Abstract: 

Il dibattito sul futuro del contante si inserisce in un processo di rapida digitalizzazione dei pagamenti, sostenuto dalla diffusione delle fintech e delle nuove forme di moneta digitale. L’esperienza internazionale mostra tuttavia che la crescita dei pagamenti elettronici non implica necessariamente la scomparsa del contante. Si sta piuttosto affermando un ecosistema monetario ibrido, nel quale strumenti fisici e digitali possono coesistere e svolgere funzioni complementari. Il contante conserva infatti rilevanti funzioni economiche e sociali: garantisce accessibilità, rappresenta una riserva immediata di liquidità, contribuisce all’inclusione finanziaria e costituisce un elemento di resilienza del sistema dei pagamenti in caso di blackout, malfunzionamenti, attacchi informatici o interruzioni delle infrastrutture digitali. A ciò si aggiunge la maggiore tutela della privacy rispetto ai pagamenti elettronici. Il caso svizzero mostra come elevata innovazione finanziaria e diffusione del contante possano convivere, confermando che la transizione digitale non segue necessariamente un percorso di sostituzione, ma può condurre a una pluralità di strumenti. La questione assume ulteriore rilievo con le Central Bank Digital Currencies (CBDC) e con il progetto dell’euro digitale, che pongono nuovi interrogativi sul rapporto tra efficienza, sicurezza, privacy, ruolo delle infrastrutture private e accesso dei cittadini alla moneta della banca centrale. Il futuro dei pagamenti sembra quindi orientarsi non verso la contrapposizione tra contante e digitale, ma verso la loro integrazione. La sfida per le istituzioni è costruire un sistema capace di coniugare innovazione ed efficienza con resilienza, inclusione, privacy e libertà di scelta, preservando al tempo stesso la fiducia e la stabilità del sistema monetario.

---

The debate regarding the future of cash takes place against the backdrop of the rapid digitalization of payments, driven by the spread of fintech and new forms of digital currency. However, international experience demonstrates that the growth of electronic payments does not necessarily entail the disappearance of cash. Instead, a hybrid monetary ecosystem is emerging, in which physical and digital instruments can coexist and perform complementary functions. Indeed, cash retains significant economic and social functions: it ensures accessibility, serves as an immediate store of liquidity, fosters financial inclusion, and acts as a source of resilience for the payment system in the event of blackouts, malfunctions, cyberattacks, or digital infrastructure disruptions. Added to this is the greater level of privacy protection it offers compared to electronic payments. The Swiss example illustrates how high levels of financial innovation and the widespread use of cash can coexist, confirming that the digital transition does not necessarily follow a path of substitution but can lead to a plurality of payment instruments. This issue takes on added significance with the advent of Central Bank Digital Currencies (CBDCs) and the digital euro project, which raise new questions regarding the balance between efficiency, security, privacy, the role of private infrastructure, and citizens’ access to central bank money. The future of payments thus appears to be moving not toward a conflict between cash and digital methods, but rather toward their integration. The challenge for institutions is to build a system capable of combining innovation and efficiency with resilience, inclusion, privacy, and freedom of choice, while simultaneously preserving trust in and the stability of the monetary system.

---

Foreword

In recent years, the debate on the future of cash has returned to the center of international economic and political attention. The acceleration of digitization processes, the growth of electronic payments and the emergence of new financial technologies have fueled the idea that cash is destined to gradually disappear. The experience of many countries, however, shows that physical money continues to perform economic and social functions that can hardly be completely replaced by digital tools.

In March of this year, Switzerland returned to the centre of the European debate precisely as a result of political initiatives aimed at strengthening the protection of cash. The proposal, supported by a significant part of public opinion, has reopened a question destined to involve all advanced economies: to what extent can the progressive digitization of payments be reconciled with the needs of infrastructural resilience, financial inclusion, privacy protection, national security and monetary sovereignty?

The question, on closer inspection, does not simply concern the choice between different payment instruments, but concerns the role of money itself in contemporary economies. On the one hand, in fact, technological innovation promises greater efficiency, reduction of transaction costs, speed in exchanges and new financial services. On the other hand, the increasing dependence on digital infrastructures raises questions about the security of systems, the protection of personal data, the universal accessibility of payment services and the maintenance of an adequate level of economic autonomy of citizens.

