Published: 29.09.2021

Payment habits have undergone substantial changes owing to the Covid-19 pandemic, and the "Payment Radar" of Latvijas Banka also suggests that this is a long-term rather than a short-term phenomenon.

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 (https://www.bank.lv/en/tasks/payment-systems/payment-radar). The central measurement of the overview supplemented by more detailed numerical information and experts' commentaries concerns development of the proportion and interaction between non-cash and cash payments (as at August 2021).

The "Payment Radar" employs the results of the population survey carried out by a market and social research agency SIA Latvijas Fakti. August saw an increase in non-cash and cash payments when the average number of payments per capita in Latvia within a week reached the level observed before the crisis caused by the Covid-19 pandemic, i.e. 13.9 payments per week (growth by 2.6 compared to February 2021). Non-cash settlement volumes have edged up (on average, 9.7 payments per week; moreover, each survey shows that the share of the population not using non-cash settlement is decreasing), and the frequency of cash payments has also taken an upward trend (on average 4.2 payments per capita a week).

According to sociologists, non-cash payments have taken root in payment and shopping habits of a weighty proportion of the public, i.e. people have gained not only the necessary skills and competences but also sufficient experience and the sense of security to be aware of and assess the advantages offered by distant payments and never return to the common practices of the past. At the same time, the number of cash payments has increased driven by the recovery of the economic activity and due to seasonal factors; moreover, cash has even strengthened its position.

Latvijas Banka emphasises that one of its tasks is to provide choice to the public, i.e. to use the most user-friendly, fastest and preferred type of money for making payments. Active work is now under way to this end: the availability of cash is being strengthened, an innovative non-cash payment infrastructure is being developed and a project for a new form of money – the digital euro – has been launched.

The latest "Payment Radar" of autumn 2021 shows that:

– the proportion of cash and non-cash settlement executed per capita in Latvia constitutes 30% and 70% respectively (27% and 73% respectively in February 2021);

the use and share of instant payments in interbank payments continue to follow an upward path. In the first half of 2021, the volume and value of instant payments made between banks in the electronic clearing system of Latvijas Banka were 8.08 million and 2.21 billion euro respectively (by comparison, the volume and value of instant payments made in the second half of 2020 were 6.76 million and 1.49 billion euro respectively). The share of instant payments increased approximately to 23%;

Luminor Bank AS and the Treasury will already start offering instant payments in the near future, and it will then be possible to consider that all customers of Latvian credit institutions have access to such modern and innovative payments;

– the use of instant links also continues to grow, and it exceeded the threshold of 500 000 instant links this summer. Latvijas Banka provides this opportunity not only for customers of Latvian credit institutions but also for those of the Estonian ones;

– the next step is the instant payment request service, which will make the payment process even more user-friendly, following a gradual introduction of the service in Latvia at an interbank level in 2022.

public satisfaction with the availability of cash has improved. In August 2021, 82% of Latvia's population (4 percentage points higher than in February 2021) were satisfied with the opportunities to withdraw cash from their bank accounts. At the initiative of Latvijas Banka, an agreement on preserving access to cash across Latvia has been reached with the leading representatives of the financial sector;

almost one third (29%) of Latvia's population has heard about the potential introduction of the digital euro in the future. It is expected that the share of those informed about the introduction of the digital euro will increase significantly in the coming years, since a historical decision on commencing the investigation phase of the digital euro project was taken by the Governing Council of the European Central Bank (ECB) on 14 July 2021. This implies that a new form of money – the digital euro – will see the light of day in the euro area (including Latvia) in a foreseeable future;

the number of people who believe that low denomination coins – 1 cent and 2 cent coins – should be withdrawn from circulation has stabilised (this view was expressed by 43% of the respondents in August 2021, while this figure was 46% in February 2021 and 43% in August 2020);

– scientists have confirmed that the risk of infection with Covid-19 from euro banknotes and coins is very low, and in real life situations there is actually no such risk.

Aigars Freimanis, Director of SIA Latvijas Fakti, Zita Zariņa, Member of the Council of Latvijas Banka, Harijs Ozols, Head of Information Systems Department and ZibLab++ of Latvijas Banka 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.

