The Reserve Bank says the country is lagging behind most developed economies in offering a digital cash option that can be used much in the way physical cash is used.
The central bank says a lack of competition in the banking sector means consumers are missing out on the type of innovation seen elsewhere in the development of digital cash, which is secure and accessible offline.
RBNZ director of money and cash Ian Woolford said this was a wake-up call to the big banks, as it was now technically possible to offer the public a digital cash system that left banks out of the transaction.
The Reserve Bank’s consultation on digital cash attracted the highest response it had ever received, more than 500 written submissions coming from individuals and groups as well as more than 18,000 responses to an online survey.
The central bank is proposing to address some of the issues raised by making cash and payments available in a single digital format.
Mr Woolford said 134 countries, representing 98% of the global economy, including key trading partners, were exploring digital currency.
“We’re exploring digital cash to ensure future generations of New Zealanders experience these benefits.”
Digital cash exists purely in electronic form. According to the Reserve Bank’s website explanation, a person would be able to receive digital payments any time using a phone.
“Hold two devices next to each other and send money instantly. You also won’t be charged any extra when you use your phone to pay,” it says.
Mr Woolford said the consultation reinforced physical cash was still crucial.
“Eighty-four percent of respondents were worried about losing access to banknotes and coins and want assurance that cash will still be issued by the Reserve Bank and not reduced or replaced by digital cash,” he said.
“We’ll keep issuing cash for as long as New Zealanders want to use it.
“We’re doing a lot of work to redesign the cash system, including helping retailers through community cash services trials next year in several rural communities lacking over-the-counter bank or ATM services.”
Mr Woolford said privacy and control were top concerns raised by the consultation.
“The Reserve Bank doesn’t care if you spend your money — physical or digital — on meat pies and lattes but does care if it is used to fund terrorism, for organised crime or money laundering.”
He said speed was another issue.
“People also told us they want fast, direct, offline and secure ways to pay with low fees but today they only have these choices with banknotes and coins.”
People wanted the ability to make offline payments in an emergency (63%), real-time payments (60%) and for cash to be free to use (60%).
He said the next stages included further engagement, design and technical work, policy development and a cost-benefit analysis during 2025 and 2026, with a decision on whether or not to introduce digital cash by 2030.
