inflation was still imperfectly understood and the bank went under rendering its notes worthless, because they had been over-issued. The lessons learned were applied to the

Bank of England The Bank of England is the central bank of the United Kingdom and the model on which most modern central banks have been based. Established in 1694 to act as the English Government's banker, and still one of the bankers for the Government of ...

, which played a crucial role in financing the

Peninsular War The Peninsular War (1807–1814) was the military conflict fought in the Iberian Peninsula by Spain, Portugal, and the United Kingdom against the invading and occupying forces of the First French Empire during the Napoleonic Wars. In Spain ...

against French troops, hamstrung by a metallic Franc de Germinal. The ability to create paper money made nation-states responsible for the management of

inflation In economics, inflation is an increase in the general price level of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reductio ...

, through control of the

. It also made a direct relation between the metal of the coin and its denomination superfluous. From 1816, coins generally became

token money Token money, or token, is a form of money that has a lesser intrinsic value compared to its face value. Token money is anything that is accepted as money, not due to its intrinsic value but instead because of custom or legal enactment. Token mo ...

, though some large silver and gold coins remained standard coins until 1927. The

World War I World War I (28 July 1914 11 November 1918), often abbreviated as WWI, was one of the deadliest global conflicts in history. Belligerents included much of Europe, the Russian Empire, the United States, and the Ottoman Empire, with fightin ...

saw standard coins disappear to a very large extent. Afterward, standard gold coins, mainly British sovereigns, would still be used in colonies and less developed economies and silver

Maria Theresa thaler The Maria Theresa thaler (MTT) is a silver bullion coin and a type of Conventionsthaler that has been used in world trade continuously since it was first minted in 1741. It is named after Maria Theresa who ruled Austria, Hungary, and Bohemia fr ...

s dated 1780 would be struck as trade coins for countries in East Asia until 1946 and possibly later locally. Cash has now become a very small part of the money supply. Its remaining role is to provide a form of currency storage and payment for those who do not wish to take part in other systems, and make small payments conveniently and promptly, though this latter role is being replaced more and more frequently by electronic

payment system A payment system is any system used to settle financial transactions through the transfer of monetary value. This includes the institutions, instruments, people, rules, procedures, standards, and technologies that make its exchange possible.Biago ...

s. Research has found that the demand for cash decreases as debit card usage increases because merchants need to make less change for customer purchases. Cash is increasing in circulation. The value of the

United States dollar The United States dollar ( symbol: $; code: USD; also abbreviated US$ or U.S. Dollar, to distinguish it from other dollar-denominated currencies; referred to as the dollar, U.S. dollar, American dollar, or colloquially buck) is the officia ...

in circulation increased by 42% from 2007 to 2012. The value of

pound sterling Sterling (abbreviation: stg; Other spelling styles, such as STG and Stg, are also seen. ISO code: GBP) is the currency of the United Kingdom and nine of its associated territories. The pound ( sign: £) is the main unit of sterling, and t ...

banknotes in circulation increased by 29% from 2008 to 2013. The value of the

euro The euro ( symbol: €; code: EUR) is the official currency of 19 out of the member states of the European Union (EU). This group of states is known as the eurozone or, officially, the euro area, and includes about 340 million citizens . ...

in circulation increased by 34% from August 2008 to August 2013 (2% of the increase was due to the adoption of euro in

Slovakia Slovakia (; sk, Slovensko ), officially the Slovak Republic ( sk, Slovenská republika, links=no ), is a landlocked country in Central Europe. It is bordered by Poland to the north, Ukraine to the east, Hungary to the south, Austria to the s ...

2009 and in

Estonia Estonia, formally the Republic of Estonia, is a country by the Baltic Sea in Northern Europe. It is bordered to the north by the Gulf of Finland across from Finland, to the west by the sea across from Sweden, to the south by Latvia, a ...

2011).

Motives of cash holding

In economic theory (according

Keynesian economics Keynesian economics ( ; sometimes Keynesianism, named after British economist John Maynard Keynes) are the various macroeconomic theories and models of how aggregate demand (total spending in the economy) strongly influences economic output an ...

