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Foreword

Daniel Dahinden

Marco Menotti

Dr. Andreas Sprock

Dr. Alexander Verbeck

1

Introduction

5

2 Relevant Future Scenarios 17

Note to the Reader

53

Table of Contents

,QWURGXFWLRQ What does the future of cash hold? How will cash change? What developments are driving these changes? What does it mean for the cash infrastructure?

What is considered money, what form it takes,

how it is used, and what its infrastructure looks like, all look set to change dramatically in the near future.

It looks as if nothing will look like the past.

presents several possible futures for money, in both its physical and digital form help strategic decision-makers in set- ting the strategic direction

5-7 years

When thinking about the future of 'something'

Ȇȇwe should start by

in terms of the value it creates (or the 'jobs it is hired to do') at an abstract level. 8

Money creates value for

people and society in three distinct ways.

Money Infrastructure

has essentially created value for people and society in two distinct ways. 12 The introduction contains all our key statements - the rest of the document allows interested readers to dive deeper into the different topics. Fa ctors

Projections

Future scenarios

Set of all possible

fu ture scenarios Se t of relevant future scenarios

Projections describe possible future

developments of these factors Pro jections are combined to form possible future scenarios, which are then challenged th rough war gaming, greenȴeld designing, tipping-point crossing, what-if questioning,

30-year-horizon backward thinking, black-swan scouting

abstracting the system under analysis in terms of 'jobs it is hired to do' possible future devel- opments impact scenarios

ȴchallenge

not aim to provide a map of all the foreseeable future variabilityȃ heterogeneity in the sources of data and information our statements capture our empirically informed beliefs If you disagree with our assessments, or if you believe we missed a crucial development/scenario, please contact us.

This is a learning journey for us.

Acc ess/coverage, acceptance, speed of transfer, ease of use, weight monet ary costs, settlement risks o f its purchasing power th eft, loss pr ivacy monetary costs Li quidity timel in ess of exc hange rates

Blackouts, network interruptions,

(cy be r-) attacks, resilience 8 People consider/weigh (consciously or unconsciously) theses aspects Protecting and securing moneyFacilitating exchanges of value supports establishing money as a 'store of value' by helping people securely store moneyacts as custodian

By offering physical vaults

-By offering digital vaults ȇ -By acting helps people securely move money from A to B

By guarding the transport of physical money

-By operating inter-custodian digital ledgers facilitates using money as a 'medium of exchange' ('means of payment') by helping people move money from A to B -By securely moving

By issuing bank notesȇȃ

-By offering user interfaces

By operating digital communication pipes

Social / CulturalTechnologicalEconomicEnvironmentalPolitical 13

24/7 availabilityAdvanced analyticsBorderless industries

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ConvenienceȴCrowd sourcing

Anti-globalization

/ Protectionism

AutomationDigital tokenization

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Cyber-security

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)ULFWLRQOHVV%XVLQHVVDigital assets

Fear of companies

becoming too powerful

Digital natives

Human-machine

interfaces

Digital data

Data sovereignty

/ control

Digital User Interfaces

(UIs)

Digital marketplaces

'LJLWDOZDUIDUH 'RLW\RXUVHOIPHQWDOLW\Internet of Things (IoT)Disintermediation

Internetization*OREDOVWDELOLW\

Voice-based human

machine interfaces (HMIs)

Knowledge systemsGovernment trust

InstantaneityMachine learning

National-security

concerns

Privacy

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Openness

Security

Privacy-preserving

systemsGrowing global middle class

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Surveillance

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Increasing speed of

changeWeaponization of economic tools

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One-stop shops

Virtualization and

dematerialization

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Standardizationȴ

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ȴseven future scenarios

context partmoney infrastructure part

Most Likely Scenario: Digital Rules -

but Cash Persists in a Fragmented World While we describe the most important facts in this summary, we prepared a human-centric description of this sce- nario on page 20 to illustrate the impact on everyday life. Context: Digital payments continue to displace cash as a 'medium of exchange'.cash continues to be perceived and widely used as a 'store of value'. Digital payments have substantially increased in con- venience compared to cash

Digital payments are seamlessly

embedded in the digital services (e.g., apps, websites,

AR, chats) running on digital UIs

digital payments can automatically and seamlessly be launched by the rapidly growing number of Inter- net-connected devices (Internet of Things, IoT) instantaneous settlement Banks (are required to) open interfaces (APIs) to their digital vaults and customer data 'beyond banking'

Payment cards have disappeared as authenticators

digital IDs have replaced payment cards

Nonmonetary digital

assets are thus increasingly replacing digital money as a digital 'store of value' pays with nonmonetary digital assets

