ECB study: Lithuanian residents have a liking to cash but would choose an alternative if they were free to choose
While less than half of Lithuanian residents prefer cash to other payment methods, in three cases out of four they pay at POS with cash, shows the survey conducted by the European Central Bank (ECB). The main reasons behind this frequent payment with cash in Lithuania are a lack of available alternative payment methods and income received in cash. Payments with cash are still highly popular in both Lithuania and most of the euro area countries.
Egidijus Paleckis, Head of the Policy, Issue and Control Division of the Cash Department
According to the ECB survey, in Lithuania and eighteen other euro area countries, 79 per cent of resident payments at POS are made with cash, 19 per cent – with payment cards, and 2 per cent – in other ways. This data contradicts the prevailing conviction that cash is already now being superseded by payment cards. Cash is more often used when people pay for low-value purchases that they soon forget about, whereas for higher-value, more remembered purchases they choose to pay in other ways. Residents in Southern Europe, Austria, Slovenia and Germany most often use cash for payments. In Ireland, Lithuania, Latvia and Slovakia cash is used somewhat less frequently. Finns, Estonians and the Duch use cash the least.
A lack of choice to use other payment methods contributes to the popularity of cash payments in Lithuania. Every fourth payment was made with cash, as it was the sole payment method possible. A lack of choice is particularly distinct at trading places on the street or at a market and within the services sector, where only in 22 and 34 per cent of cases respectively payment was possible not only with cash. Therefore people, not being sure whether they will be able to pay in other ways, supply themselves with cash in advance, and having it is one of the main reasons for payment in cash. In Lithuania, payment in cash is made mostly on the street or at markets, restaurants and cafés, as well as shops when purchasing day-to-day items, the least frequently – at hotels.
Nevertheless, the survey reveals that 44 per cent of Lithuanians, if they had a choice, would prefer payment with a payment card and only 40 per cent would choose cash. The major advantages of card payments specified by the respondents – it’s simple, quick and there’s no need to check if you have sufficient cash. Cash is preferred because, when making payments in cash, people clearly see their expenses; cash can be used for settlement at any place and quickly.
One more significant reason behind the frequency of payment in cash is the fact that almost every third resident in Lithuania receives a fourth of its regular income or above in cash. This share of income is received in cash by only every fifth Latvian and every tenth Estonian. Only Greeks, Slovaks and Cypriots receive income in cash more often than Lithuanians. In countries where the use of cash for payments is less prevalent, e.g. in the Netherlands, Finland and Luxembourg, particularly few residents receive income in cash.
Cash is mostly withdrawn from ATMs, which are easily available for most residents. The vast majority of Lithuanians claim that ATMs are easily available for them and only one-tenth of them – that they encounter difficulties in this respect. Moreover, as many as a third of Lithuanians believes that the structure of denominations at ATMs does not satisfy their needs and would welcome the possibility of receiving low denomination banknotes (€5 and €10).
Cash is also widely prevalent in Lithuania as a means of saving. As many as 37 per cent of Lithuanians have some cash savings at home or hold it in a bank’s safe, of which every fifth has set aside more than €1,000. In the euro area, only in Slovakia more residents hold their savings in cash, while in the whole of the euro area savings are accumulated in cash by every fourth.
A convenient alternative for cash – instant payments will be offered for consumers soon. This is the possibility to transfer funds within the same bank or to any other bank non-stop, day in and day out throughout the year – the money reaches the beneficiary’s account within a few seconds. Instant payments within the payment system CENTROlink of the Bank of Lithuania are available as of November 2017 and it will only depend on the preparation of the payment services provider how soon they will offer this service to consumers. As of November 2018, the Bank of Lithuania will integrate its system into the system being devised by the ECB and euro area central banks, which will allow executing instant payments in the whole of the euro area. Contactless and mobile technology based instant payment means (e.g. the smart phone) have a great potential for replacing cash payments among residents and when purchasing from small businesses.
The ECB survey was conducted in 17 euro area countries; a total of over 65 thousand residents were surveyed. More detailed information about the survey (in English) is available here.