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More Market Integration

EPC recommendations regarding proposed Regulation for the professional cross-border road transportation of euro cash

11 July 11

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Creating a market for the transportation of cash across borders will generate tangible benefits for all market participants

Existing barriers to cross-border cash transportation prevent providers and users of these services from fully reaping the benefits and efficiency gains of a harmonised market. In the view of the European Payments Council ( ), the proposal to regulate the professional cross-border road transportation of euro cash between euro area Member States (hereafter referred to as 'the proposal') is fully in line with the objectives of the Single Euro Cash Area (SECA). SECA aims to increase the efficiency of the wholesale cash processing cycle, which comprises the processes required to put euro banknotes and coins into circulation and to transport them. In SECA, as envisioned by the , cash-in-transit companies (CITs) should be able to establish cross-border cash transportation routes.

If CITs were able to use the most efficient routes for transporting cash - even if it involved using the closest cash centre located just across the border - the current security risks related to the transportation of euro banknotes and coins would be significantly reduced. In addition, CITs could render their services to a wider range of clients across the euro market. At the same time, professional cash users, such as credit and payment institutions, would be able to shop for the best service available - whether it was offered by the nearest National Central Bank (NCB) branch or CIT cash centre in another Member State. By the same token, retailers, vending machine operators and other professional cash handlers would enjoy the benefits of increased competition in the cash transportation market.

Incentivising cross-border cash transportation would also promote the objectives of the European Central Bank's Roadmap to increase convergence of NCB cash services. The Roadmap seeks to make basic cash handling functions performed by different NCBs interchangeable across the euro area.

The professional cross-border road transportation of cash is also a key factor when ensuring greater logistical and cost efficiencies in the cash circulation chain. This will ultimately benefit all end users of euro coins and banknotes.

To realise the potential benefits associated with facilitating the professional cross-border road transportation of cash, however, the believes it is necessary to amend several provisions tabled with the proposal.

Certain precious valuables to be allowed during cross-border CIT cash transportation

The recommends that the proposal should cover CIT cash transportation of foreign currencies and other precious valuables between euro countries. The transportation of these valuables should be allowed during any single cross-border journey together with euro cash when picked up at retail points, credit and payment institution branches. This would lead to the rationalisation of daily journeys performed by CIT companies and result in reduced costs for their clients. Organising parallel journeys solely for non-euro valuables would be less efficient as the volumes are much lower.

Majority of cash pick-ups / deliveries in the host Member State(s) considered a handicap

The welcomes the fact that the proposal allows for the possibility of both point-to-point and retail transportations and that no maximum limit is set for the number of cash pick-ups / deliveries by a CIT vehicle during the day. The proposal however, states that the majority of cash deliveries / pick-ups during the day should be carried out on the territory of the host Member State(s). In the view of the , such a restriction would substantially reduce the potential to scale up cross-border transport routes and would therefore jeopardise the development of a meaningful cross-border cash transport market. A study carried out at the request of the European Commission clearly demonstrated that the cross-border transportation market is, by definition, limited but has the potential to increase significantly, both in the short and the long term. A provision stipulating that the majority of cash deliveries / pick-ups during the day must be carried out on the territory of the host Member State(s), however, would limit market growth.

Curtailing market growth would also impact the potential of the 'virtual' NCB cash centre model, envisaged by the ECB's roadmap to increase convergence of NCB cash services in the euro zone. Such a 'virtual' NCB network would further encourage the design of optimal cross-border transportation routes. The therefore strongly recommends that the provision which would make it mandatory for the majority of cash deliveries / pick-ups during the day to be carried out on the territory of the host Member State(s) is deleted from the proposal.

Hurdle of CIT cross-border license

The proposal states that CIT companies wishing to offer cross-border cash transportation services must apply for a specific CIT cross-border license. The is concerned that there is an imbalance between the costs and effort required to obtain such a cross-border license and the future volume share of cross-border cash transportation within the total volume of professional cash transportation by road. The believes that CIT companies will either be dissuaded from offering cross-border cash transportation services or will pass on the cost of the cross-border license to its professional clients, thereby affecting the pricing of their goods and services to the private consumer.

The recommends that any CIT company registered and licensed (or, where licensing is not required, equivalently authorised and with at least twelve months' experience of effectively providing such services) by an Member State of origin, can simply start offering cross-border cash transportation services, provided it complies with the security dispositions (means of transport, firearms, personal, convoy and accompanying procedures) that are in force in the host Member State(s).

Cash is costly - for everybody

Consumers continue to have a great affection for cash because it is real, instantaneous and apparently free. The costs of transportation within the wider cash cycle however, are significant and are financed via the pricing of services and products provided by retailers, credit and payment institutions. The is therefore glad to see that the legislator is keen to create the required regulatory framework to achieve the most cost-efficient distribution of cash. The therefore calls on the legislator to amend the proposal for Regulation on the professional cross-border road transportation of euro cash between euro area Member States, along the lines detailed in this article.

The stresses that the forthcoming Regulation must not provide for dispositions which could negatively impact current security levels and / or increase the cost for users of professional national road transportation of cash services in the Member States concerned.

Way forward

The Committee on Economic and Monetary Affairs (ECON) of the European Parliament has indicated its intention to adopt its report on the proposal by the end of February 2011. The proposal is scheduled for adoption by the European Parliament in early April 2011.

Leonor Machado is the Chair of the Cash Working Group.

Related links:

European Commission: Commission Proposals on the professional cross-border transportation of euro cash (July 2010) COM(2010)377 final

Single Euro Cash Area (SECA) Framework

Improving Euro Zone Cash Processing Harmonisation and Efficiency within SEPA

EU White Paper on cross-border Euro Cash Transport

EPC Position Paper on EU White Paper on cross-border Cash Transport

European Commission - final Report on potential Market for professional cross-border Transport of Euro Cash

Related articles in previous issues:

The Single Euro Cash Area. Towards a more efficient European cash society ( Newsletter, Issue 8)

Significant Growth in cashless Payments in Europe. Yet cash will remain predominant payment method in 2014 ( Newsletter, Issue 6, April 2010)

Cashing out. National Central Banks commit to optimise cash handling in SECA: a progress report ( Newsletter, Issue 4, October 2009)

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