The Swiss case is particularly important precisely because it concerns one of the most advanced financial systems in the world. The Swiss Confederation has an extremely high diffusion of digital payment instruments, a highly innovative banking sector and one of the most efficient technological infrastructures at international level. Despite this, cash continues to occupy a significant position in the consumption habits of the population, both as a means of payment and as a form of liquidity preservation.

This apparent contradiction suggests a broader reflection. The evolution of payment systems does not seem to follow a linear path in which digital inevitably replaces physical money. On the contrary, empirical evidence shows a growing trend towards hybrid models, in which traditional and innovative tools coexist, responding to the different needs of citizens, businesses and institutions.

1. Evolution of payment systems

The payments market has undergone an unprecedented transformation over the past two decades. The introduction of contactless cards, the spread of  digital wallets, the expansion of smartphone payments, the development of instant transfers and the growth of fintech platforms have profoundly changed the way economic transactions are carried out.

The Covid-19 pandemic has been a powerful accelerator of this process. The need for social distancing, combined with the rapid spread of e-commerce, has led to a significant increase in the use of digital payments. According to statistics from the European Central Bank, the number of electronic transactions per capita has increased in almost all member states, consolidating a trend that has already been underway for several years. At the same time, the Bank for International Settlements (BIS) also highlights how the payments sector is now one of the most dynamic areas of global financial innovation. The entry of new technological operators, the opening of markets favored by the European PSD2 directive and the development of Open Banking have expanded competition, favoring the offer of increasingly fast, cheaper and personalized services.

Technological evolution has changed not only payment instruments, but also the very structure of the financial market. Alongside traditional banks, fintech companies, digital platforms, specialized payment operators and large technology companies capable of offering financial services directly through mobile applications now operate. This phenomenon has profoundly redesigned the payments chain, making it more articulated but also more dependent on complex digital infrastructures.

However, the growing popularity of electronic payments has not led to a corresponding disappearance of cash. In many European countries, the circulation of banknotes remains high and, in some cases, even continues to increase. This is because cash not only serves as a means of payment, but also represents a store of value, a tool for asset security and an essential component of economic resilience.

From a theoretical point of view, cash continues to perform at least four fundamental functions. It constitutes a universally accepted means of payment, an immediately available reserve of liquidity, a tool for financial inclusion for the most vulnerable sections of the population and, above all, an emergency infrastructure capable of guaranteeing the continuity of economic exchanges even in the presence of malfunctions of digital systems.

The latter aspect has become increasingly important in recent years. The entire electronic payments ecosystem depends on telecommunications networks, IT systems, energy supplies, data centers, cloud platforms and financial intermediaries. An interruption of just one of these elements can compromise the smooth functioning of the entire payment system.

The recent energy crises, the increase in cyberattacks on financial infrastructures and the frequent malfunctions of large IT systems have highlighted how digitization inevitably also involves new forms of vulnerability. In this context, cash regains a systemic security function, configuring itself as a tool capable of ensuring the operational continuity of the economy in emergency situations.

In this perspective, in our view, the real challenge lies rather in designing payment systems capable of combining technological innovation, economic efficiency, security, individual freedom and social inclusion. While the rapid growth of electronic payments is one of the most obvious aspects of the transformation of financial systems, it would be a mistake to interpret it as the inevitable decline of cash.

As is well known, economic theory and empirical evidence show that cash continues to perform essential functions that can hardly be fully replicated by digital tools. The first function is that of a universally recognized legal tender means of payment. Unlike payment cards, mobile applications or digital wallets, cash represents a kind of direct credit to the central bank and does not depend on the creditworthiness of private intermediaries or the operation of computer networks. Cash payment results in the immediate extinction of the obligation, without the need for authorizations, telematic connections or offsetting procedures. This characteristic, often taken for granted, takes on particular relevance in emergency situations. Natural events, power outages, telecommunications network malfunctions or cyberattacks can temporarily impair the operation of electronic systems, while cash continues to provide essential transactions. The second function concerns the role of cash as a store of value. In times of economic or financial uncertainty, households and businesses frequently tend to increase their cash holdings. This is a behavior widely studied by monetary theory and can be traced back to the so-called “precautionary demand for money”, already analyzed by John Maynard Keynes in his General Theory. The 2008 financial crisis, the Covid-19 pandemic and recent geopolitical tensions have confirmed this dynamic: despite the decrease in the daily use of cash, the overall amount of banknotes in circulation has remained high, a sign that physical money continues to be perceived as a safe haven asset in times of greater instability.

