As access to cash and its use is dwindling in favour of electronic payments, the Reserve Bank says it will preserve cash benefits for those who need them.
As New Zealand's 'legal tender', cash is still useful. It provides a sense of security and for some people, paying cash helps them to budget. It's still used for kids' pocket money, to pay for odd jobs, at markets, school fairs and to make donations, to name a few. It may be used as an offline backup payment and can allow privacy and autonomy in savings and payments.
But given technological advances and the requirement for contactless payments during COVID-19 lockdown, cash is no longer accepted everywhere. Providing customers are informed before they shop, retailers aren't legally required to accept it. Reserve Bank figures show that access to cash reduced by around 2 percent over 2018 to 2019.
Speaking at The Royal Numismatic Society annual conference in October, Reserve Bank assistant governor Christian Hawkesby acknowledged that fewer people use cash in everyday transactions. He noted that most of New Zealand's money balances are digitally represented and bank notes make up 7-to-9 percent of liquid money.
"Cash is being used less as a means of payment and access to cash is declining," Hawkesby said.
But some people, such as tourists and those who are financially, digitally or socially excluded, rely on it. As issuer of New Zealand's money, The Reserve Bank said it will assume the new role of steward of the cash system. Working with banks and other service industry groups, it will ensure the cash system remains fit for purpose.
"Cash provides important benefits to many people, including legal tender money, social and financial inclusion, peer-to-peer payments, backup payments, privacy and autonomy," Hawkesby added.
Emerging from the Reserve Bank Future of Cash - Te Moni Anamata initiative, the central bank will look at the future of money and how various functions work together to ensure contraction of cash is managed. It will also consider developments in 'central bank digital currencies' used around the world.
"Initiatives include reshaping vaulting arrangements, banknote standards, and building towards a sustainable future. Ultimately, a more transformational solution might be needed," Hawkesby added.
Nicola Eccleton, manager of social inclusion at charitable organisation Good Shepherd told Newshub that use of cash is largely generational. Many of the elderly are used to taking cash out to pay bills.
"For someone in their 70's or 80's, it's [often] a big step to get them to switch to digital," Eccleton said.
Budgeting advice services include improving digital financial literacy. But having ready-access to cash doesn't benefit everyone. One of the recurring issues seen among people in financial hardship is withdrawing a lump sum and forgetting where money was spent.
"For example, on a Friday, the pay or benefit payment will go in and a large amount of cash will go out," Eccleton said.
"It's really hard to unpack what that's spent on and support those people to prioritise their spending and make good choices...for those in severe financial hardship, the last couple of days are really tough," Eccleton added.
Despite the decline in transactional use, the Reserve Bank said as seen during the GFC and other periods of uncertainty, in the weeks leading up to COVID-19 lockdown, there was increased demand for cash. In March, $800 million of bank notes were issued, a significant increase from $150 million in March 2019.
As the way people access and spend money continues to evolve, the Reserve Bank said it will take a proactive and holistic approach to the future of money.
"We've seen the cash industry work together through COVID-19 to support the public's access to cash and this is something we want to encourage further.
"Cash is a crucial form of money for our country and we encourage every banking sector participant to consider their role in preserving the benefits of cash," Hawkesby added.