Money has been found in many forms: Homer calculated the value of arms in cattle, subsequent cultures used shells, grain, oil, salt and, of course, precious metals as means of payment. In the 17th century, Europe switched from payment in kind to paper for reasons of efficiency. However, development did not end here, on the contrary: Sweden wants to do away with cash by 2023, new cryptocurrencies are springing up and assets can suddenly be bought and sold easily thanks to new digital technologies and are consequently acquiring cash-equivalent functions.
Read the White Paper «Future of Money»
The SIX white paper “Future of Money” examines the dramatic changes affecting money: what means will be used for payment or as a store of value in future? What will be the role of banks and central banks? What infrastructure will be required? The white paper shows seven scenarios for a period of five to seven years and ranks them according to probability. Read the summary or download the complete white paper.
Today, digital payments are already embedded in more and more customer journeys; more and more people pay for taxis, shopping or a cup of coffee via apps while devices become ever smarter thanks to the Internet of Things (IoT) – where will this lead? Banks are required to open interfaces to their digital vaults and customer data (open banking), which allows third parties to launch their own services and products based on these and to develop their own relationships with bank customers – what impact will this have on traditional banks? For their part, central banks are considering creating their own digital currencies – what impact will this have on traditional currencies? We’ve come up with seven scenarios. In the most likely scenario, we assume that in a fragmented world “digital” rules, but cash persists. Let me briefly outline this scenario in nine scenes:
- Reduction in the Number of ATMs
The cash infrastructure is being operated centrally to increase its efficiency. But pressure to reduce costs remains. As a result, the number of ATMs have fallen by 30 to 40%, which is in line with the elimination of cash services in bank branches.
- Pervasive Connectivity
Banks are required to open interfaces (APIs) to their digital vaults and customer data, allowing third parties to seamlessly connect their digital wallets, as well. Banks expand into services “beyond banking” to counter falling margins in their traditional business and to fight for the ownership of customer relationships.
- Ubiquitous Digital User Interfaces
Digital payments have substantially increased in convenience compared to cash as digital user interfaces’ presence has expanded into ever more human activities. What started with mobile Internet and smartphones, has continued with voice interfaces, augmented reality (AR) and IoT. Digital payments are seamlessly embedded through apps, websites, AR or chats for example.
- Paying with Nonmonetary Digital Assets
People have reduced their holdings of digital money. They invest an increasing share of their capital instead of letting it lie idle in bank accounts. Non-monetary digital assets are thus increasingly replacing digital money as a digital “store of value”. Finally, an increasing number of people regularly pay with nonmonetary digital assets in lieu of digital money.
- Crowd-Sourced Cash Infrastructure
Convenience and cost pressure have also led to crowdsourcing (P2P, P2M) becoming an essential part of the cash infrastructure. Smart-banknote-based infrastructures may provide another new solution. Both infrastructures could individually have disrupted the traditional cash infrastructure by promising the same or better coverage at lower costs.
- Circular Local Cash Economies
In rural areas, local merchants fill the ATMs and keep an almost circular local cash economy going.
- One-Stop-Shop Platforms
Digital platforms integrate all now unbundled services by different financial service providers and synthesizes information about account balances and savings.
- Cash Persists as a Store of Value
At the same time, cash continues to be perceived and widely used as a “store of value”. Despite this, cash holdings have fallen by 40 to 60%, mainly driven by a 40 to 70% decline in cash being used as means of payment.
- Interoperable Payment Schemes
In response to increasing concerns over reliance and dependence on (foreign) global players, national or regional infrastructures (e.g. national payment schemes) have seen the light. They are interoperable with third-party global infrastructures, but can be run in complete isolation.
As the infrastructure provider of Switzerland’s financial center SIX operates over 6,000 ATMs in Switzerland and Liechtenstein, which meet the strictest standards for security, stability and availability. Head Cash Ecosystem at SIX is Alexander Verbeck. Prior to that he served as Head Product Management for payments, cards, and cash infrastructure at Credit Suisse for 10 years. In addition he held leadership roles in Supply Chain Management at Siemens and Unaxis. Verbeck holds a Ph.D. from ETH Zurich based on his work at the Institute for Industrial Engineering and Management. He also worked as visiting scholar at Stanford University and has published several articles and books.