Another Central Bank in Europe Warns Citizens to Have Cash “Under the Mattress” Amid Rising Payments System Fragility

“You have to take into account that you may not be able to pay by debit card for a longer period of time,” notes the Dutch National Bank. “Then you have to have cash under the mattress, or be able to pay with QR codes.”

In October, 2022, Päivi Heikkinen, the Head of the Payment Systems Department and Chief Cashier at the Bank of Finland, warned that Finland’s payments system could go down for weeks, and urged households to keep enough cash to last them for up to 72 hours in case of payment system disruptions. The irony, as we pointed out at the time, is that Finland, like its Scandinavian peers, is among the world’s most cashless economies, and its central bank, like its counterparts in Norway and Sweden, played more than a bit-part role in making that possible:

According to the Bank of Finland, [Finland] is on track to become completely cashless by 2030. A survey conducted last year by the central bank found that only 7% of people use cash when making purchases. Ninety percent of the survey’s respondents said they pay for their groceries with a card or mobile payment app.

However, Heikkinen says that now is not a good time to give up cash completely, given the rising risk of attacks against Finnish infrastructure, including its payments system:

“More payment methods bring resilience. If a single payment method sometimes does not work, then we have other payment methods at our disposal. Cash still plays a very important role here.”

It seems that more and more central banks in Europe are rediscovering one of the beauties of cash: its resilience. It won’t fail in a power cut or seize up during a cyber attack (although, of course, ATMs might). As Brett Scott, author of Cloudmoney: Cash, Cards, Crypto and the War for our Wallets, notes , any society that runs purely on digital platforms operated by large financial institutions “is going to have major resiliency problems.”  

Role of Ukraine Conflict

To reinforce Finland’s payments system, the Bank of Finland has recommended that the use of cash payments be guaranteed by law. In March 2022, the bank initiated a proposal for legislation to ensure a minimal level of cash-paid services.

But it’s not only the central bank that appears to be re-evaluating its approach toward cash: so, too, is the general public, with 95% of citizens considering it crucial for cash to continue serving as a valid payment method alongside digital alternatives, according to a 2023 survey by IRO Research for Nosto ATMs. The war in Ukraine and Finland’s recent membership of NATO appear to have played a role in this shift. According to the survey, the conflict in Ukraine and concerns about supply security have affected the attitude of nearly one-third (28%) of Finns towards cash.

“Cash usage, especially in the context of supply security, is fundamentally tied to social responsibility,” said Risto Lepo, Country Manager of Nosto ATMs. “Not every Finn has access to bank cards or digital services. Historically, societal upheavals often lead to an increased reliance on cash. The conflict in Ukraine underscored the importance of supply security, prompting Finns to consider multiple payment methods as a prudent approach.”

A similar phenomenon has occurred in Sweden and Norway. As we reported in mid-October, the government and central bank of Norway, one of Europe’s most cashless economies, are now seeking to slow or even reverse the mass abandonment of cash. Only 3% of Norwegians used cash in their latest purchase in a physical shop, according to a recent central bank survey. In a bid to change that, a new amendment to Norway’s Financial Contracts Act came into force on October 1 that bolsters citizens’ rights to pay with cash in retail settings.

Earlier this year, the world’s oldest bank, Sweden’s Riksbank, cautioned about the unintended consequences of rapidly driving cash out of the economy. In its 2024 payments report, it warned of “serious fraud problems that could undermine trust in the payment system.” Digitalisation, it said, also makes payments “more vulnerable to cyber attacks and disruptions to the power grid and data communication,” adding that these developments suggest “we should concentrate more than before on the challenges of digitalization.”*

Since then, The Daily Telegraph has reported that criminals in Sweden are “having a field day” after the country’s mass abandonment of cash. Around the same time, Fortune magazine ran an article titled “Going Cashless Has Turned Sweden from One of the Safest Countries into a High-Crime Nation.”

The country’s central bank now wants to reverse course, and has called on the government to adopt urgent measures to strengthen cash’s role as a means of payment. Late last year, the central bank echoed a point we have been making for a number of years: “it is not enough to simply take measures to strengthen the availability of cash through withdrawal requirements and new depots, it must also be usable.”

“Cash Under the Mattress”

The latest European central bank to sound the alarm is the Dutch National Bank (DNB), which in late October highlighted the rising threat posed to the financial system by artificial intelligence, surging cybercrime and system outages. Cyberattacks against the financial sector account for roughly one-quarter of all attacks and can, in extreme cases, “make financial services temporarily unavailable” across the country’s entire financial system, the central bank wrote in its financial stability report. 

In the Netherlands, like everywhere in Europe and most parts of the world, cash use has fallen sharply over the past decade.* Between 2019 and 2022, it was the second country in the Euro Zone where access to cash worsened the most. From Cash Essentials:

Per the European Central Bank’s (ECB) 2022 SPACE study, the Netherlands is the penultimate euro-area country by volume of cash payments after Finland. Cash has the lowest share of person-to-person payments in the euro area. Dutch consumers had the lowest cash holdings, with €46.

Cash services and infrastructure have shrunk, particularly after the three major banks  (ABN AMRO, ING, and Rabobank) merged their ATMs into the Geldmaat joint venture in 2019. ATMs for withdrawing cash declined 29.1%, from 7,226 in 2018 to 5,122 in 2023; recirculating ATMs combining withdrawal and deposit functions shrank 34.2%, from 2,960 in 2018 to 1,948 in 2023 (CPA Memorandum 2024:

While Dutch cash use has declined in the aggregate, 1.3-1.5 million Dutch people depend on cash in their daily transactions, according to a rough 2020 estimate by McKinsey (CPA Policy Compass 2024: 1c). In 2022, 13% of Dutch consumers reported cash was their preferred payment instrument; a plurality (46%) consider having the option to pay with cash very or fairly important.

