The coronavirus pandemic has left Italy’s economy in a bad state, with the latest predictions foreseeing a -9% in GDP in 2020. At the same time, the online economy has limited the fall, leading to a +15% in the use of contactless payments and +80% of mobile payments compared to 2019. For the first time, Italy’s historic resistance to electronic transactions might be at a turning point. This is one of the reasons behind the country’s government decision to draft a plan in the direction of a ‘cashless society’, which is also meant to counter undeclared economic activity and tax evasion – a phenomenon that in Italy is worth 12% of the country’s GDP.
Even before the pandemic, Italy was not in good shape: it is at the 24th place out of 27 countries in the EU for number of digital payments, while about 80% of all transactions are still made in cash. Now, COVID-19 has provided a big push in the direction of an enhanced use of electronic money, also because it allows no contact with objects (currently for payments up to €25 ($29) there is no need to insert a pin code) and is therefore perceived as safer.
While consumptions levels in the country have generally decreased in the first semester of 2020 (-27% in April, now recovering by 0.8% increase in August), at the same time the number of digital payments has boomed, reaching €31.4 billion ($37 billion) with contactless cards and €1.3 billion ($1.5 billion) with smartphone payments, according to the Innovative Payments Observatory at Milan’s technical university Politecnico. In total, the volume of all card transactions in the country is worth €118.3 billion ($139 billion).
In order to capitalize on these results and push more towards electronic payments, the Italian government is about to implement a series of measures: the first novelty, called ‘cashback’ will allow customers to be refunded of 10% of all payment card transactions, up to a maximum of €1,500 ($1,700) per person every semester and €3,000 ($3,500) a year, until 2022. There is also a ‘supercashback’ prize of €3,000 ($3,500) for 100,000 citizens who will have used e-payments the most. Moreover, starting from January 2021, customers and retailers using electronic money in physical stores will be allowed to participate in a lottery with prizes between €5,000 ($5,900) and €5 million ($5.9 million), for a total of €300 million ($354 million).
“Sanctions alone cannot lead to a change in behavior, while now the effort is to try to find measures that allow both consumers and retailers to pay with a card”, said Ivano Asaro, director of the Innovative Payments Observatory.
According to a study by the Bank of Italy, the public cost to sustain the use of cash in the country is worth €15 billion ($17 billion), about 1% of GDP. This is why reducing use of paper money is essential in the government’s mind. Part of the strategy is also to