A third function concerns financial inclusion. Although banking has reached very high levels in developed countries, there are still segments of the population that face difficulties in accessing digital financial services. The elderly, citizens with limited IT skills, economically fragile people, immigrants or residents in peripheral areas can find in cash a simple, immediate and universally accessible payment tool. Digitization, in fact, does not automatically eliminate inequalities, but sometimes risks accentuating them. Access to electronic services requires the availability of technological devices, internet connection, digital literacy and, in most cases, a stable relationship with the banking system. For this reason, many international bodies consider the maintenance of cash an essential component of financial inclusion policies.

The fourth function is probably the one that has taken on greater importance in recent years: cash represents a real infrastructure of resilience. The entire digital payments ecosystem is in fact based on a complex network of entities and infrastructures: banks, international circuits, telecommunications operators, cloud service providers, data centers, digital authentication systems and electricity grids. Business continuity depends on all of these elements functioning at the same time. The progressive increase in cyberattacks on critical infrastructures shows how this dependence can be a factor of vulnerability. In recent years, numerous European and North American financial institutions have suffered cyberattacks, while episodes of energy blackouts have temporarily limited the ability to make electronic payments.

In these circumstances, cash is not a remnant of the past, but a complementary instrument capable of ensuring economic continuity. For this reason, many central banks have begun to consider it a strategic component of national security, like other critical infrastructure.

2. The Swiss case

Switzerland is probably the most interesting laboratory for understanding the evolution of contemporary payment systems. The country has one of the highest levels of financial innovation in the world. Electronic payments are widespread, banking infrastructure is highly digitized, and the fintech sector continues to grow rapidly.

Yet, cash retains a surprisingly important role. In fact, there is a well-established culture of individual financial responsibility. Many citizens continue to perceive cash as a tool that promotes a more conscious management of their spending. Secondly, the Swiss institutional system attaches particular importance to the consumer’s freedom of choice, avoiding imposing exclusively digital models. Finally, there is still a widespread sensitivity towards the protection of the private sphere and the economic autonomy of the citizen.

These elements show that the adoption of financial technologies does not depend exclusively on the availability of infrastructure, but is strongly influenced by cultural, institutional and social factors. On this issue, studies by Daniel Kahneman, Richard Thaler, Drazen Prelec and Duncan Simester have shown how payment methods influence consumer behavior. In fact, cash payment generates what economists call the “pain of paying”, i.e. a more immediate perception of the economic sacrifice associated with the purchase.

Physically handing over the money makes the cost of the transaction more perceptible than using a card or smartphone, where payment is made almost automatically.

Some experiments have shown that consumers tend on average to spend more when using electronic tools, precisely because the psychological cost of the transaction is attenuated. For many families, therefore, cash would continue to represent a tool for financial education and control of the household budget.

That said, perhaps the most interesting aspect of recent developments concerns the growing integration between cash and electronic instruments. Increasingly, digital infrastructures are being used not to eliminate cash, but to facilitate its distribution.

A significant example is cashback at the POS, a service that allows customers to withdraw cash directly from businesses at the time of purchase, using a payment card. This solution is spreading especially in rural areas or small towns, where the progressive reduction of bank branches and ATMs has made it more difficult to access cash.

This is an apparently paradoxical development: digitization today contributes to maintaining the efficient circulation of physical money.

In this context, commercial establishments progressively take on a new function of financial proximity, combining traditional commercial activity with the provision of essential monetary services.

This transformation represents one of the most evident examples of the progressive affirmation of a hybrid ecosystem model, in which analogue and digital tools are not mutually exclusive, but mutually reinforcing.

3. Privacy, central bank digital currency and the new balance between efficiency and economic freedom

One of the most relevant aspects of the contemporary debate on the future of payments concerns the relationship between digitization and privacy protection. The gradual replacement of physical transactions with electronic tools has in fact produced a profound change in the very nature of economic exchange: every digital payment leaves an electronic trace, generates data and contributes to the construction of a detailed representation of individuals’ financial behaviour.

