WELLINGTON, March 13 (Reuters) – A proposal from New Zealand’s central bank that would require lenders to maintain a minimum range of cash-related services has had opposition from banks, as policymakers worldwide deal with protecting access to physical money in increasingly digital economies.
Last month, the Reserve Bank of New Zealand opened a public consultation on a plan that would require banks to provide a minimum level of cash services, including more ATMs and lower withdrawal fees.
The proposal highlighted growing concern among policymakers that the rapid shift to digital transactions could leave vulnerable groups behind and expose weaknesses in payment systems during outages or natural disasters.
“The public expect banks to provide cash services to them, but banks have been steadily reducing points of access for their customers to get cash, bank cash or get change, especially in rural areas,” said Ian Woolford, the RBNZ’s director of money and cash, when the consultation was unveiled on February 25. “We want this to change.”
Banks have criticised the plan.
“This proposal is extreme,” said Roger Beaumont, chief executive of the New Zealand Banking Association, which represents the country’s lenders.
He said it had come as a “huge surprise,” adding that banks had been working on ways to ensure customers who still used cash could access it even as demand declines and were working with members to respond to the consultation. The RBNZ estimates the plan would cost banks about NZ$104 million ($59 million) a year, a fraction of the sector’s annual pre-tax profit of more than NZ$10 billion.
Over the past decade, about 40% of bank branches in New Zealand have closed, while cash use for everyday purchases fell to 57.2% in 2023 from 95.8% in 2019, according to the RBNZ.
Central banks, governments and commercial lenders around the world have been weighing ways to safeguard cash, which studies have shown remains important for financial inclusion and can be critical after disasters like cyclones, when digital systems may fail.
Jake Lilley, senior policy advisor at financial mentoring service FinCap, said cash remained important for people on tight budgets, small businesses and those unable to access banking services, including people leaving prison or violent relationships.
“There’s all sorts of vulnerabilities where cash provides a helpful way forward,” Lilley said.
Research commissioned by the central bank found that cash also remained important in rural communities, for community groups and it holds cultural, social and practical significance in Maori communities.
Mark Hooper, banking spokesman for lobbying group Federated Farmers, said while cash was less important for agricultural businesses, which largely use digital services, it was critical for community events like the raffle at the bowling club and for small businesses, which need cash floats.
“Cash is still quite a big component of all that sort of thing,” he said.
(Reporting by Lucy Craymer; Editing by Thomas Derpinghaus)
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