yves mersch : the role of cash - customer retention and tie to the citizen contribution by mr yves mersch, member of the executive board of the european central bank, to the banker, 1 september 2017. * * * there is much talk about the demise of cash. but to paraphrase mark twain, reports of its death are an exaggeration. cash remains popular. a crucial point for banks to understand, since respecting clients ’ needs and wishes is a precondition to ensuring their loyalty and support. this not only applies to the relationship between private banks and their clients, but also between central banks and the public, where cash provides a tangible daily link. i will discuss each in turn. private banks : cash is a means of customer retention the banking sector is confronted with low profitability as well as high and increasing competition from other banks and non - banking start - ups, so - called fin - techs. in this environment, customer retention is pivotal to staying in business : if your customer is not satisfied, he most likely will not stay your customer. therefore, it is important to ensure that customers ’ interactions with banks can be carried out in a way that satisfies the customers the most. take the use of cash and the growing shift to newer payment systems. there is a wide and ever increasing supply of non - cash payment systems available, such as credit cards, electronic payments, portable wallets and mobile phone payments to name but a few. as more people adapt to new payment options, banks ’ established business models can be disrupted. banks need to remain agile and endeavour to meet their customers ’ evolving desires. in this context, some see major business opportunities arising from abolishing cash, by eliminating the high storage, issuance, and handling costs that the financial industry currently faces. customers would benefit, too, as they would no longer need to carry wads of cash or search for atms. but this assumed increase in convenience would come at a cost. there are a wide range of legal, governance and operational questions that need to be considered carefully before switching away from cash. just as cash has a number of technological safeguards to protect from counterfeiting, innovative payment systems require significant safeguards to protect individuals from theft and from loss of personal information. that protection of personal information extends to ensuring the ability of law - abiding citizens to maintain their anonymity and addressing legitimate concerns surrounding the use of big data for personal profiling. most importantly

” in terms of yield curve control, with a view to facilitating the formation of the yield curve that is considered most appropriate for achieving the price stability target, the bank has conducted purchases of japanese government bonds ( jgbs ) under the guideline for market operations, in which it sets the short - term policy interest rate at minus 0. 1 percent and the target level of 10 - year jgb yields at around zero percent. although it is likely that japan ’ s economy will continue on an expanding trend and the year - onyear rate of change in the cpi will increase gradually toward 2 percent, the bank considers it necessary to continue to pay close attention to downside risks, particularly regarding 1 / 2 bis central bankers'speeches developments in overseas economies. based on this recognition, the bank deems it appropriate to take the policy stance of being tilted toward monetary accommodation. at the monetary policy meeting held in october, the bank decided on a new forward guidance for the policy rates and clarified its stance to maintain the present levels of the policy rates or, depending on the situation, lower them from the present levels, as long as it is necessary to pay close attention to the possibility that the momentum toward achieving the price stability target will be lost. under this policy stance, the bank will continue to pursue powerful monetary easing toward achieving the price stability target. in doing so, the bank considers it important to take into account both the effects and side effects of monetary policy, including those on financial markets and the functioning of financial intermediation. on this point, the bank recognizes that prolonged downward pressure on financial institutions ’ profits, with the low interest rate environment and severe competition among financial institutions continuing, could create risks of a gradual pullback in financial intermediation and of destabilizing the financial system. although these risks are judged as not significant at this point, mainly because financial institutions have sufficient capital bases, the bank will continue to examine these risks as well as those considered most relevant to the conduct of monetary policy and conduct its policy in an appropriate manner, taking account of developments in economic activity and prices as well as financial conditions. thank you. 2 / 2 bis central bankers'speeches