This feature is both one of the main advantages and one of the major criticalities of digital systems. On the one hand, the availability of data allows financial operators to offer more efficient, personalized and secure services. Banks can spot suspicious transactions faster, prevent fraud and improve risk management. Businesses can develop more targeted business models and better understand consumer needs. On the other hand, the increasing collection of financial information raises significant questions about the governance of personal data. Economic transactions represent, in fact, an extremely sensitive component of private life: they indicate consumption habits, personal preferences, geographical movements, economic relationships and, indirectly, aspects of the lifestyle of individuals.

Cash, on the other hand, has a distinctive feature: it guarantees a higher level of anonymity than electronic instruments. Of course, this anonymity is not absolute, since the use of physical money is also subject to controls (albeit within the limits provided for by anti-money laundering legislation). However, a cash transaction does not automatically generate a permanent digital record that is accessible to multiple parties. This difference is particularly relevant in a society increasingly characterised by the production and processing of personal data. The issue does not only concern individual privacy, but also the relationship between citizens, public institutions and large technological operators.

The maintenance of cash is therefore interpreted by a part of the economic and legal literature as a form of balance within the monetary system: the simultaneous presence of highly efficient digital tools and a relatively less traceable physical means of payment makes it possible to preserve a plurality of options available to citizens. Cash, in our view, therefore does not necessarily represent an obstacle to financial modernization, but can be considered an element of monetary pluralism.

4. Central Bank Digital Currencies and the Future of Public Money

The issue of privacy takes on even greater relevance in the debate on Central Bank Digital Currencies (CBDCs), i.e. digital currencies issued directly by central banks. In recent years, numerous monetary authorities have launched study and experimentation programs relating to the possibility of introducing digital forms of public money. The main objective is to adapt the role of the central bank to an economy in which transactions are increasingly taking place through electronic infrastructure. The idea behind CBDCs is to offer citizens a form of digital currency guaranteed directly by the monetary authority, thus maintaining a public alternative to payment instruments issued by private entities.

In the European case, the digital euro project stems precisely from the need to preserve the role of public money in an environment dominated by private technology platforms and international payment circuits. From an economic point of view, a central bank digital currency could offer several advantages: greater efficiency in payments; reduction of transaction costs; increased competitiveness of the European financial system; possibility of making digital payments even without depending exclusively on private operators.

However, alongside the potential benefits, some issues still under debate emerge, such as the one concerning the level of traceability of transactions which, as anticipated, requires a reflection on the delicate balance between the needs of public security, the fight against financial crime and the protection of individual privacy. The future model, therefore, will probably have to include systems capable of guaranteeing both digital efficiency and adequate levels of privacy protection.

In this sense, the maintenance of cash could continue to play a complementary function even in a world characterized by the spread of public digital currencies.

But the debate on physical money cannot ignore the critical elements associated with the use of cash. The management of banknotes entails economic costs for the entire financial system. Production, distribution, transportation, security, insurance, and operations are costly activities for central banks, financial institutions, and businesses. Furthermore, for commercial establishments, cash implies longer management times than electronic payments considering that it is necessary to count money, make deposits, manage the risk of error or theft and incur logistical costs.

From a macroeconomic point of view, some studies have shown how the high circulation of cash can make the fight against the shadow economy, tax evasion and money laundering more complex. For this reason, many governments have introduced limits on the use of cash in large transactions, with the aim of increasing the transparency of financial flows and improving the effectiveness of controls.

On this aspect, it should be considered that tax evasion and economic crime depend on numerous factors: quality of controls, administrative effectiveness, tax culture, economic structure and level of trust in institutions and that the digitization of payments can be a useful tool, but it is not a definitive solution on its own.

5. International comparison: different models of evolution. Fintech, new payment ecosystems and future prospects

A comparative analysis of European payment systems shows that there is no single path to digitalisation. Sweden is the most evident case of a reduction in the use of cash. In recent years, the country has developed one of the most advanced digital payment ecosystems in the world, with a strong diffusion of mobile applications and electronic payments even for small amounts. This model has produced important advantages in terms of efficiency, but it has also opened a debate on the need to guarantee alternative tools for the less digitalized segments of the population and for emergency situations.

In contrast, countries such as Germany, Austria, and Switzerland maintain a greater preference for physical money. In these economies, cash continues to be perceived as an element linked to individual freedom, financial tradition and the possibility of maintaining greater direct control of one’s resources.

These differences show that the future of payments depends not only on the technology available, but also on historical, cultural and institutional factors.

