Storm Éowyn. Blowing Access to Cash back onto the Agenda

At the time of writing (January) Ireland continues to grapple with an unprecedented level of infrastructural damage to its electricity, water and telecoms networks caused by Storm Éowyn.

The media airwaves are dominated by increasing levels of public and political frustration, accompanied by demands for accountability regarding the amount of time it is taking for state and semi-state agencies to restore access to vital utilities.

While 635,000 premises have been restored to a partial or complete degree, over 100,00 more premises, including businesses, farms and homes continue to remain without power more than a week after the event, with indications that it may be early February before normal service levels resume.

One of the issues that has re-emerged amid this chorus of criticism and condemnation centres on the fragility of access to electronic payments and the related importance of retaining and protecting access to cash as a form of payment for goods and services.

The high demand for maintaining access to cash has remained steady in Ireland over recent years, even as there has been a parallel and dramatic acceleration in consumer preferences towards digital payments.

Indeed, a Consumer Banking Survey conducted by Ireland’s Department of Finance in 2022 found that cash was the preferred payment method for one out of five people. The preference rate was even higher for people aged 55 and over.

Statistics from the Central Bank of Ireland also reveal that in 2023 the total value of card transactions in Ireland amounted to over €90 billion. This compares to €13 billion worth of cash withdrawals for the same period.

The level of demand for cash in Ireland is similar to that of other jurisdictions across the Eurozone. The ECB Study on the Payment Attitudes of Consumers in the Euro Area (SPACE12), conducted prior to the onset of the COVID pandemic, found that consumers still predominantly use cash for physical point of sale (POS) and person-to-person (P2P) payments with 73% of the volume of POS and P2P transactions carried out using cash as payment .

An episode that has come to epitomise the sensitivity of the issues involved in the Irish ‘access to cash’ debate and the level of disconnect that can exist at the political and banking level is the decision of Allied Irish Bank (AIB) to publicly announce on 19 July 2022 that it intended to withdraw ATM, cash withdrawal, and cheque lodging facilities from 70 of its 170 branches nationwide. A significant number of the 70 branches were located in rural areas already underserved by availability of banking and Post Office outlets.

Such was the scale of the backlash that AIB was pressured into performing an embarrassingly swift volte-face, leading to a reversal of the policy a mere three days later on 22 July.

Political controversy also ensued after it was revealed that while Department of Finance officials had met with AIB on 15 July, they had all completely failed to anticipate the public and political desire to maintain access to cash facilities while also failing to brief the Minister for Finance until the 18 July leaving him blindsided by the announcement.

There can be little doubt that the episode directly contributed to the Department of Finance Retail Banking Review recommending in November 2022 that Access to Cash legislation be developed during 2023.

Specifically, the review recommended that the Access to Cash legislation would:

“Require banks that meet objective criteria to provide reasonable access to cash. ‘Reasonable access to cash’ criteria will be defined in consultation with the Central Bank and other stakeholders and the initial objective of the legislation will be to preserve access at December 2022 levels; and Provide that the criteria can be changed by the Minister for Finance by regulation, based on research and advice from the Central Bank. This will allow for the further evolution of the cash infrastructure to be managed in a fair, orderly, transparent, and equitable manner for all stakeholders.”

It was not until January 2024 however that a General Scheme of Access to Cash legislation was eventually published with pre-legislative scrutiny of the draft Bill by the Irish parliaments Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach taking place in February and March 2024.

In light of the disproportionate impact on rural communities the Joint Committee was to eventually recommend that a monitoring and review group be established including membership from the community and voluntary sector and that this should provide a mechanism by which vulnerable groups can raise concerns related to access to cash infrastructure.

Additional key provisions of the General Scheme and subsequent Bill have been identified in an analysis by Arthur Cox. These include:

While the Bill has since lapsed following the dissolution of the previous Dáil, the new Programme for Government negotiated in the aftermath of the general election of November 2024 contains an explicit commitment to maintain access to cash and support its continued acceptance in our economy.

This is in line with The Eurosystem Cash Strategy, as agreed by the 19 governors of the euro central banks and ECB Executive Board in September 2020.

This Strategy acknowledges a fundamental responsibility for the Eurosystem and wider banking sector to safeguard the “three A’s” of Availability, Access, and Acceptance of cash.

The strategy further outlines what this means in practice:

Doubts persist however around how long these commitments can credibly be maintained in light of the parallel ECB policy to explore the implementation of a digital euro, the investigation phase of which was launched in 2021.

This phase ended in October 2023 when the Governing Council of the ECB approved the launch of a two-year preparation phase which will last until 31 October 2025, and which is designed to “lay the foundations for the potential issuance of a digital euro” by “finalising the digital euro rulebook.”

The European Commission has also published its “Single Currency Package”, which set out the legislative framework for the establishment of the digital euro.

The ECB claims the digital euro would always complement and not replace cash, “offer individual users more freedom of choice by providing a secure and accessible payment solution.”

The policy is also being pursued because of the ECB belief that a digital euro would “strengthen Europe’s monetary sovereignty and reduce our dependence on the large, non-European private payment providers that currently dominate the European landscape.”

However, the potential dangers of a digital euro are acute. These include a real risk that the dominance and reach of the ECB and banks more generally may eventually lead to the stealth marginalisation of cash thereby forcing people into a form of payment they would not ordinarily choose. Privacy concerns also arise in that the ability of individuals to maintain financial privacy could be undermined through digital tracking. There are also clear challenges around the how to maintain access to digital payments following events such as power outages, cyber-attacks, or for communities with no or poor internet connectivity.

Regardless of talk from the ECB around “the potential issuance of a digital euro,” it seems more than probable that the EU and Ireland will adopt a digital euro policy at some point post 2025. Indeed, the Central Bank of Ireland has already lauded the digital euro in a 2024 Briefing Note to the Dáil’s Finance Committee:

“From the perspective of consumers, a Digital Euro would offer a universally-accepted digital means of payment that can be used free of charge, throughout the euro area, for payments in shops, online or from person-to-person. From the perspective of merchants, a Digital Euro, as a truly pan- European solution, could provide an easier and cheaper alternative to the currently fragmented payments landscape in which merchants operate.”

There are storm clouds on the horizon however, indicating a more troubled path to the digital paradise being proposed by the ECB.

Early indications of this can be seen in the European Commission public consultation of 2022. An overwhelming majority of the 16,299 responses from EU citizens opposed the adoption of a digital euro citing loss of privacy in their transactions, government control.

The European Parliament’s Economic Affairs Committee has also expressed concern around the cost of implementing a digital currency and a failure of the ECB to clearly outline what additional benefit may be gained by citizens from a digital euro.

One thing is clear-EU citizens whether they are in Ireland or elsewhere have shown no patience for a system of payments that collapses when electricity networks go down. For this reason, it is likely that a preference for cash will continue at the same high rates that it has historically witnessed. The extent to which the EU/ECB respects this may yet reveal how genuine its commitment is to the will of the people for complementary forms of legal tender, especially when they are confronted by a powerful and ubiquitous banking and financial lobby.