Malta had highest percentage of cash payments in euro area before COVID-19 onset

Malta had the highest percentage of cash payments in the euro area in 2019, when compared to credit card and phone payments and bank transfers, despite a slight increase in non-cash payments across the bloc.

A Deutsche Bank report on payment choices in Europe in 2020 found that euro-area retail and corporate customers made more than 101 billion non-cash payments in 2020, a year hallmarked by the COVID-19 pandemic.

The restrictions of private, business and public life met with very different payment preferences and payment service offerings in the individual countries. In some cases, the preferences converged, in others the differences became more pronounced.

But while the number of non-cash payments rose again, it grew only by 3.7% (+3.6 billion transactions). More than half of this total (55%) was driven by a dynamic increase in Germany, which accounts for about one-quarter of aggregate euro-area payment transactions.

In Malta, around 89% of all transactions were cash payments, as opposed to merely 33% in the Netherlands, at the other end of the spectrum. Hot on Malta’s tails for the number of cash payments are Cyprus (83%), Spain (82%) and Italy (81%).

The small increase in the euro area was mainly due to card payments, which make up about half of all non-cash transactions. Their growth rate slumped to only 2.5%, down from double digits in the years before. This may mainly reflect the cutback in household consumption due to lockdowns and income losses during the pandemic. However, depending on the country and on the payment situation (i.e. at the till or online checkout), there were different or even opposing trends.

The bottom line is that payment habits at the till are converging: euro-area customers increasingly use cards – and this is also true for some countries where they (traditionally) prefer cash payments. At the same time, national differences seem to become more pronounced in online shopping. Depending on the country, either the use of cards or e-payment solutions increased.

The report found that at the point of sale (POS), i.e. in brick-and-mortar shops, the pandemic probably reduced traditional differences concerning the use of cash or cards. Customers in some countries with a strong preference for cash switched from cash to card payments to such an extent that card payments saw considerable growth despite the lockdown. This took place particularly in Germany and Spain, but also in Greece and Austria. In Italy, the number of POS card payments declined only slightly. By contrast, the Netherlands saw POS card payments drop significantly as shops were closed – after all, the Dutch rarely used cash already before the pandemic. Developments were similar in France where cash payments were only marginally more popular than card payments even before 2020.

At the same time, national differences in online shopping seem to have been reinforced as a result of rising internet purchases during the pandemic. According to surveys, customers prefer to use cards to pay for their online purchases in some countries such as France, Italy or Spain, whereas in others - including Germany and the Netherlands - they like to pay by bank transfers (purchase on account) or e-payment solutions.

The Deutsche Bank researchers expect the number of non-cash payments to increase considerably across the euro area in the post-pandemic period, as many consumers will have switched permanently from traditional cash to card payments. Moreover, once the pandemic-related restrictions on physical shopping and the hospitality sector are lifted, transactions in card-oriented countries are likely to jump.

It also remains to be seen to what extent European consumers will return to local brick-and-mortar shops instead of shopping on the internet. If online shopping retains its higher share in total retailing, card or e-payment solutions will gain further in importance, depending on the individual countries.

And if customers return to brick-and-mortar shopping, they will probably use less cash than before the pandemic. Right now, this mostly drives up the number of card payments.

In the future, mobile phone payments may gain in importance at the till, at the expense of cash and card payments. From 2026, another payment method might be used: the digital euro. It remains exciting to see which traditional and new payment methods customers will prefer.