SEPA for Cash
One important objective of the Single Euro Payments Area (SEPA) initiative should be to encourage a shift from cash to electronic payments. Despite the fact that cash accounts for a falling proportion of retail payments, it is still the predominant payment method in most European countries and the overall demand for euro cash continues to grow. Studies over the years have shown that the social cost of cash remains considerable. In October 2012, the European Central Bank (ECB) released the report 'The Social and Private Costs of Retail Payment Instruments'. The objective of this study is "to enhance the general understanding of the social and private costs of different retail payment instruments from a European perspective, with the aim of helping policy-makers, banks and retailers promote efficient payments." The ECB report analyses the social and private costs of making retail payments in 13 European countries and discovers that they are substantial, amounting to around 45 billion euros, or almost 1 percent of their combined gross domestic product. Due to the relatively high usage of cash, it accounts for nearly half of the total social costs.
The European Payments Council (EPC) believes that coordinated actions by all stakeholders within the euro area could contribute towards reducing the high cost of processing and handling cash.
Single Euro Cash Area (SECA)
The plans for SECA have been developed in close consultation with the Eurosystem Banknote Committee, banks and other key players. The Eurosystem, which comprises the European Central Bank and the national central banks of the European Union Member States whose currency is the euro, is the monetary authority of the euro area. The objective of SECA is to create, with the Eurosystem, a level playing field where the basic cash functions performed by each of the National Central Banks (NCBs) in the euro area are interchangeable, e.g. there is a common level of service and common processes are followed by all euro area NCBs. For more information, refer to the document 'Single Euro Cash Area (SECA) Framework'.
In June 2016, a new version of the SECA Framework (version 4.0 – the first version dated from 2006), has been published in order to update the context relevant for SECA and the efforts required to achieve it. Indeed the present landscape for the distribution of euro cash is characterised by the coexistence in SEPA of multiple national infrastructures, organised at national level and based on different business models. Thus there is currently no Single Euro Cash Area for banks and other professional cash handlers.
In this context, the objective of the SECA Framework is to define:
- taking a “user perspective”, banking industry requirements for core cash services provided by Eurosystem NCBs,
- a common set of banking best practices for the efficient distribution and recirculation of euro cash in the eurozone.
This will shape the SECA where banks will be enabled to exercise their responsibilities with respect to both wholesale and retail cash in a more efficient way also taking into account business objectives. The migration from the current to the SECA landscape will however require a reasonable adaptation period, in view of national legacy processes and infrastructures and the heavy investments that characterise the cash processing industry (depreciation of the cost of the fixed assets over several years).
A constructive dialogue between the Eurosystem (ESCB Banknote Committee - BANCO) and the European banking industry (EPC Cash Efficiency Working Group) takes place about how to achieve a greater harmonisation of Eurosystem NCB operational conditions.
Establishing a level playing field (the “Single Euro Cash Area”) requires:
- Structuring principles to be agreed and implemented: access to NCB cash services across national borders, sufficient network coverage, interchangeability of services as regards lodgings and withdrawals of coins and banknotes, advanced information interface and feedback between NCBs and banks, and stability of services and operational conditions.
- The harmonisation of a range of NCB operational conditions: authenticity control policy, cash quality control, penalties for lack of compliance and dispute resolution processes.
Check our infographic to learn more about the advantages and costs of cash, and how we can improve its cost efficiency.
Selection of articles from the EPC Newsletter and other sources
- EPC Publication: Single Euro Cash Area (SECA) Framework
- EPC Publication: 'Improving the Efficiency of the Handling of Cash - Cash Cycle Models
- Infographic: Improving the cost efficiency of Cash
- EPC Newsletter: Articles Published in the ‘SEPA for Cash’ Section
- European Central Bank: The Social and Private Costs of Retail Payment Instruments. A European Perspective