erkki liikanen : cash and the central bank opening remarks by mr erkki liikanen, governor of the bank of finland, at the bank of finland conference on going cashless, helsinki, 14 june 2016. * * * dear friends and colleagues, i want to welcome you all to this conference organized around a very old and at the same time a most timely topic : cash. central banks have always thought a lot about cash, of course. but until recently, it was mainly seen as a logistical and security matter. this is changing. now, we have to consider the role and the future of cash from more fundamental perspectives. * * * one perspective is the effect of information technology. technological change has always shaped banking. historically we see the impact of such inventions as the telegraph, the credit card, the atm, and electronic fund transfers. but how about notes and coin? in essence, cash is a way to store and convey information : information about the purchasing power of the bearer. but cash is not the only possible way to do it. information technology offers more and more alternatives, many of which compete in today ’ s marketplace. technological development has made it possible to offer improved services and to increase efficiency in the payments industry. but the technological imperative is not the only force at play. commercial incentives are also important. the utilization of the technological possibilities has sometimes been spurred by crises. finland is an example of this. after the nordic banking crisis in the early 1990s, our banking sector had to go through major cost - cutting and productivity improvements. during the 1970s and 1980s the banks had invested very much in the ict, which was made possible due to high profitability. in this structural change, finnish banks profited from these investments in changing their way to operate and they became forerunners in internet - banking. this shows once more how necessity becomes the mother of invention. today, finland and the other nordic countries are pretty advanced in the electrification of payments, and most people can go about their daily lives perfectly well without touching cash. and many do so. contactless payment cards are among the new developments which, by their convenience, pose a serious challenge to cash in terms of sheer technical efficiency and timesaving. by the way, finland was a pioneer in the use of contactless smart cards for payments. they were first introduced by the mid - 1990 ’ s in the public transit systems of several finnish cities like oulu and tampere. technology is not only about efficiency

##ystem will discontinue the production and issuance of € 500 banknotes. the elimination of the largest - denomination banknote is hoped to have an impact in limiting the underground economy and making all kinds of illegal transactions more difficult. its use in ordinary transactions has not been large in any case. some people have been disappointed by this decision, and interpreted it as a sign that the ecb is taking a more negative view on the future of cash in general. this is a misinterpretation. the decision should not be overdramatized. for a comparison, in the u. s. the $ 100 bill is the largest banknote. the ecb is not taking a radical step in discontinuing a € 500 banknote. at the same time the new series of € 200 and € 100 notes will be introduced to meet the all the demand. there is no change in our attitude on the future of cash. * * * to conclude, cash has never been more interesting than now. increasingly, the central banks and the whole society need analyses which go to the foundations of the monetary and payments system. i trust this conference will make a valuable contribution to this fascinating research area. i thank you for your attention, and wish you a very productive conference day. bis central bankers ’ speeches