Cash and card payments are stagnating, the use of mobile devices is on the rise. In his last Study on cash usage habits 2023The Bank of Spain confirms that cash continues to be the most used means of payment by Spaniards in their daily lives in physical devices (65% use it daily), followed by cards (32%) and, at a greater distance, mobile devices, used daily in retail 10% of respondents.
The photo brings some background currents. Most notable is the significant progress, in relative terms, of mobile devices (phones and smartwatches) as a means of payment, increasing from 7% of daily usage in 2022 to 10% in 2023.
Age and level of education are determining factors in the use of payment methods
But when the analysis expands beyond their everyday use, a quarter of the population (24%) say they use mobile devices to make payments at physical facilities. This is a percentage that has clearly progressed compared to the 19% registered just a year ago, and which also has consequences.
These include operations through online payment platforms (PayPal, Bizum), where 21% of the population declares to have used one in 2023, compared to 16% in 2022. In many of these cases Hardware What makes this possible is mobile devices.
On the other hand, traditional payment systems such as cash or cards, despite their widespread implementation, see almost no change from year to year. The number of people who use cash for their daily payments thus increases from 64% in 2022 to 65% in 2023, while the daily use of cards remains unchanged at 32%.
Can population profiles be distinguished in preferences for certain payment systems? A report from the Spanish central bank deals with these profiles. The main findings are that the higher the age and the lower the level of education, the greater the use of cash, while the younger and more educated a person is, the greater the use of cards and mobile devices. By gender, the differences are imperceptible.
“Every non-cash purchase has a sanitizing power to facilitate it”
Martín Vivancos (EADA Business School)
In the case of mobile devices, their use as a daily form of payment by the population groups between 18 and 24 years old (26%) and between 25 and 34 years old (23%) is noteworthy. , replaces the use of cash, which is used daily for payments by only 48% of citizens aged 18 to 24 and 46% of citizens aged 25 to 34.
Cash is more of a “boomer”
In other words: cash is no longer the majority form of daily payment for residents under 35 in Spain. What future awaits traditional cash and cards, as the digital euro advances in the kitchen of the European Central Bank (ECB) and growth rates clearly favor these mobile payment systems and internet platforms?
Martín Vivancos, professor of marketing at EADA Business School, believes that “digitalization is unstoppable and new payment systems are emerging as a result, but there is one factor that has been the catalyst for this process: the pandemic.”
Cash remains the most used means of payment by Spaniards in physical establishments: 65% use it daily
“After the pandemic,” continues this professor of marketing, “we found many people who literally do not carry cash with them, because now the smallest things, even a bottle of water, are paid by card.”
Jordi Martínez, director of financial education at the Institut d’Estudis Financers (IEF), focuses on the generational problem: “There is a generational gap that is very clear when we find that one in four young people pay by mobile phone. .” The slight recovery in the use of cash in 2023 is due to the latest adjustments following the extraordinary measures taken during the pandemic.
How does choosing one or another payment method affect our consumer behavior? Martín Vivancos from EADA Business School is clear: “Any cashless purchase has a disinfectant power in its process. The concept pain (the pain) of making a purchase is not the same with cash as with a digitized system, and this disinhibition is an enabler of the purchase, coupled with the fact that the minimum amounts for card purchases are getting lower”.
“There is a movement that argues that using cash allows for greater privacy”
Jordi Martínez (IEF)
Jordi Martínez of the IEF agrees with this analysis: “When you pay with cash, you feel a loss of purchasing power, while when you pay with a card or mobile phone, you are not so aware of it, and therefore it is easier to “Fall into compulsive buying.”
“From the perspective of retailer -adds Martín Vivancos, from EADA- there are two variables: how you allocate the commission for the card and what level of rotation the use of this card gives you to your product. The answer is that retailer Contemporary already understands the impact of digital transformation on its business. Finally it retailer He’s an intermediary, just like the classic salesman who told you ‘I’ll write it for you’ so you can keep buying more. Now this retailer “He is currently looking for additional mechanisms that facilitate the purchasing process.”
A quarter of the population (24%) declares that they use a mobile device to pay in physical establishments, although on a daily basis it is 10%.
