Debit and credit cards may be ubiquitous, but cash is still king in Canada – and its reign won’t be ending any time soon.
As Canada unveils a new kind of currency this week, with the introduction of the country’s first polymer banknotes to replace the paper-style money used since the early 1800s, Bank of Canada Governor Mark Carney believes talk of a cashless society is overblown.
“Reports of the death of cash are greatly exaggerated,” Mr. Carney said Monday as the central bank put the new polymer $100 bill into circulation. “Our research shows that cash is used for more than half of all shopping transactions.”
The Bank of Canada has a vested interest in touting the relevancy of cold hard cash these days. The shift to polymer banknotes represents the biggest change to Canada’s money supply since the rainbow-coloured money was introduced in the 1960s.
As of Monday afternoon, Canadian banks are issuing polymer $100 bills instead of paper. The new polymer $50 bill arrives in March, while the rest of the denominations – the $20, $10 and $5 – will be released in 2013. Smooth and shiny, the sleek new bills are made of thin layers of plastic that are nearly impossible to rip, and believed to be almost as difficult to counterfeit.
Mr. Carney’s comments come at a time when the banking industry is working on ways to make cash payments obsolete. Some of Canada’s largest financial institutions and credit-card issuers have joined forces with phone companies to develop payment systems that will allow consumers to pay digitally from their phones at the cash register, similar to using a debit card.
While the development of those types of payments will make purchases more convenient for consumers who don’t want to carry cash or bother with change, the chances of getting rid of currency bills entirely is remote, since cash is the most commonly accepted form of payment.
“Canadians, as a consequence, need a currency that they can trust,” Mr. Carney said.
Canada is one of about 30 countries to have ditched paper-style bills, including Australia, which pioneered the use of polymer bills in the 1980s.
The introduction of polymer bills in Canada comes after a sharp increase in counterfeiting rates a decade ago, as home computers, colour printers and scanner technology got cheaper and more sophisticated. Canada’s paper banknotes, which are actually made of cotton fibre, will be removed from circulation over the next few years as more polymer denominations are introduced.
The central bank is using the $100 note as its test run for its other denominations, hoping to work out any kinks in the introduction of the polymer bills. Banks have been testing the new notes in their machines for months, said Martine Warren, the Bank of Canada’s scientific adviser.
“We’ve been working with the market for over two years to make sure that ATMs and all banknote-processing equipment are ready for these polymer notes,” Ms. Warren said. “We distributed test notes and advance designs of the genuine notes to machine manufacturers far earlier than we have in the past to make sure that the circulation system is ready for these polymer notes.”
The Bank of Canada has been working with the banking sector on the development of electronic payments, but the central bank has no plans to reduce the amount of banknotes in circulation. While the new polymer bills will cost about 19 cents to produce, roughly double what the paper notes of past series cost, they will last at least 2.5 times longer, Mr. Carney said.
Paper notes will still be legal tender, however banks will begin removing them from circulation as more polymer notes are introduced. Unlike the cotton-paper-based notes, the polymer banknotes have a see-through area that is not possible with ink on paper, which the central bank believes will be the most difficult aspect to counterfeit.