The recent evolution of payment systems highlights how the comparison between cash and digital instruments cannot be interpreted as a simple replacement of one model with another. The direction in which advanced economies seem to be moving is rather that of a progressive integration between different instruments, each of which retains specific economic and social functions.

In this scenario, an increasingly important role is played by fintech companies, i.e. technology operators specializing in the development of innovative financial services. The growth of these companies has profoundly changed the structure of the payments market, introducing new models based on speed, personalization of services and intensive use of data. Fintechs have contributed to the spread of tools such as digital wallets, smartphone payment applications, instant money transfer platforms and financial services integrated into online trading platforms. This transformation has increased competition in the sector, pushing even traditional banking operators to accelerate their innovation processes, but even today it is clear that even the most digitization-oriented operators are progressively abandoning rigidly cashless approaches and that the most recent trend is to develop flexible solutions, capable of integrating electronic payments,  cash management and proximity financial services.

This evolution stems from a fundamental economic observation that consumers do not use payment instruments exclusively, but choose different solutions based on the context.

The plurality of choices appears to be a feature of efficiency, suggesting that a truly competitive payments market is one that manages to guarantee the availability of different tools so that citizens and businesses can select the one that best suits their needs.

Specifically, one of the most interesting examples of the growing integration between cash and technology concerns e-commerce. At first glance, the e-commerce sector would seem to represent the paradigm of the complete digitization of payments. In fact, models capable of combining online purchases and physical payment have emerged in many countries. In several European and Latin American economies, in fact, consumers without payment cards or traditional banking instruments can place an order through a digital platform and then complete the payment in cash at affiliated networks of supermarkets, tobacconists or authorized points of sale.

These systems play an important role because they extend access to digital services even to entities with less integration into the traditional financial system.

The phenomenon shows how digital technology does not necessarily eliminate the role of cash, but can transform its function. Physical money is no longer just a tool used in a traditional economy, but can become a complementary element within technologically advanced ecosystems.

This is a significant conceptual shift: the future of payments may not be characterised by one instrument winning over another, but by the ability of different instruments to cooperate.

6. An open theme: towards a new concept of monetary sovereignty?

The digitization of payments is undoubtedly an irreversible process. The benefits in terms of speed, efficiency and innovation are clear and are likely to continue to increase in the coming years. At the same time, however, cash continues to perform functions that retain significant economic and social importance. In fact, it guarantees accessibility, represents an alternative tool in emergency situations, protects citizens’ privacy and helps reduce dependence on digital infrastructures.

The Swiss experience shows that technological innovation and the presence of cash are not necessarily incompatible phenomena. On the contrary, a modern financial system can be characterized by the coexistence of different payment instruments, each intended to meet specific needs. The future of payments therefore does not seem to be oriented towards a completely digital model or one based exclusively on physical money. The most realistic prospect appears to be that of a hybrid monetary ecosystem, in which cash, electronic payments and new forms of digital currency coexist within a dynamic equilibrium.

The debate on the future of cash is also part of a broader reflection on the issue of monetary sovereignty. For centuries, the currency issued by public authorities has been one of the fundamental instruments through which states have exercised their economic functions and guaranteed confidence in the monetary system. However, the increasing privatization of payment systems and the increasingly important role of large technology platforms have progressively changed this balance.

Today, a significant share of transactions are carried out through infrastructures controlled by private operators, often multinationals. This change raises a fundamental question: what should be the role of public money in an increasingly digitized economy? Central Bank Digital Currencies (CBDCs) are one possible answer, but they are not necessarily the only solution. The maintenance of cash can also be interpreted as a tool through which public institutions continue to guarantee citizens direct access to the money issued by the central bank. In this perspective, the question is not only about the technology used to make payments, but about the relationship between citizens, the monetary system and institutions. The availability of a plurality of payment instruments makes it possible to preserve a balance between innovation, competition, financial inclusion and individual autonomy.

The real challenge for economic institutions will therefore not be to choose between cash and digital tools, but to design a system capable of simultaneously guaranteeing efficiency, security, resilience, inclusion and freedom of choice. In an increasingly technological economy, the value of money will depend not only on its ability to transfer financial information quickly, but also on its ability to maintain public trust, ensure universal accessibility and ensure business continuity even in crisis situations. It is precisely this combination of innovation, pluralism and reliability that is likely to characterise the future of payment systems.