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XXV INTERNATIONAL FINANCIAL CONGRESS BANK OF RUSSIA

XXV INTERNATIONAL FINANCIAL CONGRESS BANK OF RUSSIA R ound table on “Cash circulation and non-cash payments strategy ” Enrica Teresa Vignoli Head of the General Cashier Directorate. CONTENTS:

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XXV INTERNATIONAL FINANCIAL CONGRESS BANK OF RUSSIA

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  1. XXV INTERNATIONAL FINANCIAL CONGRESS • BANK OF RUSSIA • Round table on “Cash circulation and non-cash payments strategy” • Enrica Teresa Vignoli • Head of the General Cashier Directorate

  2. CONTENTS: • Whatare the strategic positions of Bank of Italy in cash management area? • Trends of cash • The Eurosystem position and goals • The cash cycle in Italy – goals of the Bank of Italy • Is it realistic the existence of a cashless payment system? • Cashless payments in Italy vs. EU • Drivers for change at EU level, the digital agenda, EU and Italian regulation 2

  3. What are the strategic positions of Bank of Italy in cash management area? 3

  4. Trends of Cash: Circulation of Euro banknotes in the Eurozone (quantities) 4

  5. Trends of Cash:Circulationof Euro banknotes in the Eurozone (value) 5

  6. Trends of Cash:Circulationof Euro Banknotes in Italy (quantities) 6

  7. Trends of Cash: Circulationof Euro banknotes in Italy (value) 7

  8. Stop of the issuance of 500 euro banknote • Decision of the Governing Council to permanently stop producing the €500 banknote and exclude it from the Europa series (4 May 2016). • The € 500 would remain legal tender and could continue to be used as a means of payment and store of value Replacement by otherdenominations €200 (25%), €100 (50%) and €50 (25%) Impact on demand of otherdenominations 8

  9. The Eurosystem position • The Eurosystem is NEUTRAL with regards to the use of cash or non-cash payment instruments • The Eurosystemhasa SPECIAL RESPONSIBILITY for cash, as the only legal issuer of euro banknotes. • The Eurosystemgoals on cash are to promote: EFFICIENCY, SECURITY, AND RESILIENCE of the cash cycle. 9

  10. The Eurosystemgoals • MONITORING RECIRCULATION AND DEVELOPING ANALYSIS OF THE CIT AND CASH PROCESSING SECTOR  security, efficiency, resilience • PERIODICAL REVIEW OF THE USE OF CASH AND CASH INFRASTRUCTURE •  resilience and efficiency • PREVENT DISRUPTIONS OF CASH DISTRIBUTION DEVELOPING BUSINESS CONTINUITY PLANS •  security, resilience • DEVELOPING MORE COST-OF-CASH EXPERTISE AND ENHANCE SOCIAL COST ANALYSIS • efficiency 10

  11. The cash cycle in Italy – general overview BANCA D’ITALIA General Cash Department BdI’s Branches Recirculation 20% CIT (transport and cash processing) CIT (banknote transports) Recirculation42% Banks that have outsourced cash processing Recirculating Banks Recirculation38% counters ATM Cash-in Cash-out P U B L I C RETAILERS 11

  12. Increaseefficiency security and resilience of the cash cycle • BANK OF ITALY’S GOALS: • Keep the Bank of Italy’ share in the cash cycle • Streamlining the branch network (internal efficiency) • CASH- EDI and the Cash Tracingsystem (external and internalefficiency/ security) • Enhance the monitoring of Cash handlers’ activity • Implementing business continuity plans 12

  13. A2A on SWIFT A CIT x U The Cash-IT & CTS projects Bank y A Exchange of coin stocks btw CH A BRF POC CIT x A CRF lodgement withdrawal Bank y U CASH TRACING SYSTEM STORAGE STORAGE Packaging SORTING OPENING Reconciliation 13

  14. The monitoring of Cash handlers Critical area: 30 % Critical area: 19 % 14

  15. Business Continuity COBAN: Crisis management Committee crisis procedures 15

  16. Isitrealistic the existence of a cashlesspaymentsystem? 16

  17. Prospects of cash • CASH WILL BECOME LESS RELEVANT due to an unavoidablebigger share of payments made with innovative solutions. Not to forgetthat cash isexpensive for society. • BUT CASH IS HERE TO STAY 17

  18. Number of per capita cashlesstransactions in Europe (2014) Source: ECB, sdw Italy’slagpossibly due to: Lower financialliteracy Greater shadow economy 18

  19. Non-cash payments: Italy/EU More recently also IT non cash payments have registered higher growth rates than in the past, especially in comparison with the EU payment statistics. Source: ECB, BIS 19

  20. Cashlesspayments by instruments in Italy 20

  21. Relative importance of cashlesspaymentinstrumentsin Italy (2015) 21

  22. Drivers for changeatEuropeanlevel Drivers for change: Technology Efficiency Integration Safety Competition Single Market Authorities aim for integration and competition as preconditions for the achievement of the effective European Single Market Market operators look for efficiency and innovation 22

  23. 1. Digital agenda for Authorities in the single market • Higherefficiency and safety • Higherconfidence, highertransparency, fastertransactions • More integration, more innovation, more competition: positive spillovers on economicgrowth Europeanstrategy 2020 (promoting the econonomicgrowthbased on knowledge and innovation) 23

  24. 1. EU Regulation • PSD2: revision of payment service directive2007/64/EC (PSD) • IFR: interchangefeeregulationfor card-basedpaymenttransactions Goals: increasing the use of electronicpaymentinstruments and competitionbetweenpayment service providers and paymentinstruments 24

  25. 1.Recent ad hoc nationallegislation in Italy • «Legge di Stabilità 2016» • Extension of the obligation (existing for debitcards) to accept credit cardspaymentsat POS (new «POS decree») • Lower fees to acceptcardspaymentsbelow € 5 • Interchangefeeregulation: caps of 0.3% of transactionvalue for credit cards and 0.2 for debitcards • New cash transactionlimits: from € 1000 to € 3000 except for money transfer and PA payments 25

  26. 2. What solutions does the market offer? Wallet: a virtual space for the storage of data on payment instruments ; users that pay on e-commerce websites select the preferred channel . Faster/instant 24/7/365payments: Fund transfers, “face-to-face” or “at a distance”, at any time of the day, immediate debiting and crediting for both, the payer and the payee. No need for specific devices at the point of acceptance ; a mobile phone or a computer are enough. Payment cards installed on a telephone device: cards data are registered on a telephone device and also make contact-less payments possible by offering the same functionalities as card payments. Blockchain - distributedledgertechnology- virtualcurrency (bitcoin) 26

  27. Future prospects of paymentinstruments • Increase of innovative instruments due to technologicaldevelopmentsthatmakethem more similar to cash • Yes but in what time? • Difficult to predict. In Italytherecould be a suddenjump in the trend • What to do? How do wereact? • Need to merge knowledgeto monitor the market on cash and non cash instruments and not to be • caughtunprepared • 27

  28. Thankyou for yourattention!

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