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Monday, 20 january 2020 | Redacción CEU
Have you noticed that you pay less and less by cash? Have you noticed that you no longer go to the ATM to withdraw money? Have you noticed that you increasingly rely on new alternatives to cash payment? If so, you are in line with what is already a growing trend in many countries. The use of new payment methods, the approval of policies against money laundering and tax evasion, the development of digital banking or the promotion of electronic commerce are leading to greater disinterest in the use of physical money. However, is Spain one of the countries where this trend is already noticed? What are the countries which bet more and less on cash? Why?
In Spain, the use of cash is deeply rooted. Compared to other alternatives like card payment, Spaniards prefer to pay in hard cash. The study carried out by the European Central Bank (ECB) and published by the media at the beginning of this year has made this clear. This report concludes that, together with Greece, Cyprus and Malta, Spain is one of the countries which is in the ranking of states that are most committed to the use of coins and bills as a payment formula. In Spain, cash was used to pay 87% of the operations carried out in 2016 (the year analyzed in the study). This figure accounts for 68% of the total amount of the payments that were made.
The purpose of the ECB survey was to analyze the use of the different payment instruments in the euro zone. To do this, they used the data that they collected from its surveys in 19 countries. According to this work, cash is still the "king" in the euro zone, since it is the predominant payment method in the region. Cash was used for 79% of transactions. It accounted for 54% of the total amount paid in 2016. The difference between percentages is due to another conclusion of this study: cash is used more when it comes to the payment of small amounts.
Nonetheless, it should be noted that this trend is changing. According to official data provided by the Bank of Spain, the number of cash withdrawals at ATMs decreased at the interannual rate in the second and third quarter in 2019. Similarly, the amount of withdrawn money also fell. In particular, from July to September, Spaniards withdrew 1.17% less money than in 2018. These figures contrast with those recorded in operations with credit cards and other payment alternatives. This is the case of Bizum, which is a fintech company based on mobile payment that is driven jointly by different Spanish entities. Its use has grown considerably in the last year.
Cash in the rest the world
Although Spaniards still resist the change, there are many factors that point out to the gradual disappearance of cash. Among them, we can find the convenience and simplicity in the use of new payment methods, the legislative support, the design of new cryptocurrencies, etc. Our readers can check out some of our articles on this topic such as The cash farewell reason, Beats which replace passwords or Getting on the bus by means of our face. In them, we explain more deeply what this trend change consists of exactly. In turn, ECB’s study leads us to thinking that in other EU countries, citizens might already be leaving home with almost no cash in their pockets. This is the case in the Netherlands, where only 45% of transactions are made in cash and the total amount of purchases account for 27%. This country is followed by others such as France, with 68% and 28% respectively, and Luxembourg, with 64% and 30%.
If we look at what is happening in the rest of the world, the case of China and the Nordic countries soon attracts our attention. In these countries, cash is treated secondarily. In some cases, its usage is even anecdotal. For example, according to the 2017 Mobile Payment Usage in China Report, which was carried out by Tencent and Ipsos, 14% of the Chinese might already live without cash. This fact is partly due to the popularization of biometric payments and the high penetration rate of digital payments in the country. On the other hand, in Sweden, Norway and Denmark, cash payments constitute a minimum percentage (in some of them, it only accounts for 1%). This fact is mainly due to the policies carried out in order to fight against tax evasion and money laundering.
Another case to note is that of the countries with a deep-rooted use of cash that are joining the battle against cash because of the large size of their black economy. Italy is one of them. Its idea: investing 3,000 million euros in bonuses and discounts for those who use the card instead cash when making their purchases. Greece is also combating cash with another proposal: fining those citizens who carry out more than 70% of cash transactions. Which one of these proposals will be more effective? Positive or negative reinforcement?
The breathtaking advance of technology in economy and society is fostering the essential need to work from a new approach in the financial sector. The CEU IAM Business School offers an Advanced Programme in Digital Economy, FINTECH and Intelligent Society (online) which is aimed at providing its students with the knowledge and skills that are necessary to acquire a global vision on the digital transformation process regarding the different economic actors and their environment. Only in this way will they be able to develop business models which will be conveniently adapted to this technological change. Ask for further information!