What is the Future of Cash Payment in BiH?

On 15th November 2018, International Conference “The Future of Cash” has been held in Sarajevo. The conference was organized by the Central Bank of Bosnia and Herzegovina (CBBH) in cooperation with the USAID on the occasion of the 20thanniversary of the introduction of the convertible mark as the legal tender in Bosnia and Herzegovina.

Recognized experts from Austria, Albania, Bulgaria, Macedonia, Montenegro and Bosnia and Herzegovina participated in the conference and had interesting discussions on cash and non-cash payments, digitisation and fintech and, the fact was pointed out that, despite a significant technological progress achieved in financial mediation, the trend of a continuous increase of cash in circulation has been present since 2007, which is considered a direct effect of the global financial crisis.

In his speech, Governor Softić, Ph.D. emphasized that the convertible mark fully justified its introduction after 20 years of existence, and that in that period Bosnia and Herzegovina recorded an exceptional financial stability and low inflation.

“We have done a part of the work, we have established a reliable and solid framework, now all of us, not only the CBBH, but also the executive authorities, need to implement structural reforms in order to accelerate economic growth, to reduce unemployment and to increase the standard of citizens of Bosnia and Herzegovina” said Governor Softić.

Deputy Director of the IMF for Europe Jörg Decressin said in a speech that the issue of digital payments has already matured, and they offer a variety of alternatives to cash. “Yet, the cashless or less-cash society, as appealing as it may sound, has so far remained elusive. But the tide could turn. Fintech innovations could provide ever more opportunities that favor digital payments” said Mr. Decressin and added that the central banks should face the challenges brought about by private digital currencies and crypto-assets.

Belma Čolaković, the Chief Economist of the CBBH, emphasized that reliance solely on the level of registered / legal economic activity in the country can result in inadequately formulated economic policies, and that with the growth of the importance of fintech, the assessment of real demand for money is additionally complicated and consequently the measuring of economic activities in the country.

When it comes to the age of digitisation in the financial sector, a strong impact of digital technologies on banking is something that is already happening, with great potential for further growth. Some of the participants of the conference forecast that in the developed countries, banking with citizens will be almost completely automated by 2020, and that automation will help banks to reduce their operating costs in some sectors by 30-40%.
In the conclusion of the conference it was assessed that regulators will have to change their approach, to adjust the framework in which they operate, in order to follow up with the market developments.

Regarding the cryptocurrencies, it was mentioned that those are high risk assets and investments, and not money in the standard meaning which includes some underlying liabilities.

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