), the cash holding of cash (especially sight deposits) is roughly attributed to three motives: * Transactions motive * Precautionary motive * Speculative motive. The transactions motive covers the business needs of economic subjects, the precautionary motive serves to hold money for liquidity purposes and to provide for crisis situations, and the speculation motive, according to

John Maynard Keynes John Maynard Keynes, 1st Baron Keynes, ( ; 5 June 1883 – 21 April 1946), was an English economist whose ideas fundamentally changed the theory and practice of macroeconomics and the economic policies of governments. Originally trained in ...

, results from the uncertainty about future interest rate developments and relates to financial investments. In addition to this purely economic importance, there are other aspects of cash use: * Activation of a reward center in the brain (anticipation of reaching a specific goal) * Expenditure control (immediate physical payment) * Tradition (haptic experience, e.g. monetary donation; long-term reliability of value retention) * Inclusion (anonymous payment without disclosing personal data) * Identification (symbolic character, solidarity and group membership) * Educational tool for children (objective handling of assets and expenses) * Paying a tip as immediate recognition of good service.

Cash in circulation

Cash in circulation is characterized by strong seasonal fluctuations. Wage and salary payment dates, tax payment dates or holidays lead to statistically perceptible increases in cash in circulation, for which the credit institutions are preparing. Since cash holdings at banks do not earn interest and can also lead to security problems (

bank robbery Bank robbery is the criminal act of stealing from a bank, specifically while bank employees and customers are subjected to force, violence, or a threat of violence. This refers to robbery of a bank branch or teller, as opposed to other bank- ...

), banks usually only hold very small amounts of cash. They are therefore forced to involve the central bank in times of higher cash requirements. Therefore, the cash in circulation only remains unchanged if the banks hand over cash from their own cash holdings to their bank customers or take cash deposits from their customers into their own holdings. The ratio of the cash in circulation in relation to the

gross domestic product Gross domestic product (GDP) is a money, monetary Measurement in economics, measure of the market value of all the final goods and services produced and sold (not resold) in a specific time period by countries. Due to its complex and subjec ...

(cash to GDP ratio) is a good indicator of cash usage and payment behavior in an economy. In countries like the United States, increased use of debit and credit cards is increasing the amount of cash in circulation at a slower rate than in countries with a high amount of cash payments. In 2018, it ranged from 1.3% (in

Sweden Sweden, formally the Kingdom of Sweden,The United Nations Group of Experts on Geographical Names states that the country's formal name is the Kingdom of SwedenUNGEGN World Geographical Names, Sweden./ref> is a Nordic country located on ...

) to more than 21% (in Japan), 10.5% in Switzerland and 10.7% in the eurozone. Since around 2018, exacerbated by the COVID-19 pandemic, cash in circulation in the

eurozone The euro area, commonly called eurozone (EZ), is a currency union of 19 member states of the European Union (EU) that have adopted the euro (€) as their primary currency and sole legal tender, and have thus fully implemented EMU policies ...

has increased significantly while the share of cash payments (i.e. transactions) has decreased, known as the ''paradox of banknotes''. Analyzes show that private households are increasingly keeping cash as a precaution against crises and that

negative interest rates An interest rate is the amount of interest due per period, as a proportion of the amount lent, deposited, or borrowed (called the principal sum). The total interest on an amount lent or borrowed depends on the principal sum, the interest rate, th ...

also play a role. This effect is also observed in many other currency areas, e.g. in the

USA The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country Continental United States, primarily located in North America. It consists of 50 U.S. state, states, a Washington, D.C., ...

and

Japan Japan ( ja, 日本, or , and formally , ''Nihonkoku'') is an island country in East Asia. It is situated in the northwest Pacific Ocean, and is bordered on the west by the Sea of Japan, while extending from the Sea of Okhotsk in the north ...

