Italy: the “cash” culture

Italy: the “cash” culture

[quote]Ludovic Esteves, Sales Manager Payment Methods Limonetik[/quote]

For most people, Italy means fashion, good food, sunshine and beautiful beaches… But did you know that Italy is also the country of…cash?

Italian people are attached to their cash. On average, they keep 65 euros in their pockets, the highest for all European countries, just before the British (52 euros) and the Spanish (49 euros).

There are some disadvantages for the Italian economy. The first of them is the cost of cash management, which is huge: 10 billion euros, which are shared among the banking system and companies. The risk of hold-ups is greater and cash in hand payments are more difficult to control by the fiscal services.

To find a solution to these difficulties, in 2013 the Italian government imposed an upper threshold of 1000 euros for cash transactions.

If cash is a real culture in Italy, this is not the case for cards.

According to the European Central Bank, in 2010, on average, each Italian made 66 payments by card, compared with a European average of 176. The European Payments Council cite that in 2008 only 60% of Italians owned a credit card.

Why is Italy so late concerning the credit card?

The relative absence of credit cards may not be attributed to a lack of chip and PIN machines in Italian shops (in fact similar to the European average). In fact, although not strictly enforced, a law exists since the 30th June 2014, which obliges retailers to own chip and PIN machines. The reflex of paying by cash is quite simply an old habit in Italy. They generally use credit cards or cheques for significant sums of money. The Osservatorio delle Carte di Credito Assofin (Credit card observatory) reveals that such transactions are rarely below 20 or 30 euros. For purchases of between 30 and 100 euros, an Italian will pay three times out of four by cash (*). The average in Europe is hardly more than one time out of two. In Italy, if you want to pay your coffee by credit card, the waitress will look at you strangely. The director of the financial consultancy Super Money, Paolo Sansone, explains on his website that Italians also feel that when they pay by card they are not able to manage how much they spend because the money is dematerialised. They need to touch the money. Another reason for the “cash culture” is the fear of being hacked… especially for the payments on Internet.Most of Italians consumers lack confidence regarding the security of online credit card purchases.

To protect themselves from this fear, many Italians buy prepaid cards, for example, the Postpay card offered by the Italian Post Office (Poste Italiane). Such cards provide a feeling of security and remove the possibility of having one’s bank account hacked. You just have to charge the card with the sum you wish and then pay on Internet. Poste Italiane is not the only establishment to propose this method of payment, more and more banks do the same. In 2007, 5.8 billion prepaid cards were in use in Italy and have proved especially popular amongst young people. Indeed, such cards are found in the wallets of 63% of Italians under the age of 24 years.

To sum up, Italians have an unusual relationship with the credit card. They don’t trust its use on Internet, they don’t use it for shopping and they often have a lot of cash in their pockets.