Italy's Digital Divide: Cash versus Cards in a Land of Tradition

An impressive point-of-sale (POS) payment acceptance network

Italy boasts a high number of merchants, especially small and medium-sized enterprises (SMEs), who have installed POS devices to accept card payments (See Figure 1). It is not uncommon to find a merchant with multiple POS devices, a consequence of enthusiastic marketing by acquiring banks across the country. The POS network continues to grow especially because, since June 30th, 2022, merchants who do not accept cards could face possible penalties¹.

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Challenges in payment card usage  

Despite having a high concentration of POS devices, Italy lags in payment card usage at the POS relative to other European markets (See Figure 2).

Note: Data covers all types of consumer cards

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In 2022, approximately 67% of consumer payments were made with cash. However, the average transaction value (ATV) of card payments is higher than in countries such as France or the United Kingdom, indicating that payment cards are primarily used for higher-value transactions.

One of the reasons why cash continues to be used widely is that many merchants still prefer to accept cash payments, perceiving cash to be cheaper than cards. Unlike cards, there are no fees for accepting cash and merchants also benefit from immediate cash flow. But this perspective ignores the costs relating to cash management, security, and logistics, which can be significant. Another reason is that cash is not traceable and is preferred by merchants who aim to avoid paying taxes.

On the consumer side, Italy has fewer cards per million inhabitants compared to Germany, Spain and the United Kingdom, but its card penetration is comparable to that of France (See Figure 3). Nevertheless, France ranks in the top 3 for the number of card payments on the total transaction volumes (Figure 2).

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Italy’s low card usage can also be traced to consumer attitudes. Italians feel that holding and using cash is more prudent and provides greater privacy than electronic payments. According to the Bank of Italy, more than 36% of Italians consider cash a store value, storing it at home as a precautionary measure. This trend is particularly pronounced in the country's southern regions and among young people and students. There is also a sense of mistrust towards banks, which are perceived as not doing enough to promote the growth of local communities and support families, businesses, and young people. According to Forrester’s Financial Services Customer Trust Index, Italian banks rank among the least trusted in Europe. Indeed, 41% of Italians believe that their primary bank does not understand their needs or operate with transparency.

New trends changing the Italian payment landscape

Despite all this, payment card usage has been gradually increasing, with card payments going from 13% of the total consumer transaction volumes in 2019 to 26% in 2022. This growth can be attributed to several factors, including the Covid-19 pandemic and the increasing popularity of contactless payments. Alternative payment methods are also experiencing remarkable growth in the country. For example, in 2022, the Italian digital payment application Satispay achieved 18% growth in transaction volumes compared to the preceding year, processing €400 billion.

To promote card acceptance several organisations, including the Italian Banking Association (ABI), the Italian Association of Payment Service Providers (APSP), and various business associations, signed a memorandum of understanding (“Protocollo d’intesa”) on July 27th, 2023, which calls for more clarity of costs associated with electronic payment services. It suggests a standardised format that acquirers can follow to communicate their commercial offers in simple and clear terms. Another goal is to make electronic payments affordable for small businesses. Banks are encouraged to lower fees for small value transactions below €30 and offer incentives for transactions below €10 for a minimum of 9 months. Several acquirers, such as Intesa Sanpaolo, UniCredit and Banco BPM, have already begun implementing this.

While adherence to these guidelines is not mandatory, its introduction represents an important initiative to help merchants understand the cost implications and benefits of accepting card payments.

In conclusion, the recent trends and initiatives will give an important boost to payment card usage. However, a shift in the cultural mindset of both consumers and merchants is required to match the card usage rates seen in other countries such as France, Denmark, and the United Kingdom.

¹€30 + 4% of the transaction for which the merchant did not accept a card payment. This applies even to low-value transactions. For example, if a card payment of €10 is not accepted, the merchant could face a penalty of €30.40 (€30 + €0.40)

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