Competition of cash

Cashless payments

cashless society can be defined as one in which all financial transactions are handled through "digital" forms (debit and credit cards) in preference to cash (physical banknotes and coins). Cashless societies have been a part of history from the very beginning of human existence. Barter and other methods of exchange were used to conduct a wide variety of trade transactions during this time period. Since the 1980s, the use of banknotes has increasingly been displaced by credit and debit cards, electronic money transfers and

mobile payment A mobile payment, also referred to as mobile money, mobile money transfer and mobile wallet, is any of various payment processing services operated under financial regulations and performed from or via a mobile device, as the cardinal class of d ...

s, but much slower than expected. The

cashless society In a cashless society, financial transactions are not conducted with physical banknotes or coins, but instead with digital information (usually an electronic representation of money). Cashless societies have existed from the time when human soc ...

has been predicted for more than forty years, but cash remains the most widely used payment instrument in the world and on all continents. In 17 out of 24 studied countries, cash represents more than 50% of all payment transactions, with Austria at 85%, Germany at 80%, France at 68%. The United Kingdom at 42%, Australia at 37%, United States at 32%, Sweden at 20%, and South Korea at 14% are among the countries with lower cash usage. By the 2010s, cash was no longer the preferred method of payment in the United States. In 2016, the United States User Consumer Survey Study reported that three out of four of the participants preferred a debit or credit card payment instead of cash. Some nations have contributed to this trend, by regulating what type of transactions can be conducted with cash and setting limits on the amount of cash that can be used in a single transaction. Cash is still the primary means of payment (and store of value) for unbanked people with a low income and helps avoiding debt traps due to uncontrolled spending of money. It supports

anonymity Anonymity describes situations where the acting person's identity is unknown. Some writers have argued that namelessness, though technically correct, does not capture what is more centrally at stake in contexts of anonymity. The important idea he ...

and avoids tracking for economic or political reasons. In addition, cash is the only means for

contingency plan A contingency plan, also known colloquially as Plan B, is a plan devised for an outcome other than in the usual (expected) plan. It is often used for risk management for an exceptional risk that, though unlikely, would have catastrophic conseque ...

ning in order to mitigate risks in case of

natural disasters A natural disaster is "the negative impact following an actual occurrence of natural hazard in the event that it significantly harms a community". A natural disaster can cause loss of life or damage property, and typically leaves some econo ...

or failures of the technical infrastructure like a large-scale power blackout or shutdown of the communication network. Therefore, central banks and governments are increasingly driving the sufficient availability of cash. The

US Federal Reserve The Federal Reserve System (often shortened to the Federal Reserve, or simply the Fed) is the central banking system of the United States of America. It was created on December 23, 1913, with the enactment of the Federal Reserve Act, after a ...

has provided guidelines for the continuity of cash services, and the Swedish government is concerned about the consequences in abandoning cash and is considering to pass a law requiring all banks to handle cash.

Digital and virtual currencies

Digital currency Digital currency (digital money, electronic money or electronic currency) is any currency, money, or money-like asset that is primarily managed, stored or exchanged on digital computer systems, especially over the internet. Types of digital cu ...

is a generic term for various approaches to support secure transactions of the public or using a

distributed ledger A distributed ledger (also called a shared ledger or distributed ledger technology or DLT) is the consensus of replicated, shared, and synchronized digital data that is geographically spread (distributed) across many sites, countries, or institutio ...

, like

blockchain A blockchain is a type of distributed ledger technology (DLT) that consists of growing lists of records, called ''blocks'', that are securely linked together using cryptography. Each block contains a cryptographic hash of the previous block, a ...

, as a new technology for decentralized asset management. The blockchain 1.0 era has enabled the application of virtual digital currencies in the marketplace, such as money transfer and payment systems. It considers establishing an electronic version of the national currency which is backed by the central bank as the issuer.

