Published: 24.09.2020

According to the September edition of the "Payment Radar" of Latvijas Banka, the spread of the coronavirus COVID-19 and the related restrictive measures concerning people's daily lives significantly affected payment habits in Latvia over the last half of the year.  The total volume of non-cash payments edged down for the first time. At the same time, the share of non-cash payments in the total volume of payments is gradually increasing.

The "Payment Radar" contains the latest information on money usage habits of Latvia's households, businesses and the public at large. The "Payment Radar" is published semi-annually and available on Latvijas Banka's website ( Development of the proportion and interaction between non-cash and cash payments (as at August 2020) is the central measurement of the overview supplemented by more detailed numerical information and experts' commentaries.

The latest edition of the "Payment Radar" suggests the following:

– the share of non-cash payments in the total volume of payments is gradually picking up; the proportion of cash and non-cash payments made by one inhabitant of Latvia constitutes 32% and 68% respectively (in February 2020 – 36% and 64% respectively);

– both the popularity of instant payments and the use of instant links have followed an upward path; 20% of instant payment users made instant payments by indicating the payee's mobile phone number only in August 2020 (11% in February 2020), but 46% of the population knew about this service (30% in February 2020).

– the number of registered instant links has exceeded 235 thousand, and this service has been provided not only to the leading banks of Latvia but also to Estonian commercial banks via Latvijas Banka's infrastructure;

the number of people who take the view that low denomination coins – 1 cent and 2 cents – should be withdrawn from circulation has risen (43% of the surveyed population expressed such a view in August 2020 vis-à-vis 27% in February 2020); the number of people who believe that 1 cent and 2 cent coins should remain in circulation is still stable (49% in August and 46% in February);

the population is overall satisfied with the availability of cash (84% of those surveyed); however, a relatively high proportion (8%) of the respondents were somewhat dissatisfied or very dissatisfied with the opportunities to withdraw cash from their current accounts.

The "Payment Radar" employs the results of the population survey carried out by a market and social research agency SIA "LATVIJAS FAKTI" in August 2020. Aigars Freimanis, Director of SIA "LATVIJAS FAKTI", Deniss Fiļipovs, Head of the Payment Systems Policy Division of Latvijas Banka, Harijs Ozols, Latvijas Banka's Innovative Payment Services Manager and Ģirts Jansons, Deputy Head of the Cash Department of Latvijas Banka have commented on the recent trends in the development of non-cash and cash use.

"According to the August survey, the share of those who have made payments using a contactless card has increased more than three times year-on-year. More than half of the surveyed Latvia's population (53%) acknowledged in August that they make payments with a contactless card. In comparison with the survey conducted in February, the number of respondents paying with a smart phone and the number of Latvia's population making instant payments took an upward trend in August.

The results seem to be strongly facilitated by the COVID-19 pandemic; however, this impact should not be overestimated. It follows from the analysis of results obtained from surveys conducted over several years that the readiness of Latvia's population to use modern technological tools in payments is quite high, people trust technologies and consequently also the institutions that guarantee security of these technologies. Therefore, the risks presented by the coronavirus COVID-19 could be an additional factor affecting people's behaviour; however, this impact should not be exaggerated. When assessing the impact of the COVID-19 pandemic on life in the long run, a major part of the respondents remain optimistic and believe that the pandemic will have no long-term consequences," stresses Aigars Freimanis.

"The first half of the year has been defined by the Covid-19 pandemic. It has affected virtually all aspects of our daily life, and payments are no exception. For the first time, the total volume of payments recorded a decrease instead of following an upward trend evident over the most recent years.

For the first time, the total volume of payments recorded a decrease instead of following an upward trend evident over the most recent years. In the first half of 2020, the card payments which are the most popular among the population dropped by 6.1% in the number of transactions as compared to the second half of 2019. At the same time, the credit transfers dominating in terms of volume decreased significantly: with the economic activity contracting sharply, the total volume of payments dropped by 14.8% in the first half of the year in comparison with the second half of 2019.

