Awareness of the benefits deriving from the use of cashless payment instruments is increasingly widespread, both internationally and among the business community and national decision-makers. As detailed in 2016 by the Community Cashless Society, the Italian system-country can derive multiple and important benefits from a greater diffusion of electronic payments:
1. La cost reduction associated with the use of cash, often difficult to perceive but with a significant impact on an economic and social level.
2. THEemergence of the shadow economy, given that countries with the highest use of cash-based payment instruments tend to suffer from high levels of tax evasion.
3. THEincrease in the consumption cycle, thanks to the stimulus role on consumption and economic activity.
4. La transaction security which, thanks to the investments made by operators in the sector, is set on high standards and is constantly improving.
5. Lo stimulus to innovation and digitization of the economy, thus enabling the creation and strengthening of a competitive digital payments chain.
Having a strongly cash-based economy represents a brake on the country's modernization and competitiveness and generates negative costs and externalities.
1) COST REDUCTION
Important direct and indirect costs are associated with cash. The "social costs" are connected to each payment instrument. In the case of Italy, the estimates made by the Bank of Italy (2012 on data referring to the year 2009), show that the total social cost deriving from the use of all payment instruments is equal to 15 billion euro (l 1% of national GDP, 260 euros in per capita terms). However, it is cash, the most widespread payment instrument in the country, that determines the highest costs: this instrument costs the country system about 10 billion euros per year (0,53% of GDP), equivalent to a burden of 133 Euros per inhabitant.
Furthermore, due to the characteristics and economic structure of the country, the benefits associated with the reduction of electronic payments would be greater for Italy than for other realities, precisely by virtue of the large margin for improvement deriving from investments aimed at the full development of cashless society and the breadth of the cost of cash for the country-system.
In this regard, it must be considered that the cost of cash in Italy is higher than the European average (where the social costs connected to this instrument are equal to 0,45% of GDP) and to that estimated by the central banks of Denmark, Estonia, Finland, Greece, Ireland, Latvia, the Netherlands, Portugal, Romania, Spain and Sweden, with the only exception being Hungary among the countries that participated in the econometric analysis.
In reverse, the cost of credit and debit cards it affects 0,04% and 0,07% of the Italian GDP and generates an annual per capita cost of 11 euros for credit cards and 18 euros for debit cards. The social cost is also lower compared to the average value per transaction: while that of cash is equal to 2%, that of credit cards is 1,95% and that of debit cards is 1,07%.
These are obvious costs, even if perceived as nil by consumers who use cash and by merchants who accept it: in the hypothesis of aligning themselves with the average incidence in the EU-28 of the costs of cash on GDP, thanks to the greater use of electronic payments, Italy could save up to 1,5 billion euros a year.
2) EMERGENCE OF THE BLACK ECONOMY
The greater diffusion of cash is accompanied by a higher share of shadow economy: a 10% annual increase in electronic transactions for at least 4 consecutive years could lead to a reduction of the underground economy of at least 5%. This is a very significant benefit, especially if one considers that the shadow economy in Italy is estimated at around 21% of GDP2, while – according to recent estimates3 – tax and social security evasion would amount to 111,6 billion Euros in 2014 (7% of the national GDP, up from the 108 billion Euros of 2012).
The same inverse relationship exists if we consider the VAT revenue shortfall, for which Italy is the negative leader among European countries, with lost revenue of 40,5 billion euros in 20144.
3) THE INCREASE OF CONSUMPTION
Cashless payments they also stimulate consumption and economic activity: the migration towards more efficient retail payment systems based on electronic platforms favors both consumption and commerce, and the economic system as a whole.
4) SAFETY
Electronic payments make a substantial contribution to transaction security. Cash, and more generally physical payment systems, are in fact associated with greater risks of theft and offences. For example, in Italy, the robberies reported during 2015 were almost 35.0005, while in the second half of 2016 alone the Bank of Italy recognized almost 75.000 counterfeit banknotes, with an increase of 2,8% compared to the first half of 2016.
In reverse, the incidence of fraud on payment card transactions is low (5,9 per 1.000 cards), also in relation to the other main European countries: an average of 14,9 for the Single Euro Payments Area (SEPA), 42,3 for France and 27,5 for the United Kingdom.
In 2015, with reference to cards issued in Italy, both the economic value (from 0,019% to 0,017%) and the number (from 0,013% to 0,011%) of unrecognized transactions (fraud) decreased with respect to the total of genuine payments through card6. In fact, the players in the supply chain have made important investments to increase the level of security of electronic transactions, complying with European standards in this sector and at the same time pursuing the maintenance or improvement of the user experience.
5) INNOVATION AND DIGITALIZATION
Finally, the development of online payments makes it possible to stimulate innovation and the innovative value chain linked to digital payments and the digital economy. The supply chain relating to electronic transactions in fact includes numerous players belonging to different sectors (from banking to physical and digital infrastructures, from payment schemes to fintech start-ups, from retail marketing to security).
From the innovations that arise within the payment chain originate technologies and business models from which the entire economic system benefits, as in the case of accessibility linked to mobile payments, the offer of value-added services, the development of bitcoins and blockchain technology (see the following box).
Again, innovation is driven by customer needs: security (development of solutions that make use of geolocation, biometric systems and cloud-computing), ease of use (solutions for paying for stops and contactless, P2P payment, etc.), financial awareness (apps and solutions for managing savings and collections, financial advisory services, real-time alerts, etc.), customer relationship management (couponing, promotions based on geolocation, etc.).
