Pandemic accelerates eurozone consumers’ move from cash

The pandemic sparked a sharp decline in the use of cash across the eurozone, as the amount consumers spent in person using cards overtook purchases with notes and coins for the first time.

The European Central Bank said card payments rose to 46 per cent of face-to-face transactions by value, up from 43 per cent three years ago, while the use of cash slipped from 47 per cent to 42 per cent. 

The study also found payments made using mobile phones tripled to 10 per cent of person-to-person payments over the past three years, while online payments for buying food or daily supplies from supermarkets and restaurants also rose at a similar rate to 17 per cent. 

The findings — based on a poll of 39,765 people — indicate the coronavirus lockdowns imposed across Europe accelerated the long-running trend for consumers to use cash less, even as some countries like Italy are seeking to protect transactions using notes and coins.

However, hoarding cash reserves grew in popularity, with 37 per cent of consumers stashing banknotes at home, up from 34 per cent three years ago. The ECB, which has imposed negative rates on eurozone banks since 2014, said the trend may reflect the uncertainty caused by the pandemic.

Cash was still the dominant payment method by number of transactions, although it dropped from 72 per cent in 2019 to 59 per cent this year. Cash usage for in-person payments ranges from 77 per cent of transactions in Malta to 19 per cent in Finland.

Just over half of consumers said they had not changed how often they used cash since the pandemic hit. But 31 per cent said they were using cash less often, while 14 per cent said they were using it more. 

The main reason people gave for using cash less often was that paying electronically had become more convenient. Many also said they were heeding official advice to avoid cash payments. A quarter cited the risk of catching Covid-19 from handling cash, despite this risk being “shown to be mostly unfounded in recent microbiological studies”, the ECB said.

There were also signs of people’s attachment to cash continuing to wane. Six out of 10 consumers said it was fairly important or very important to have the option to pay in cash. That was down from 65 per cent in 2019.

Italy’s rightwing government this week scrapped plans to allow local merchants to refuse digital payments for transactions under €60, averting a potential showdown with Brussels on the use of cash. But Rome is pressing ahead with plans to raise the legal limit on cash transactions from €2,000 to €5,000, sparking fears it could enable more tax evasion.

Cash is the preferred payment instrument for only 18 per cent of Italians surveyed by the ECB, which is higher than 7 per cent in Finland, but below the eurozone average of 22 per cent. Austria has the highest preference for cash at 45 per cent, followed by Germany at 30 per cent.

The ECB plans to decide in October 2023 whether to press ahead with plans to launch a digital euro, which it has said will provide a new way for people to access central bank-backed money in a digital form. 

“Our commitment to cash and our ongoing work on a digital euro aims to ensure that paying with public money is always an option,” said ECB executive board member Fabio Panetta on Tuesday.

Crypto assets such as bitcoin are owned by only 4 per cent of consumers in the euro area and over two-thirds of these said they used them for investment rather than payment, the ECB said.

The survey was carried out in late 2021 and spring 2022. The next survey is due to be published in 2024.