##bank ’ s statutory mandate to promote the smooth functioning of payment transactions and payment systems. 1 / 4 bis central bankers'speeches the bundesbank is an integral component of the cash cycle in germany, but we are not the only game in town. the way in which the cash cycle functions internally is based on close cooperation and coordination between the central bank, commercial banks, cash - in - transit companies and retailers. all actors in the cash cycle need to work together to ensure that handling and distributing cash remains efficient in terms of costs. what does this mean? with the diversity of payment options increasing, their underlying cost structures are coming under greater scrutiny. measuring these reliably is not an easy task, but we have to try nevertheless. the bundesbank recently published a comparative study on the costs of using different payment methods in the german retail sector. 1 it turns out that, at least on a transaction basis, paying in cash is less costly than paying by debit or credit card. but with regulations bringing down the transaction costs of card payments and the rise of contactless payment options, this gap could narrow. at the same time, we are at risk of measuring underlying cost structures inaccurately if we fail to recognise that transaction costs may simply be becoming less obvious. customers reveal personal data when making card and contactless payments such that, in a way, costs are shifted towards them. it might be necessary for regulators to consider how to deal with this from a consumer protection point of view. at the end of the day, bringing down the costs associated with handling and distributing cash is a matter of maintaining efficiency. this requires sensible investment. all actors along the cash value chain are in it together to ensure that processes are automated and quick. credit institutions in germany, for example, are replacing traditional atms with devices that customers can use to both deposit and withdraw cash. these machines can even recycle banknotes. one in three of the roughly 60, 000 atms in germany have already been replaced with such upgraded devices. in the retail sector, more and more automated points of sale and back office systems are being deployed – for example, systems which can portion paid - in banknotes in store. mounting cash handling costs are likely to entice cash - in - transit companies to invest in more efficient and automated processes. finally, turning to us, central banks need to keep on investing in the long - term sustainability of their own processes. let me give you two examples of what the

bundesbank is doing in this regard. first, we have been upgrading a large number of our cash processing machines located across our network of branches in germany. second, we are in the process of setting up our new state - of - the - art cash center in dortmund. once operational, this branch will pool operations previously performed by five other branches. it will be equipped with automated transport vehicles and high - bay warehouses. these substantial investments in the existing cash infrastructure are necessary to ensure that cash remains one of the variety of payment options that customers can choose from for their everyday transactions. 3 external resilience of the cash cycle 2 / 4 bis central bankers'speeches ladies and gentlemen, just like the human body, the cash cycle is essentially a closed system. working smoothly and efficiently from within is the foundation on which everything else is based. but this by itself is of little use if the system is not resilient against external influences. attempts to inject counterfeit banknotes into the financial system are one example of this. the good news : their success is limited in the euro area. enhanced security features were introduced with the issuance of the new europa series of euro banknotes. this is to keep ahead of counterfeiters, and the banknotes are also more durable than the first series. placing explosives around atms is a bolder example of an external attack that tends to receive considerable public attention. generally speaking, storing wealth – be it in electronic or physical form – will always attract illegal activities. the way to counter these is with effective law enforcement – white blood cells, if you like. safety measures tend to imply further regulations. regulations tend to generate costs. it is an obvious trade - off. but the only cash cycle that households will trust in is a safe one. trust is particularly important in times of crisis. cash is naturally immune to power outages, failing payment systems or even large - scale cyberattacks. we observe sharp spikes in cash demand in regions affected, for example, by earthquakes or hurricanes. a safe and resilient cash value chain can act as a cushion for households during periods of economic uncertainty. cash does this by establishing a link between households and the central bank. to date, this link has been physical and, for the most part, established via commercial banks. in my view, having a tactile means of payment is important. our evidence suggests that this helps households keep their personal budgets in check. 2 moreover, physical cash