The Banque de France’s Cash Strategy

Introduction

At the Banque de France, the Cash 2030 Strategy is based on the dual principle of neutrality and freedom of choice with regard to payment instruments.

This means:

• not favouring one means of payment over another and not seeking to influence public behaviour and preferences;
• that cash must remain a secure means of payment, easily accessible to all who wish to use it, especially those who are financially vulnerable, and accepted at all points of sale.

The Banque de France ensures the availability of euro cash

The rapid changes in the use of means of payment call for a collective response, involving public authorities, banks and cash-in-transit companies, as well as all other stakeholders in the French cash industry, particularly the retail sector. 
Euro banknotes and coins must be available to the public at all times. The Banque de France offers free-of-charge cash services for professionals in France. It also considers the needs of international customers, since a large share of euro banknotes circulate outside the euro area.
In addition, the Banque de France ensures that the French cash industry is able to respond operationally to all types of crisis and to define robust arrangements for access to cash. In the event of a sudden increase in demand for banknotes, it provides support to the cash industry.

The Banque de France is adapting to the changes observed in the use of cash in transactions, while also taking into account the high level of demand for cash, which is being driven by hoarding.

As a result of technological innovations and changes in patterns of consumption in payment and also because of the effects of the pandemic, the use of cash in transactions is declining in favour of electronic means of payment. As in other euro area countries, the total flow of banknotes from individuals and merchants to professional cash handlers (credit institutions, cash-in-transit companies and the Banque de France) is decreasing. In France, it continuously: from 500 M per year during the period 2017-2019, with a peak in the level of entries at 7 bn banknotes in early 2010 to around 4.6 bn in 2019. In 2020 the pandemic strengthened the trend (- 1.1 bn banknotes), bringing the level of Lodgments to an historical floor of 3.5 bn banknotes.

The COVID 19 pandemic (although there is no particular risk of transmission of the virus through banknotes), contributed to the development of contactless card payments. The number of contactless payments increased by 35% in 2020.  The total value of transactions (boosted by the increase in the ceiling to €50), reached €71bn, compared to €37.6bn in 2019. These contactless payments therefore represent 53% of cash payments in shops (estimated at €133bn in 2020).

However, the decline in cash usage needs to be put into perspective, as banknotes are still the dominant method of payment in day-to-day transactions, especially for small-value purchases, as shown by recent studies conducted by the Eurosystem. Banknotes are still the most frequently used payment instrument in Europe and in France, in terms of transaction numbers: in 2019, they were used in 73% of transactions at the point-of-sale in the euro area and 59% in France.

The strength of net demand for cash, driven by hoarding, also needs to be taken into account because, although cash payments are declining, net demand for banknotes remains structurally positive: at the end of December 2020, the total value of euro banknotes in circulation stood at EUR 1,434 billion, an increase of 11% in one year. In France, net banknote issuance reached EUR 168 billion in 2020, also up 11% year-on-year. 

This apparent paradox reflects the continuing popularity of cash as a precautionary reserve,  as well as the strength of international demand for euro banknotes. In its most recent work, the ECB estimates that transactional use of euro banknotes accounts for about 20% of their circulation in value terms, with the remaining 80% divided broadly evenly (40-40, plus or minus 10 percentage points) between cash held outside the euro area and banknotes hoarded within the euro area.

The Banque de France guarantees the universal acceptability of cash

Cash is legal tender in France. It is a criminal offence to refuse it as settlement in a transaction, although cash payments are subject to thresholds set by law, and the payee has the right to demand that the payer provide the right change. The fact that cash is legal tender ensures that consumers are always free to choose how to pay. Moreover, cash is often the only method of payment available for the most fragile segments of the population.  
 

The Banque de France designs and produces secure and innovative euro banknotes

The Eurosystem develops secure banknotes that are protected by the latest and most effective technologies, to make them highly resistant to counterfeiting and easy to authenticate. In France, banknote paper and banknotes are manufactured at the Banque de France's industrial sites in the Auvergne region: the paper mill in Vic-le-Comte and the printing works in Chamalières. The legislator has entrusted the Banque de France with the task of maintaining the quality of banknote circulation in France. This makes it possible to both limit the risk of counterfeiting (poor-quality circulation facilitates the flow of counterfeit banknotes) and reduce processing and collection-distribution costs, as these processes are largely automated (cash machines, sorting machines, etc.). Accordingly, the Banque de France carries out checks on players in the sector, particularly in the context of recycling.
The Eurosystem makes sure that banknotes are safe to use by researching the potential impact of euro banknote production and circulation on public health and carrying out scientific examination and testing. In particular, analyses carried out by European reference laboratories since the beginning of the pandemic have confirmed that cash does not pose any particular risk of infection compared with other everyday surfaces. In the context of the health crisis, therefore, the use of cash does not increase the risk of contamination in everyday life, provided of course that the barrier measures recommended by the World Health Organization are applied (in particular washing hands regularly and avoiding face-touching).

The Banque de France is also working on the environmental footprint of banknotes to reduce their impact on the environment through new products and processes. As a result, euro banknotes and their production processes are sustainable, green and environmentally friendly.