Virtual currency Virtual currency, or virtual money, is a digital currency that is largely unregulated and issued and usually controlled by its developers and used and accepted electronically among the members of a specific virtual community. In 2014, the Europe ...

is a digital representation of value that is neither issued by a central bank or a public authority, such as

Bitcoin Bitcoin ( abbreviation: BTC; sign: ₿) is a decentralized digital currency that can be transferred on the peer-to-peer bitcoin network. Bitcoin transactions are verified by network nodes through cryptography and recorded in a public distr ...

. Facebook's concept for the diem is based on a token to be backed by financial assets such as a basket of national currencies. In 2012,

Bank of Canada The Bank of Canada (BoC; french: Banque du Canada) is a Crown corporation and Canada's central bank. Chartered in 1934 under the ''Bank of Canada Act'', it is responsible for formulating Canada's monetary policy,OECD. OECD Economic Surveys: Ca ...

was considering introducing digital currency. Meanwhile, it rates digital currency a fairly complicated decision and is analyzing the pros and cons and working to determine under which conditions it may make sense to, one day, issue a digital currency. As a threat, a central bank digital currency could increase the risk of a run on the banking system. Also in 2012,

Sveriges Riksbank Sveriges Riksbank, or simply the ''Riksbank'', is the central bank of Sweden. It is the world's oldest central bank and the fourth oldest bank in operation. Etymology The first part of the word ''riksbank'', ''riks'', stems from the Swedish w ...

, the central bank of Sweden, was reported to analyze technological advances with regard to electronic money and payment methods for digital currency as an alternative to cash. In 2019, it is investigating whether

Swedish krona The krona (; plural: ''kronor''; sign: kr; code: SEK) is the official currency of the Kingdom of Sweden. Both the ISO code "SEK" and currency sign "kr" are in common use; the former precedes or follows the value, the latter usually follows it ...

need to be made available in electronic form, the so-called e-krona, and if so, how it would affect Swedish legislation and the Riksbank's task. It has started procuring a technical supplier to develop and test solutions for a potential future e-krona. No decisions have yet been taken on issuing an e-krona.

Costs of payment

An analysis by the

Deutsche Bundesbank The Deutsche Bundesbank (), literally "German Federal Bank", is the central bank of the Federal Republic of Germany and as such part of the European System of Central Banks (ESCB). Due to its strength and former size, the Bundesbank is the most ...

in 2017 found that a cash payment in retail costs an average of 24

cents, while payments with a

girocard girocard is an interbank network and debit card service connecting virtually all German ATMs and banks. It is based on standards and agreements developed by the German Banking Industry Committee. German girocards are usually co-branded with Mast ...

cost 30 cents (or often 0.3 to 0.4% of sales plus a transaction fee) and with a

credit card A credit card is a payment card issued to users (cardholders) to enable the cardholder to pay a merchant for goods and services based on the cardholder's accrued debt (i.e., promise to the card issuer to pay them for the amounts plus the o ...

charge one euro which is included in the sales price. This is why retailers often refuse to accept card payments below a minimum amount. Depending on the account model, there are also booking costs for the account holder with an average of 35 euro cents charged for each(!) account posting. Because of this convenient source of income, commercial banks and credit card companies favor cashless payments. In the case of cashless payment transactions, in addition to the documentation of the payment itself, the personal details of the payer are usually linked to the data of the payee according to the

Know Your Customer Know Your Customer (KYC) guidelines in financial services require that professionals make an effort to verify the identity, suitability, and risks involved with maintaining a business relationship. The procedures fit within the broader scope of a ...

(KYC) principle. This enables the payment process to be precisely traced for the payer and the payee. The constant increase in digitization leads to a more detailed recording of cashless payment transactions and their evaluation for advertising and marketing campaigns. Since this digital documentation is usually more centralized than before, the potential for abuse increases. On the other hand, the cash transactions are anonymous, unless purchasing profiles are recorded with the help of

loyalty program A loyalty program is a marketing strategy designed to encourage customers to continue to shop at or use the services of a business associated with the program. Today, such programs cover most types of commerce, each having varying features and ...

s based on customer cards, and keep the payment landscape competitive.