The Netherlands has already suffered two large payment outages in the past 15 months, not to mention the fallout from the global Crowdstrike meltdown. In August 2023, a nationwide outage made it prevented stores from being able to process many debit card payments. Problems with ATMs were also reported. Then, on May 16 and 18 of this year, another outage struck retail payment systems, with more than a third of PIN-based payments affected. This time, ATMs were unaffected, providing a vital lifeline for citizens and businesses.

However, DNB’s monetary affairs chief Olaf Sleijpen recently told the Dutch financial newspaper Financieele Dagblad that people should not assume that payments system will always work:

This could happen, for example, if the services of a number of large financial institutions were to go down at the same time, if several banks were to suffer financial damage at the same time or if customers were to lose confidence in the sector due to an incident.

A bank’s services can be out of service for a longer period of time and customers need to be prepared for this, says DNB director Olaf Sleijpen. “Large online attacks simply happen more often. Just look at the hack at the National Police (in which contact details of almost all police employees were stolen at the end of September, ed.) You have to take into account that you may not be able to pay by debit card for a longer period of time. Then you have to have cash under the mattress, or be able to pay with QR codes.”…

The biggest danger of bank hacks is that if one bank is hit, consumers lose confidence in the entire system, says Sleijpen. “This could lead to a run, which may lead to DNB having to block financial transactions. Then people can no longer access their money. You don’t want that.”

Third-Party Risks

The report also notes that the financial sector is increasingly vulnerable to incidents affecting third parties, as recently demonstrated by the Cloudstrike outage that caused millions of Microsoft systems around the world to crash, bringing the operating systems of banks, payment card firms, airlines, hospitals, NHS clinics, retailers and hospitality businesses to a standstill. Affected businesses were faced with a stark choice: go cash-only, or close operations until the systems came back online.

The scale of the resulting disruption was so great that it even prompted some of the UK’s largest newspapers, which had heretofore played a key supporting role in the War on Cash, to warn about the inherent fragility risks of a cashless society. In the wake of the outage, New Zealand’s central bank, like an increasing number of central banks in Europe, recommended that citizens have some cash on hand in the case of future incidents.

Since the Cloudstrike meltdown, outages have continued to plague banks, both large and small, around the world. On Sunday, the UK lender Natwest’s banking app went down, leaving thousands of customers “unable to access money” for hours, reports The Mirror.  In the US, two of the largest lenders, JP Morgan Chase and Bank of America, have suffered significant outages in the past month. In the case of Bank of America, many of its customers complained that their account balances were not visible on the app while others reported seeing a balance of $0.

It is a similar story down under. Two of Australia’s “Big Four” lenders, Westpac and Commonwealth Bank, have both suffered extensive problems with their online and mobile banking systems over the past month. In the case of Westpac, its banking services repeatedly became unavailable over a four-day period, leaving customers unable to transfer funds or payments. Days later, a systems error at Commonwealth Bank brought its banking app down. Some customers complained of having duplicate transactions taken out of their bank accounts – with many reportedly going overdrawn as a result.

Australia has been so plagued with bank outages that the Reserve Bank of Australia (RBA) began requiring banks to publish consistent figures on how reliable their services had been across areas such as branches, ATMs, websites, apps and card payments. The Optus meltdown last year resulted in the CEO’s resignation, a parliamentary inquiry, and significant brand damage. The banks claim to be spending more on cybersecurity, yet while the number of outages has gone down the actual number of hours lost to outages remains unchanged.

Bank outages are on the rise as a result of the complexity of ever more flexible and immediate banking services, the RBA recently conceded, noting that “online banking and fast payments services are most likely to be affected from outages.” Yet these are the exact same services and platforms the banking industry, including the RBA itself, has spent the past decade or so encouraging (to put it mildly) people to do all their banking with, while removing traditional options such as old-school branches and ATMs.

Yet even as the outages persist, the RBA and Australian government appear to be doing precious little to help support public access to and use of cash. Meanwhile, in Europe the central banks of both Sweden and Norway have the unenviable task of trying to slow or even reverse the mass abandonment of cash they themselves helped set in motion. They will have their work cut out given that so much of the countries’ cash infrastructure — in particular private banks’ branch networks, ATMs and the distribution services offered by cash handling companies — has been allowed to wither over recent years.

 

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* There can be no doubt that we are living in a less cash world, with digital wallets now leading point-of-sale payments at 30% of transaction value, with credit cards second at 27%, debit cards third at 23% and cash fourth at 16%, according to the latest Global Payments Report by Worldpay.

But it’s far from a uniform picture. While countries like Sweden claim to have reached the outer limits of what is possible in their transition to becoming cashless societies, cash is still being used by billions of people worldwide. It is the leading payment method in twelve of the 40 markets examined by Worldpay: Argentina, Colombia, Japan, Malaysia, Mexico, Nigeria, the Philippines, Peru, Poland, Spain, Thailand and Vietnam. In Germany, cash is narrowly pipped at the post by debit cards, at 36 and 38% of payment value respectively.

As the pressure group Cash Matters notes, in the current landscape, the strengths of cash continue to shine: “being an ‘always on’ payment unaffected by network outages, supporting people with managing tight budgets, and providing privacy and competition as a not-for-profit payment method in a field of profit-making options.”