Tuesday, January 07, 2003

The cost of cash: robbery...

Yesterday evening a pump station was raided resulting in the murder of a female employee. The police have not disclosed any information on the robbery, except that they have not yet found the criminals. The public discussion here in the Netherlands is now all about securing pump stations.

A similar discussion occurs with respect to the transport and delivery of cash. One of the major companies in this market, Brinks, has announced that changes in their delivery schedules have been made, following a violent attempt to stop one of their deliveries. As a result they now only do daytime transport and delivery.

Today J. Schraven, the chairman of Confederation of Netherlands Industry and Employers (known as VNO-NCW), suggested to ask the army to accompany cash transports in the future. Reactions to this suggestion are, unfortunately, lukewarm.

Although we could speak of incidents, we need to realise that this security problem is exactly where central banks come into play. Central banks issue cash and use the proceeds to finance and subsidize their operations. Improvements and security measures for bank notes are thus financed from the revenue stream of cash. In my opinion, the concept of security measures should not be taken too strictly (limiting the measures to physical adaptations of bank notes). By stretching the concept to safe transport, delivery and handling of cash, we can see that the current revenue flow of cash needs to be redistributed. A part of the revenue stream of cash should therefore be used to ensure both trust in cash and a safe usage environment. Practically speaking: central banks should fund/pay the army, police and perhaps even retailers to reimburse costs/efforts related to ensuring the safe availability of cash in their countries.

Of course, this redistribution of revenue may negatively impact the balance sheet of central banks. But it is one of the most urgent policy issues for central banks all around the world to deal with. Perhaps that is why it has been defined as 'out of scope' by the central bankers that are contemplating policy issues in retail payments. And although I understand and respect the scoping decision made by my former colleagues in the BIS-working group, I would strongly suggest they reconsider their scope.