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Currency Research

Presentation Details

Tuesday 24th September 2019

As the payments landscape is becoming more digitised, many countries are studying digital currency and forecasting currency levels appropriate for their future operations. This session discusses the trends in cash and non-cash payments, and whether the cash cycle is adapting to the change.

The payment landscape in Sri Lanka has changed considerably in the recent past with the introduction of many alternative payment methods. However, cash continues to be the most important mode of payment with the growth of currency in circulation increasing more than 10 percent on average, during last five years. As the ability to access cash has been increasing, with number of bank branches and ATM terminals, this suggests that cash will continue to meet by the financial sector. Predominant shifting in demand for high value notes indicates that the usage of cash as store of value. Large volume of small denomination notes and coins are being used for small purchases at retail level. As Central Bank of Sri Lanka carries out currency management operations in a centralized model, appropriate measures are being taken to make the cash cycle more cost effective by making required investment and process adjustments with the cooperation of the banking sector.

While cash in circulation keeps growing year on year in most countries, with very few exceptions,
cash usage is changing. Consumer behaviour is changing, as is the way cash is circulating. The
process of adopting new ways of making payments is quicker in some countries than others, and
with the rise of FinTechs and new payment technologies, the retail payments landscape, that used
to look at cheques, cards and cash, has become so much more diverse and therefore more difficult
to navigate. The cash industry must be aware of these changes in order to plan realistically for
the future; this presentation is meant to help raise awareness.

Payment reforms are the nucleus of digitization and are changing at an accelerating pace. Users
expect faster, easier payments anywhere and at any time, mirroring the digitalization and
convenience of other aspects of life. Virtual currencies (VCs) and crypto-currencies (CCs) are
subsets of DCs, which only exist electronically and are highly vulnerable to computer crimes and
cyber-attacks compared to paper currencies. DCs or CCs are not issued by central banks nor have
they been legalized by most central banks. Examples of privately issued DCs include Bitcoin,
Litecoin, Ether (Ethereum) and XRP. DCs such as Bitcoin were designed to be used to make
payments, but today many DCs are held as speculative assets. Bitcoin and other private DCs are
underpinned by distributive ledger technology (DLT) or blockchain, which is an electronic ledger
that records and verifies transactions made using the currency.

At present, the public can only hold central bank money in physical form – as banknotes. In the
near future, central bank money could be very different to traditional bank notes. If a central
bank issues DCs then everyone could store value and make payments in electronic central bank
money. Such a move could have wide-ranging implications for monetary policy and financial
stability. Across the world, central banks are thinking about how central bank digital
currencies (CBDCs) could replace paper money. All central banks have begun theoretical and
conceptual research and are generally sharing their studies in order to develop a common
understanding of the proposed new CBDCs. Central banks in Sweden, Norway and Denmark have
already established relevant infrastructure and legal frameworks for the issue of CBDCs,
assessed the challenges of launching them and are likely to issue CBDCs in the short or medium
term. Meanwhile, Bank of Canada, MAS in Singapore and the Reserve Bank of South Africa have
established DLT to replace wholesale payment systems as a prelude to issuing CBDCs. During the
course of this presentation, the current strategies by these central banks and the future
implications of this technology will be discussed.

Cash handling and the provision of cash services is labour intensive and a main cost centre for
financial institutions. As more central banks and commercial banks reduce their branch network and
outsource/delegate cash services, cash management companies are becoming a more integral part of the
cash cycle.

Cash management companies are investing in technology to improve efficiency and provide a wider range
of services such as providing smart safes, operating ATM networks, providing single line ATM
maintenance, and serving as cash centres for their customers.

To further speed up the cash cycle, central banks may delegate the holding of extended inventory to
cash management companies as has already happened in some countries. From the perspective of CMCs
and commercial banks, what can a central bank do to speed up the cash cycle?

Over the past few years, the region witnessed an increasing use of recycling ATM/CRM, cash back at
point of sale, and mobile app for cash withdrawal at shops. This trend is expected to continue and
gather pace in the near future.

However, this revolutionary change means that an increasing amount of cash is circulating outside the
banking system for prolonged periods. Maintaining banknote authenticity and quality is growing more
complex. How are central banks and commercial sector working together to achieve efficiency gain
from this change while maintaining quality and security of cash?

The panelists will discuss some of the benefits of these methods of recycling cash to the public,
share their experiences and explore how to maintain quality and authenticity when currency is
infrequently returned to the banking system.

Wednesday 25th September 2019

To meet the expectations of consumers before, during and after their purchase, the retail sector has
integrated its store operations, delivery and inventory management. Is our industry ready to provide
such visibility to cash logistics?

Hear a vision on how data standards and best practices can be used for cash logistics affecting
intensive cash users and businesses. This new level of cash visibility will improve data accuracy,
speed up resolution of discrepancies, and facilitate track and trace throughout the cash supply
chain.

As the cash cycle evolves, CITs are no longer solely armoured carriers. They have become the backbone
of the circulation cycle. Many CITs are now CMCs that handle and store cash for banks (including
central banks) and retailers. Proper facilities, operating procedures, and risk mitigation measures
are a must when it comes to cash processing, cash forecasting and replenishment, and safe-keeping of
cash for their customers. There is no doubt that CMCs play an increasingly important role in
speeding up the cash cycle, thus improving efficiency and lowering the overall cost of cash
handling. How do we ensure that every player is doing a proper job in creating an efficient and
secure cash cycle?

There is much hype around the advance of digital payments, many Central Banks are supporting a less
cash society, but cash continues to grow in most economies. This panel will separate the facts from
the myths and look to a future where digital payments and cash will co-exist, but cash in a digital
world will be different and it has been transforming at a fast pace.

As the payments landscape is becoming more digitised, many countries are studying digital currency and forecasting currency levels appropriate for their future operations. This session discusses the trends in cash and non-cash payments, and whether the cash cycle is adapting to the change.

Any organization would need a business continuity plan to ensure that a business can continue its processes during a time of emergency or disaster. Traditionally, emergencies or disasters like fires, floods or other adverse weather conditions, unexpected political situations, curfew etc. were considered when planning for business continuity. But, in the modern world, with the heavy dependence on information technology for business operations, cyber security has also become an important part of business continuity planning. The purpose of a cyber-attack can be to steal the financial information of the business or its customers, to deny service to the company website or to install a malware or a bot that can monitor the behavior of the system and users to plan future attacks. In the recent past it could be witnessed an increase in the number of cyber-attacks and development of new cyber threats that have potential to cause severe damages to organizations including financial and reputational impacts. The financial cost of cyber-attacks is also in the rise and the data breaches caused by these cyber-attacks have exposed millions of user details resulting in loss of customer confidence and market share. Considering all these facts it is high time for the organizations to include cyber security measures in their business continuity plans.

Financial Institutions, consumers and service providers are more connected than ever before, and
as a result (whether they realise it or not) they share risk. This means they need to be even
more open and collaborative. Also, when measuring resilience in the cash cycle they need to look
beyond traditional thinking and their own infrastructure.

During this session we will explore the characteristics needed to develop robust incident
management solutions.

Automation and interconnection of systems is half way to an efficient solution. The second half
to full efficiency is software and digitalization.

During this session you will find out more information on how digital twins performance monitors
and cash management software give you the freedom to adapt fast to changing central bank
regulations and customer requirements.

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