Undeniably, the decline has been driven by a considerable slowdown in the economic growth resulting from the Covid-19 pandemic containment measures, but also the surveys and the payment data analysis provide evidence about the changes in the payment behaviour of the public. In the express survey of the social media users conducted recently by Latvijas Banka, less than half of the respondents clearly stated that overall, the Covid-19 pandemic had not affected their spending habits. Almost one-third of the respondents noted that they shop less frequently, whereas another one-third of the respondents reported changes in their spending habits, pointing to a more active use of payment cards and the use of the Internet for remote purchases.

With the impact of the COVID-19 pandemic weakening and the situation normalising, the growth in the volume of non-cash payments is expected to resume. However, the developments of the most recent months have contributed to changes in the spending habits of the population. This should be borne in mind by both the non-cash payment service providers to make their services more attractive, convenient and safer for consumers and the provider of the payment infrastructure – Latvijas Banka," Deniss Fiļipovs points out.

"Latvijas Banka does not intend to rest on its laurels since instant payments and the Proxy Registry "Instant Links" allow much better provision of services to any person and company as well as give a major support to further development of innovative payment services. Businesses active in fintech, e-commerce, trade, the provision of services and other sectors have an opportunity to develop modern payment services via the state-of-the-art payment infrastructure provided by Latvijas Banka. Benefits are extended to businesses, the population, the financial sector and the public at large.

Currently, Latvijas Banka in cooperation with commercial banks and other players of the financial sector is working on the next important initiative – the introduction of instant payment requests at interbank level, including additional advantages provided by instant links. This initiative could be of particular interest to and useful for businesses. At the same time, it will enable making person-to-person payments in a more user-friendly and divergent way.

It has been envisaged that not only the payer's account number but also the mobile phone number or another unique identifier contained in the Proxy Registry "Instant Links" will suffice to send an instant payment request. This is the opportunity individuals could seize to "ask" those involved to pay for a joint gift or lunch, while businesses and public institutions will be able to send invoices for their direct approval (payment) without entering additional information, thus making this process more user-friendly, reducing the risk of errors and accelerating payment of invoices.

The introduction of instant payment requests will complete the next generation state-of-the-art payment infrastructure of Latvijas Banka intended for the development of innovative interbank payments to be widely used to facilitate creation of innovative payment services to be used between individuals, in e-commerce, trade, in person (e.g. for the provision of public services) and practically in any other field," stresses Harijs Ozols.

"There is an opinion that the role of cash is decreasing, and that cash is in danger of disappearing. I would not agree with that. Despite the progress in using non-cash payments, cash has a future as well.

First, there are many people who prefer cash payments and savings due to a variety of reasons. The share of cash payments in the total volume of payments is declining, but this happens on account of a steeper rise in the non-cash settlement volumes: at the same time, the volume of cash payments is also increasing, only at a slower pace. According to the estimates of the European Central Bank, the amount of euro cash in circulation is constantly growing (the value of banknotes has grown from approximately 225 billion euro in January 2002 to 1.38 trillion euro in July 2020). Cash in circulation in the euro area has recorded an annual average of 5% within the last five years. Moreover, the number of banknotes and coins of all denominations is actually rising, and this is a sign of an increased use of cash both in daily transactions (low denomination banknotes and coins that are used for daily purchases) and for saving purposes (high denomination banknotes and coins).

Second, diversification plays a significant role in ensuring a balanced cash and non-cash use. This is also a matter of security, as we experienced it, for example, on 9 June 2020 when a loss of power supply was reported in a large part of Riga for a relatively long time. As a result, non-cash payments were disrupted and people could not access the internet bank services, etc. during this time. Let us not forget about the risks existing nowadays, for example, the cybersecurity issues. It would be equally painful to lose your cash reserves if your home safe has been cracked and the electronic money in your bank account if a fraudster has stolen it. Latvijas Banka's annual economic conference to be held on 25 September will also discuss the security aspects of cash and non-cash," emphasises Ģirts Jansons.

For more extensive expert commentaries, see

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