Banknotes require raw materials like cotton and a complex manufacturing process. Getting the money to ATMs adds to the emissions in cash’s lifecycle. Yet the cash industry is reducing its carbon footprint and digital payments are not necessarily the green payment panacea, argues a new report.

A new report finds that the global cash industry is doing its bit to reduce carbon emissions – and that digital payments are not necessarily the low carbon, more eco-friendly payments alternative to physical money as so often perceived. In “Cash: Roadmap to Sustainability’” (https://estore.reconnaissance.net/wp-content/uploads/2021/10/Cash-a-Roadmap-to-Sustainability.pdf) report author John Winchcombe argues that the cash industry is reducing its emissions and people should use cash with confidence. “The cash industry has worked hard to ensure cash is a product for today and is committed to keeping it fit for use for years to come,” he says.

Irrespective of the move towards digital payments around the world, cash remains a key pillar in the payments eco-system; every person on the planet uses cash and most of the world’s population depends on it. Moreover, cash usage continues to grow in most countries.

However, cash carries an environmental footprint throughout its lifecycle. Banknote paper is made from cotton or a combination of paper and polymer – although the cotton is a by-product of the textile industry, providing an early and enduring example of recycling in the banknote industry. The production of banknotes involves manufacturing processes and additional emissions come when cash is then transported to print works or mints and put into circulation.

There are still inefficiencies – and opportunities – to lower its impact further. More durable banknotes, lower energy manufacturing processes, greener transportation, greener electricity sources, recycling of worn-out cash and less energy intensive infrastructure in the cash cycle are some of the collective actions that the industry can and is taking.

Central banks are also playing a role in reducing the environmental impact of cash. Examples include specifying longer lasting notes: coated papers, varnished banknotes, hybrid banknotes or polymer banknotes. In other initiatives, the industry is endeavouring to use less raw materials and introduce returnable cash boxes and reusable and recyclable packaging materials.

“Unusually, this is an industry that is changing through choice. There is little actual customer demand or government legislation at this stage forcing them to change. There is a genuine momentum across the cash industry to be a good citizen,” says Winchcombe.

The report highlights that digital payments aren’t always as green as they seem. The carbon footprint of digital payments is hard to quantify, but it does require substantial hardware, software and considerable energy consumption for payment data processing, data management and communications, whether at the point of sale, on the internet or paying using mobiles. The hardware such as smartphones and computers that are used for digital payments (amongst a myriad of other uses) are significant and growing consumers of precious and rare earth metals.

As the number of digital transactions rises, particularly those made using mobile devices and wallets, at the absolute rather than the per transaction level, the digital impact must be increasing significantly, argues Winchcombe. Elsewhere cards – often plastic – need to be produced, as do point-of-sale (POS) terminals. They also generate a paper trail as payment receipts are printed. “Either way, there is no such thing as a free lunch regarding payments,” he concludes.