• CE Financial Observer

Cash isn’t going anywhere anytime soon

CEFO Oko na gospodarkę Gotówka szybko nie zniknie jamnik

According to a study conducted by the ECB, nearly 80 per cent of transactions in the Eurozone are carried out in cash, despite the rapid development of electronic payments.

Our knowledge about the number and value of cash transactions is only an estimate. The European Central Bank (ECB) set out to examine the scale and ways of using cash more closely, and in the second half of 2015 and 2016 it conducted a survey in which questioned 25 thousand respondents in the Eurozone countries about their payment preferences. This is the first attempt to check whether cash is in retreat in the Eurozone since 2008. The results of the study published in November 2017 show, that in the Eurozone 78.8 per cent of the total number of transactions are cash transactions. Approximately 19.1 per cent of payment transactions are carried out with the use of cards. In terms of value, cash is used in 53.8 per cent of transactions.

Cash is primarily preferred in the countries of Southern Europe, with Malta taking the lead with only 8 non-cash transactions out of 100 payments. The total value share of cash transactions in Malta is 74 per cent. The share of cash in the total number of transactions well exceeds 80 per cent also in Greece and Cyprus (88 per cent each), Spain (87 per cent), Italy (86 per cent), and – which may come as a surprise – Austria (85 per cent). The threshold of four-fifths of all transactions is also achieved by Portugal (81 per cent), as well as Slovenia and Germany (80 per cent each).

Greece is the Eurozone leader in the share of cash operations in terms of transaction value (75 per cent). The countries of Northern Europe are at the opposite side. The lowest share of cash transactions in terms of their number is recorded in the Netherlands (45 per cent), and in terms of value – in Finland (54 per cent).

More thorough scientific research indicates that cash dominates primarily in everyday small payments. The present survey confirms the suspicions of researchers. One third of payments do not exceed the amount of EUR5, and 65 per cent reach a maximum of EUR15. Only 2 cash transactions out of 100 have a value exceeding EUR100. In the Eurozone the average value of cash payments is EUR12.8, and EUR36.9 in the case of card payments. Cash is primarily used to pay for small purchases made on streets (newspapers, flowers, snacks, etc.), in restaurants, bars and cafes, whereas cards are usually used in stores with durable goods and at gas stations, although in the latter the share of cash payments is higher and reaches 46 per cent .

The results of the ECB’s survey provide information on the way in which we use cash. As it turns out, cash is still popular not only for payments, but also for hoarding purposes. This is probably supported by the low level of interest rates. The study shows that 24 per cent of respondents hold cash reserves outside of banks.

Yet, it is difficult to find any regularities in regional preferences. The share of people holding their reserves in cash accounts for 40 per cent of residents of Slovakia and 37 per cent of inhabitants of Lithuania – two countries that have not experienced a real crisis in recent years. And crises are precisely the type of event that encourages people to keep their money at home. Meanwhile, in Greece, which suffered through a deep banking crisis and where there were problems with withdrawals from ATMs, only 22 per cent of residents admit to holding cash reserves.

The amounts kept „just in case” usually aren’t large. The ECB’s study shows that 23 per cent of those who admit to keep cash out of the bank for prudential reasons do not have more than EUR100 at their disposal. In the case of 22 per cent of respondents the value of hoarded cash is between EUR101-250, while in the case of 19 per cent of people it ranges between EUR251-500. Only 9 per cent of the respondents declare that these amounts range from EUR1,001-5,000, and only in 2 cases out of a hundred such cash reserves exceed EUR5,000.

The accumulation of larger amounts (over EUR1,000) at home and even in one’s wallet is the most widespread in Slovenia (23 per cent of respondents) and in Lithuania (20 per cent ), as well as in Greece (19 per cent ) and in Austria (18 per cent ). It is the least common in the Netherlands and Cyprus (4 per cent each).

Also the popularity of large-denomination – EUR200 and EUR500 banknotes should be highlighted. Some 19 per cent of the Eurozone consumers surveyed in the study declared having held such banknotes. In response to a similar question asked in 2008, but in a smaller number of countries, 25 per cent responded this way. The largest denominations of the EUR were the most frequently held in Slovenia, Luxembourg, Slovakia and Lithuania. They were the least frequently held in the Netherlands and France.

Outside the Eurozone and outside the European Union, cash still holds a strong position in payment transactions and as a way of accumulating savings. The only exception is Sweden, where the share of SEK in cash reaches 1.4 per cent of the country’s GDP, and many branches of commercial banks no longer conduct cash operations. Sweden may be the first country to get rid of cash entirely.

However, information derived from other countries are different. At the end of 2016, the Reserve Bank of Australia published an assessment of the extent of using cash, which shows that its share in the number of transactions is falling, but the change is slow. For example, in the United Kingdom, the percentage of cash transactions decreased from 64 per cent in 2005 to 45 per cent in 2015. In the aforementioned Sweden, it decreased from 39 per cent in 2010 to 15 per cent in 2015. In Canada it fell – in terms of the number of transactions – from 54 per cent in 2009 to 44 per cent in 2013, but in terms of value, it remained at the same level of 23 per cent. In Australia the number of cash transactions decreased from 62 per cent in 2010 to 47 per cent in 2013.

On the other hand, the KPMG report, published in August 2016, on the future of cash transactions in Singapore shows that even in a such technologically advanced country, 60 per cent of payments are still carried out in cash.

The situation in Poland is similar. It is difficult to obtain hard data, but a high share of cash in the total of transactions is supported by various indirect evidence, including the high average annual growth in the value of cash in circulation, reaching over a dozen per cent in the years 2013-2016. In 2016 alone it reached nearly 15 per cent , but over the last four quarters (from October 2016 to September 2017) this rate of growth decreased to 8.4 per cent .

According to the Ministry of Development, the estimated number of non-cash payments in Poland accounts for approx. 30 per cent of all payments. This could mean that 70 per cent of transactions are still carried out in cash. The survey carried out in autumn 2016 by Poland’s central bank NBP and the comparative analysis of daily payments included in the results indicate, that cash is still the most often used in transactions (53.92 per cent), although its share in the value of transactions is smaller and amounts to 40.66 per cent.

In Poland cash is the most often used in payments for household help (95.6 per cent in terms of value of transactions), payments related to the use of motor vehicles (53.7 per cent ), and for educational purposes (52.3 per cent ). The average share of cash in terms of value in the total expenditure amounts to 38.9 per cent, while the share of cards amounts to 46.5 per cent, and the share of other payment instruments is 14.6 per cent. The share of cash in the diary payments in 2016 amounted 42.5 per cent by volume and 46.12 per cent by value.

Data from Poland cannot be directly compared to the results of the report on the use of cash in the Eurozone, but it is worth quoting the results of NBP’s study according to which in 2017 the average value of cash payments was PLN48.14, the median was PLN19.89, and the dominant was PLN10. The value of payments made with the use of cards is higher – the average was PLN69.28, the median – PLN40.25, and the dominant – PLN50.


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