The role of cash

Published: 12.01.2023 Updated: 02.08.2024

The economy requires a certain amount of available cash to function. Cash is the dominant means of payment within the euro area, as the clear majority of our daily payments are made using banknotes or coins. Cash is also essential for the inclusion of socially vulnerable citizens, such as the elderly or lower-income groups.

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But cash offers other important functions and benefits:

It ensures your freedom and autonomy. Banknotes and coins are the only form of money that people can keep without involving a third party. You don’t need access to equipment, the internet or electricity to pay with cash, meaning it can be used when the power is down or if you lose your card.
It’s legal tender. Creditors, such as shops and restaurants, cannot refuse cash, unless both they and the customer have agreed on another means of payment in advance. For more information see the European Commission recommendation of 22 March 2010 (2010/191/EU).
It ensures your privacy. Cash transactions respect our fundamental right to have our privacy, data and identity protected in financial matters.
It’s inclusive. Cash provides payment and savings options for people with limited or no access to digital money, making it crucial for the inclusion of socially vulnerable citizens such as the elderly or lower-income groups.
It helps you keep track of your expenses. Cash allows you to keep closer control of your spending, for example by preventing you from overspending.
It’s fast. Banknotes and coins settle a payment instantly.
It’s secure. Cash has proven to be secure in terms of cybercrime, fraud and counterfeiting. And, as it’s central bank money, it doesn’t entail financial risks for either the payer or the payee.
It’s a store of value. Cash is more than just a payment instrument. It allows people to hold money for saving purposes without default risk. It is useful for small person-to-person gifts and payments. For example, parents can entrust small amounts of cash to their children for small purchases, or a person can give a friend or acquaintance cash to purchase something on their behalf. Cash also contributes to the financial literacy of children.

Will cash disappear in the near future?

No. Cash will remain the default means of payment for the foreseeable future. Cash carries value, can be reliably authenticated and distinguished from counterfeits, and does not require any third party to settle the payment. No other payment instrument includes these three elements as effectively as cash.

Will the rise of electronic payments make cash obsolete?

No. The unique features of cash ensure that it will remain relevant in the future. Digital means of payment may be convenient for many people, but they do not suit everyone. Electronic payments will not replace cash as a payment instrument, but rather exist alongside it.

Are retailers allowed to reject cash as a means of payment?

In March 2010 the European Commission issued Recommendation (2010/191/EU), based on a report by the Euro Legal Tender Expert Group, which states the following with regard to the obligation to accept cash.

Retailers cannot refuse cash payments unless both parties have agreed to use a different means of payment.
Displaying a label or posters indicating that the retailer refuses payments in cash, or payments made in certain banknote denominations, is not enough. The retailer must provide a legitimate excuse, such as a difficulty maintaining sufficient cash reserves to provide change or concrete physical security risks due to the presence of large amounts of cash.
Public entities providing essential services to citizens cannot apply restrictions or refuse cash payments altogether without sufficient reason. Doing so would undermine the legal tender status of euro banknotes and coins protected by EU law.

Do national central banks have competences over banknotes and coins?

Yes. The competence for euro banknotes lies with the ECB and the national central banks of the Eurosysetm. In contrast, the competence for issuing euro coins lies with the individual Member States, although the ECB approves the volume of coins that Member States may issue. All national central banks are involved in the logistics of coin supply and the storage of reserve stocks.

Does a commercial bank have the competency to determine if a banknote is a counterfeit?

No. If a commercial bank has doubts about the authenticity of a euro banknote it will hand it over to the national central bank (or competent national analysis centre), which makes the final decision on whether a note is real or not.

Is there more than one series of euro banknotes?

Yes. The first series (€5 to €500) of euro banknotes was issued in 2002 and remains legal tender. Between 2013 and 2019 the ECB and the national central banks of the Eurosystem introduced a second series of euro banknotes, also known as the Europa series, ranging from €5 to €200 (the €500 banknote is no longer issued). The Europa series banknotes include a refreshed design and enhanced security features.

Do all retailers have to offer cashback and cash-in-shop services? Are these services available in every country?

Cashback and cash-in-shop services are alternative ways of withdrawing cash, complementary to ATMs and bank branches, and it is up to retailers to decide whether to offer these services to their customers. According to our survey, in 2021 11% of retailers in the euro area provided cashback services and 6% of retailers offered cash-in-shop services. However, there are still some euro area countries where these services are not available yet.

Can I catch the coronavirus from banknotes?

The amount of the virus that might be transferred is so small that the risk of infection is insignificant compared to that from other surfaces that people come into contact with on a daily basis. The ECB is working closely with European laboratories to assess the behaviour of coronaviruses on different surfaces so that we can ensure that handling cash remains as safe as possible.