In this dynamic of encouraging these purchases, the capital issue comes into play, which is none other than the low level of basic personal finance knowledge we carry as a society. IEF’s Jordi Martínez reflects: “When it comes to cards, I’m worried about the funding system today. Credit cards are on the rise again, putting you at risk of falling behind on late payments.
Another problem is the use of cash for reasons of freedom and privacy, a phenomenon that is beginning to spread among some of those profiles that have such a level of financial literacy and that is why they choose to use it consciously in this form of payment.
“There is a movement – explains Jordi Martínez from the IEF – that advocates that the use of cash allows for a greater degree of privacy. But at the same time, we all carry our cell phones with us. “It’s a contradiction: people who don’t want to lose the right to cash payments, but at the same time be reachable by their mobile phone.”
“The ECB seeks to support mechanisms that earn card fees, with instant transfers in all use cases.”
Carlos Torme (ECB)
Long live cash
From AECOC – the Spanish Association of Manufacturers and Distributors, which brings together more than 33,000 companies with around 25% of Spain’s GDP – its Director of Market Development, Carlos Torme, processes data very similar to those from the Bank of Spain: « It is estimated that in 2023 will receive a five point higher share of mobile payments compared to the rest of digital media, from 18% to 23%, an increase of 26%.
That said, he is clear about the future: “Cash will never go away. None of the literature of the European Central Bank talks about this, and it is logical that this is the case, to protect certain vulnerable groups, the first of which are those who do not have access to banking services. In Spain alone, there are more than 600,000 people who do not have access to banking services.
As for cards, this expert emphasizes that “they are a very convenient payment system” that “as a concept I don’t think will disappear, even if it is affected by the digital euro and instant transfers like Bizum in peer to peer».
Only 46% of 25-34 year olds use cash daily: 54% already use digital systems every day
If one can doubt anything in this regard today, then it is the support of these cards. That is, the piece of plastic or metal that contains the NFC chip, with which most transactions are carried out today, at a time when the magnetic stripe is on the verge of extinction. Carlos Torme of AECOC explains: “Ultimately, when we pay with our mobile phone, we pay with a digitized card, but I don’t think the physical card will just disappear.”
In this case, Torme predicts that if one day the cards fall in Europe, it will be for different reasons. The most prominent of them, financial sovereignty. “The ECB – explains this expert on payment systems – is trying to promote mechanisms that gain a stake in the concept of cards, with immediate transfers in all cases of use.” In other words: Bizum not only for spreading the beer bill on the terrace, but also for buying bread.
“The account-to-account system will be very successful in Europe because Bizum was very successful”
Leyre Celdrán (AEFI)
The underlying reasons that lead the ECB to want to “develop its own European payment system as a wallet digital’, according to Carlos Torme, ‘is trying to fight, in terms of financial sovereignty, against the big card schemes (Visa, MasterCard and American Express), today all American’.
Leyre Celdrán, Commercial Director of AEFI (Spanish Fintech and Insurtech Association), shares the analysis: “Cash and card payments are completely established in society, and although there are other means such as mobile, it is still card payment because is integrated. There has to be something very disruptive to end one payment method or the other. “Card and cash payments are the two most used methods and will coexist for the next few years.”
Could instant transfers be the disruptive system that could change everything? This Fintech expert confirms that “Account-to-Account payments are an alternative method to cards and cash, and the European Commission is talking about instant payments as part of the European Union’s digital finance package.
In Spain alone, there are more than 600,000 people who do not have access to banking services
“One of the advantages it can have – continues Leyre Celdrán – is the fulfillment of contracts. In any case, when the EU starts proposing a rule, it is because there is a very important EU-wide interest behind it. The account-to-account system has a much larger market than now. Do we think it will be very successful? The answer is yes, because Bizum has been very successful, but it is only a Spanish system. If it is extended to the whole of the EU, we have another scale.
In this immediate future, Leyre Celdrán envisages a scenario in which “various payment methods will coexist” but where “cash will not disappear in the short term”.
“In the end – he concludes – sometimes it’s better for you to pay cash, others with a card, others account by account. We will see how the creation of the digital euro ends, and just the fact that the EU is investigating payment systems seems positive to us. But beyond that, I think everything starts with financial education: to know what you can spend on, you need to know what you have and what your debts are. “The fundamental problem is financial education.”