"Payment choices are measured twice a year – in February and August. Traditionally, the measurements performed in August display higher consumer activity, including an increase in the share of cash payments. This could be associated with consumer purchasing habits relating to seasonal food products, since summer is the period when people buy seasonal vegetables, mushrooms and fruit in the market or directly from local suppliers more frequently than usual. This may also be attributed to active exploring of the opportunities offered by tourism (particularly domestic rural tourism during the pandemic) and the related services. The above factors are typical examples of cash transactions," Aigars Freimanis comments on the situation. "Another dimension of the analysis is the intensity of the Covid-19 pandemic during the measurement period and the pandemic-induced changes to people's payment habits. The Covid-19 pandemic restrictions have had significant effects on consumers' overall shopping activity, as well as their habits and ways of shopping. During the restriction period, households reduced the total number of purchases and increased the share of online shopping and payments.

"Someone who does not work daily in the financial area can feel overwhelmed by these terms: cash, non-cash money held on accounts at commercial banks, non-cash money that replicates the features of cash in instant payments; the digital euro... The central bank digital currency is one of the most recent types of money, which still has to acquire a specific form of digital identity and solidify its position among the various types of money", emphasises Zita Zariņa. "The third type of money – the digital euro – will see the light of day in the euro area (including Latvia) in a foreseeable future. The matter raised by the public is whether this decision means the abandonment of cash. The answer is no, the digital euro will not replace any of the existing types of money (cash and non-cash money). It will complement the choices provided to businesses and the population in terms of payments and other activities carried out in the fields of finance and entrepreneurship. It will be the evolution of money!"

This commitment by Latvijas Banka has been confirmed by the Memorandum of Cooperation on Ensuring Access to Cash for Residents of Latvia signed with the leading representatives of the financial sector (Finance Latvia Association, Swedbank AS, AS SEB banka, the Latvian branch of Luminor Bank AS and AS Citadele banka).


"What are the practical implications? In fact, banks have committed themselves to preserving the existing ATM network (since ATMs play a major role in providing cash) and taking other measures relating to cash availability, e.g. to ensure proper access to ATMs often located in the premises of shops or other indoor spaces; to facilitate, whenever possible, alternative types of cash withdrawal, e.g. cashback," explains Zita Zariņa. "Our determination is strong – cash will remain a significant payment and savings instrument, and we will respect people's choices in relation to money matters. According to the sociological survey, only 2% of the population does not use cash. In other words, our cash-related decisions affect 98% of the population, which is the absolute majority."

Harijs Ozols highlights the intentions of Latvijas Banka to further develop the already innovative payment infrastructure: "The complete set of instant solutions (instant payments, instant links and instant payment requests) will provide unlimited opportunities for innovative payment services at an interbank level in all areas: highly user-friendly payments between individuals, bill payments, e-commerce and trade, including possibilities to develop these innovative solutions further and employ them not only between credit institutions but also between fintech companies. Latvijas Banka not only provides the necessary infrastructure but also invites fintech companies and businesses representing other sectors to benefit from the support offered within the framework of the innovative payment laboratory ZibLab++ for the development of specific innovative payment services. Our common objective is to become a frontrunner in Europe in the field of innovative and modern payments."

"The central banks pay particular attention to the aspect of security in cash circulation, including cash availability and the avoidance of risks to the public arising from the use of cash. This subject became particularly important in the context of the Covid-19 pandemic. At the onset of the pandemic, the public's anxiety over the assumption that the virus can be passed via various surfaces was mounting. Currently, these concerns have been entirely removed, since a joint study carried out by a group of scientists from Ruhr University Bochum and ECB experts (published in July this year) concludes that the risk of euro banknotes and coins as a source of infection is very low," indicates Ģirts Jansons. "Latvijas Banka, like the ECB and other euro area national central banks, will also continue to consider all aspects relating to safe use of cash. The availability of cash is a key element of economic security, and Latvijas Banka will make sure that people's wallets contain high quality and clean banknotes and coins."

The sociological survey data and full-length expert commentaries are available at https://www.bank.lv/en/tasks/payment-systems/payment-radar.