There are thus a number of good reasons that explain why we use cash and why we will continue to do so for some time to come. For this reason alone there is a lower limit below which cash usage cannot fall. Where exactly this limit lies and how quickly we may reach it will largely depend on what other payment services are developed. For payments from private individuals to companies there are a number of competing services such as card payments, mobile payments, Internet transfers and so on. However, for payments between private individuals there are far fewer alternatives. Despite the rapid rate of technological development, no satisfactory replacement for cheques has emerged in this context. What is required to make new payment services successful? There are a number of fundamental characteristics of the payment system that affect the chances of successfully launching new substitutes for cash and other existing payment services. Some of these characteristics raise barriers to innovation and may thus help to protect the already established payment services. If we assume that, in one way or another, new payment services will be based on payment by electronic means between accounts in one or several custodial institutions, then there at least three problems that a payment service must overcome in order to succeed. First, launching a new payment system is in itself costly.
Through these Lecture Series, which have successfully ended today, it has been highlighted that the central bank, like the rest of the economy, adapts to changes in the market environment. In the case of the Bank of Zambia, prior to 1991, the Bank had numerous roles, including the promotion of economic growth through the provision of credit to critical sectors such as agriculture, manufacturing, mining, etc, as well as issuance of export guarantees to exporters. As expected, the multiplicity of functions led to conflict of interest. For instance, on one hand, the Bank was expected to control the growth of money supply while, on the other hand, it was required to inject money into the system through the provision of credit to the selected sectors. The introduction of economic reforms by the Government beginning the end of 1991 therefore brought about enormous challenges for the Bank of Zambia. To meet the new challenges, the Bank’s operations needed to be more focused. In this respect, the Bank of Zambia Act was amended in 1996 to reflect the changed nature of the operating environment. By amending the Act, the Bank’s primary role was solely “to formulate and implement monetary and supervisory policies that will ensure the maintenance of price and financial system stability”. This was deliberate, as experience world-over has shown that you can only achieve sustained and high economic growth in an economic environment characterised by low and stable inflation.