Central banks in a cashless world

Economics has always had a strange and much-debated relationship with money.

For a long time, economists including Nobel laureates like Merton Miller and Franco Modigliani-regarded money merely as a medium of exchange. But by building on the work of John Maynard Keynes and Hyman Minsky, economists have since moved beyond a narrow focus on the quantity of money to consider its structural influence on the real economy and the financial system.

A structural understanding of money and finance becomes even more important in an increasingly digitalised and cashless world, because there is a growing need for policymakers to operate not just as market fixers but as proactive market shapers. A cashless world not only changes people's relationship with money and creates new opportunities for how it is managed or even conceived; it also puts new pressure on central banks to reimagine their role and become more innovative.

Cashless transactions are growing faster than ever as reliance on physical cash declines. Consumers, businesses, and governments clearly prefer cashless technology's cost-effectiveness and ease of use. Tap-based payment systems, once confined to the realm of tech-savvy urbanites, now pervade even the most rudimentary economies. Interoperable payment systems are quickly emerging as the core economic infrastructure of the digital-era economy, marking a departure from the past 2,000 years of government-issued physical cash.