COVID-19 & Cashless Payments – Has the Coronavirus Changed Europeans’ Love of Cash?

By Steffi Offe
Stefan Gehrold, Burkhard Balz, Peter Robejsek, Ivan Stefanec, Alexander von Schirmeister, Amrit Rescheneder, Neil McMillan, Georgis Kyrtsos;

On Wednesday, October 21st, SME Europe organized a Webinar titled “COVID-19 and Cashless Payments – Has the Coronavirus Changed Europeans’ Love of Cash?” to draw conclusions from the German debate, trends, and solutions in order to inform future European approaches.

Moderated by Stefan Gehrold ret MEP, Senator for SME Europe of the EPP, the Virtual Meeting hosted Ivan Stefanec MEP, IMCO Committee and President of SME Europe of the EPP;  Burkhard Balz ret. MEP, Member Executive Board Deutsche Bundesbank, Responsible for Payments and Settlement Systems, Economic Education at the Bundesbank University of Applied Science and International Central Bank Dialogue; Alexander von Schirmeister, Executive Vice-President of SumUp; Neil McMillan, Policy Director at EuroCommerce, Peter Robejsek, Head of Product Management Germany & Switzerland of Mastercard; Amrit Rescheneder, Head of European Affairs at Österreichische Sparkasse and Georgis Kyrtsos MEP, ECON Committee and Board Member of SME Europe to the EPP. 

Ivan Stefanec MEP opened the debate setting the scene that during the COVID-19 crisis people tend to pay more and more without cash. The same trend is visible, despite the country differences, across Europe. Cashless payment alternatives bring three major advantages, firstly the simplicity of financial transaction, secondly the better transparency and last but not least, higher economic clarification for SMEs in regard to security costs and the transport of cash. He stated the importance for SMEs of having a variety of payment choices and that the EU should not focus on one payment type but rather provide more choices especially as some countries “need better digital infrastructures”. 

Burkard Balz ret MEP, clearly expressed the consequences of the COVID-19 crisis for payments in terms of disruption. This year, the crisis has forced people to change their day to day habits and many activities people took for granted, has become impossible. “The public life as we knew, came to a complete hold”, which resulted in a dramatic economic down tern with widespread insolvencies and unemployment. Nevertheless, the pandemic is a catalyser for digital transformation, and thus, innovation accelerator for the entire economy. He sees the shift towards cashless payments was impacted through the corona measures of preventing the transmission. Although, it is known that bank notes and coins are not likely to spread the virus, the costumers´ wish is strong to avoid the risk. 

Thus, many retails have started to offer more and more cashless payment alternatives, like contactless payments. He underlined this by a study conducted this year, which shows that 50% of all Girocard transactions in the first quarter of 2020 were contactless. He furthermore emphasised, that the debate on central bank digital currency (CBDC) like the digital euro has just started and that many stakeholders have now begun to understand which challenges have to be overcome. “The Deutsche Bundesbank urges the market to develop a Pan-European payment solution with full deployment of new instant payment infrastructure as introducing CBDC is rather a political stand than a technical decision.

Alexander von Schrimeister has also seen the increasing trend of cashless payments throughout different European countries with a further accelerating trend. Especially when the economy was reopened after the lockdown, the interest in card payment transaction has been increased. Even the average amount has declined significantly which means smaller amounts were paid by using cards.  “COVID has not necessarily generated a revolution on the payment landscape but it is significantly accelerating trends which wold have not be seen in Europe for quite a while.”

Neil McMillan stated that the trend of cashless payments will further increase, although cash is cheaper than cashless alternatives. It is important to provide alternative payment methods. “It would be great, if we could get as quick as possible an instant payment system at European level as an alternative to card payments”, especially as he also sees the acceleration in online sales also for uncommon goods like food. The debate on the digital Euro is interesting in his eyes, but the education about the mechanism behind remains important. He further explained that the only way to get new start-ups work in a market which is dominated by very large players is to regulate them. However, we need to ensure that this is not done on a commercial and unprofitable basis by the actions of half of the players already active on the market. 

Peter Robejsek pointed out  evidence shows that 90% of the participants in a study responded that the acceptance of card payments should be a regular service in the stores. He also sees the up- trend of contactless payments. “This is an example where the payment ecosystem came to together and reacted very fast to the pandemic in adjusting the contactless NFC limits.” He highlighted that the digital world became the new normal, as consumers today are used to it and simply will not reverse back. However, the costumer authentication component of PSD2 still leads to issues to a large number of businesses in Germany regarding the implementation. “The question should not be: have the Germans changed their love to cash temporarily, but rather how to ensure that Europeans can pay in the way they most prefer in any given moment?”, he stressed. Moreover, he stated that the debate of whether electronic payments should be possible everywhere, is slightly absurd, as in the intertest of all participants in the ecosystem the freedom of choice of which payment methods to use is the most important. 

Amrit Rescheneder sees the interest in cash payments is very high in Austria, although the use of cash has declined, too. However, she stressed the fact that on the unlucky day of Friday the 13th (March) there was an increase in cash withdrawals which was 4 times higher than on any normal Friday. For her, the reason is that even in times of crisis, people want to have their cash. However, a few days later the trend towards cashless payments rose due to 2 facts. Firstly, through the fear of contagious cash, and secondly, through stocking up the limits of contactless payments to 50 Euro per transaction. She also highlighted the importance of an instant payment system on a European level and said that with a European payment scheme, cashless paymenst would become cheaper. However, “it is important that the bureaucratic and administrative burden is kept as low as possible”, as for SMEs it is challenging to not only offer digital solutions, but also to keep up with all the regulations. 

The closing remarks were hold by Georgis Kyrtsos MEP. He also described that the digital modern world is being accelerated by the pandemic and that china performs better than other major powers as they are closer to a cashless society than others. Moreover, he stated the situation in Greece and that they are moving towards a more cashless society. With a huge public debt which reaches the range of 200% of the GDP, the governments keep trying to increase tax revenues. “The only way to limit the tax evasion is to limit the use of cash”, he pointed out. However, it is important to understand that there is no definite solution as the situation is not stabilised, which impacts the economic or financial planning. He further stated that in Greece, for the first time in the last 10 to 15 years, the bank deposits are going up, hence saving money. Nevertheless, “the trend of digital transformation is a radiant future”, but we also need to ensure the freedom of choice.

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