Understanding an Industry

All too often notifications arrive about a new study into an aspect of the cash industry, the cash cycle or payments.

The trouble is that if it is written by an industry-insider, the competitive value is so high that the document has to talk in bland generalisations. If written by a professional organisation outside of the industry, where has the data come from and how do you know if you can trust it?

Such is the joy of working with a product which is simultaneously important to individuals, businesses and governments in what they do and how they live, but which has to be secret, and secure, given its value and role.

Although a public good, owned by the state for the people, cash and the cash cycle is also deeply commercially competitive. At the same time, there are legitimate interests in understanding cash and the cash cycle both for insiders and outsiders.

Where’s the data?

In this industry what matters is volumes, rather than values, since it is the changing volumes that drive manufacturing and cash movements. Understanding cash starts with knowing what is in circulation and, ideally, what has been issued each year.

Cash in circulation data can be found on the Bank of International Settlement website for a selection of countries, and in the ECB’s data vault for EU member countries.

A minority of central banks make their banknote and coin data easily available, while some publish this data in their annual reports. With the advent of the internet, it is now much easier to access to these, but it represents a very significant investment in time to search for the data. Since coins are often not issued by the central bank, coin data can be especially hard to obtain. It appears that finance ministries/treasuries are not in the habit of sharing information.

Such data can be used to look at store of value, payment and market banknote denominations and payment and settlement coin denominations. Viewed over time alongside political, economic, social and regulatory changes in each country, it is possible to start understanding the changing cash landscape.

Issue data?

For suppliers, it is the issue of documents that matters, and this is seldom in the public domain (a notable exception being the results of central bank surveys on banknote values and volumes produced by Antti Heinonen, former Director of Banknotes at the ECB, and published in Currency News, albeit that the data is aggregated rather than country-specific, and doesn’t include coins).

There are organisations that make their living by scanning for tenders, but relatively few banknote tenders are found by this, and indents awarded directly to state printing works, paper mills or mints are not visible.

Analysis of 2020 data

At the coin seminar at the Banknote and Currency Conference in Washington on 21 February, we reported on the data we have found to date about both coins and banknotes, representing half the world’s population. Changes in cash in circulation in 2020 ranged from +24% to -46%, with an average increase of 2%. Banknote circulation ranged from +28% to -3%, with an average increase of 9%. 59% of central banks saw banknote circulation increase by more than their long run CAGR, while only 14% of coins did.

We also looked at coin production data, which doesn’t necessarily correlate to circulation data, over the five years preceding the pandemic, and then during the pandemic. As noted above, this information is not easy to obtain. From 16 selected countries on all continents with (mostly) large populations and (mostly) developed economies, representing c. 75% of all coins produced in a year, our aim was to see if there were any clear trends.

There aren’t.

Production was up in the US in 2020, but down in neighbouring Canada. Volumes in Australia and Sweden, both seen as being in the vanguard of the move to cashless, have reached their highest levels in several years. India’s coin production has fallen sharply, whilst volumes in China have fallen through the floor.

As ever, the variation needs work at a country level to understand what is happening, particularly where settlement coins increased while payment coins did not.

Future data request

It is hard to consider cash in circulation data as commercially sensitive, given it is a subset of M0 data, but it has real value to the industry as it strives to map out the cash landscape. As cash volumes change, reflecting the reality of increasing digital payments, good data will be vital to making good decisions.

As central banks put together their 2021 annual reports, would it be possible to include both banknote and coin cash in circulation data by denomination? It might raise the quality of all those cash industry notifications and even encourage us to read them!