Cash Infrastructure: sub-

stantially reduce operational costs The cash infrastructure is being operated centrally crowd-sourced (P2P, P2M) cash infrastructures becoming an essential part

Smart-banknote infrastructures

Both infrastructures may individually dis-

rupt

In rural areas,

crowd-sourced cash infrastructure has led to an almost-circular cash economy

Digital-Money Infrastructure

settles instantlyfully programma- ble digital assets, a digital-assets ledger infrastructure may disrupt national/regional money infra- structures

Incumbent payment schemes face increasing compe-

tition and substitution risks

Payment-API aggre-

gators may become the new payment schemes

Digital Infrastructure:

People are highly aware of the potential

costs of trusting too easily with their data cyber-threats have continued to increase in sophistication

Alternative Scenario:

Context

ȇdigital money/assets have also largely dis-

placed cash as a safe 'store of value' Government may discourage people from holding cash

Money Infrastructureputs

additional pressure on the cash infrastructure to sig-

Alternative Scenario:

Rise of the Central Bank Digital

ContextAnyone can have an account at the central

bank

ȇPeople can choose where to

hold their digital currency

The usage of cash may decline

Money Infrastructure

Alternative Scenario:

Central Banks Are Dead, Long

ContextNew centrally-issued currencies are the new money

Nonsovereign currencies

have become dominant Money InfrastructureNew players/issuers may (partly) rely on existing money infrastructures if they are modern enough

Alternative Scenario:

ContextCash disappears completely

government enforcement Money InfrastructureA 'digital cash' infrastructure may take the place of the 'physical cash' infrastructure. The physical cash infrastructure may, however, not be dismantled entirely: Some of it may be leveraged to increase security and control over digital currencies E\GLV WULEXWLQJXQLTXHO\LGHQWL4DE OHWDQJLEOHSLHFHVRI

Alternative Scenario:

Moneyless Begins

Context There is no such thing as 'money' anymore

Money InfrastructureThe money infrastructures con- tinue to be relevant the demand for and exchanges in these hitherto-monetary assets falls substantially

Alternative Scenario:

ContextDecentralized digital currencies have become dominant replaced central-bank-issued currencies

Money Infrastructure

ȃDApps

cash may continue to exist if some real-world

Changes in the Fundamentals of How the Business

Works

Digital payments continue to displace cash as a

'medium of exchange'

Digital money/assets may even displace cash as a

safe 'store of value'

Banks are opening interfaces (APIs) to their data

Payment cards are replaced as authenticators by dig- ital IDs People regularly pay with nonmonetary digital assets

People expect instantaneity and zero transaction

fees in the digital sphere cantly lower costs while still providing full geographic coverage

Crowd-based solution may disrupt the cash infra-

structure

Smart banknotes may disrupt traditional banknotes

and some more Digital-assets ledger infrastructures may disrupt tra- ditional digital money infrastructure Digital money infrastructure is fully programmable Trustworthiness in terms of security and privacy is likely to be a source of competitive advantage

Possible Moves

Consider centrally operating the national cash infra- structure as a utility

Consider exploring the potential of crowd-sourced

(P2P, P2M) cash infrastructures Consider exploring the potential of smart banknotes

Consider building the infrastructure enabling

bank-account portability

Consider building the API infrastructure/platform

necessary for API banking

Consider setting up a national payment scheme

Consider building, partnering, or operating a digi- tal-assets ledger infrastructure Consider exploring next generation Internet infra- Consider exploring payment infrastructures that are resilient to blackouts and network interruptions Consider exploring resilient digital currencies that continue working during blackouts, network inter ruptions, and loss of digital ledger Consider supporting nonsovereign entities wanting to issue their own currencies

Most-Likely Scenario

18

Medium-likelihood Scenario

37

Medium-Low-likelihood scenarios

39
41

Low-likelihood scenarios

44
48
(reduction in the num- ber of ATMs) (pervasive connectivity) (ubiquitous digital UIs) (nonmonetary assets as means of payment) (crowd- sourced cash infrastructure) (circular local cash econo- mies) (one-stop-shop platforms) 21

Increasing Demand for Instantaneity

driven by their user experiences with big tech companies

Ubiquitous Digital User interfaces (UIs)

18 16

Broad Awareness of Security and Privacy Risks

trusting service providers with their data too easily. greatly value security and pri- vacy regarding their personal data win in the digital sphere. 28
trustwor- thiness in terms of security and privacy may amountquotesdbs_dbs17.pdfusesText_23

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