The proportion of non-cash payments in Latvia has reached the highest level in history

The ratio of non-cash and cash payments in Latvia was 77% against 23% in February 2024, according to the latest, Spring 2024, “Payment Radar” of the Bank of Latvia. This is the highest proportion of non-cash payments in history.

“Payment radar” collects the latest information about the money usage habits of Latvian citizens, businessmen and society in general, using the results of a population survey conducted by the market and social research agency SIA “Latvijas Fakti”.

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“Payment radar” is published every six months and is available on the website of the Bank of Latvia. The central measurement of the report is the development and interaction of the non-cash and cash payment ratio (as of February 2024), complemented by more detailed numerical information and expert commentary.

Non-cash to cash ratio

Compared to August 2023, in February 2024, the use of cashless money has increased. Half a year ago, the ratio of non-cash to cash payments was 73% to 27% (a year ago, in February 2023, it was 67% to 33%). In February 2024, the average number of payments made by one resident per week was 17.1 (13.8 in August 2023, and 14.3 in February 2023), i.e. see 13.1 non-cash payment and 4 cash payments.

Modern technologies in the field of payments

Data from the “Payment Radar” show that modern technologies are gaining an increasing role in the field of payments. In February 2024, the use of instant payments grew significantly – 41% of respondents use them on a daily basis, and this is 10 percentage points more than half a year ago and 8 percentage points more than in February 2023. The use of smartphones in payments has also increased – up to 22.5% (19% in August 2023 and 16% in February 2023). At the same time, the use of contactless cards remained unchanged at the level of 68% during half a year (an increase of 5 percentage points compared to February 2023).

Director of SIA “Latvijas Fakti” Aigars Freimanis informs “Payment radar” that respondents with higher education and higher incomes use cashless payment options more and more actively. Despite a relatively lower income level, new payment technologies are actively used by survey participants aged 15-24.

“Perhaps not too fast, but payments by contactless card and mobile smartphone are growing steadily. It is interesting that both young people and consumers of retirement age are willing to pay with a contactless card. Young people are more likely to pay with a smartphone, while the survey participants of retirement age are much more reserved. Perhaps the reticence of people of retirement age is due to the smartphones they own. They are often older models, they are not changed that often, and their technological capabilities are limited,” A. Freimanis comments on the situation.

Strengthening cash availability

The decline in the share of cash in payments is one of the reasons why the Bank of Latvia has developed and submitted to the Ministry of Finance a draft amendment to the Law on Credit Institutions. As Zita Zariņa, a member of the Council of the Bank of Latvia, informs “Payment Radar”, it is planned to supplement the Law on Credit Institutions with an article that defines the criteria (for example, the bank provides services related to payment accounts) for determining those credit institutions that are of significant importance in ensuring the availability of cash in Latvia and to which the obligation to ensure the compliance of the cash payment service provided to the customer with certain requirements is attributed. In the current market situation, the four largest banks in Latvia in terms of the number of customer payment accounts and the volume of domestic household deposits are recognized as important credit institutions, namely “Swedbank” AS, “SEB banka” AS, “Citadele banka” AS and the Latvian branch of Luminor Bank AS, which are also providers of critical financial services.

The Law on Credit Institutions will establish several requirements for the preservation of cash, for example, in relation to the main tool for providing cash disbursement services – ATMs, their geographical reach, operation and availability time, cash disbursement limits, etc. etc.

“We hope for the support of the responsible institution and the parliament in advancing these amendments. The role of cash alongside cashless remains very important, for example it still accounts for around a quarter of total payments and transfers. Cash is also an important element of economic security in cases of various crises,” emphasizes Z. Zariņa. “Latvijas Banka has acted so far and will continue to act so that people have options to choose between different types of money, each of which has its own advantages.”

Crypto assets are becoming more accessible

During the past six months, significant news has been expected in the crypto-asset markets, as Reinis Vecbaštiks, an expert in modern payments of the Bank of Latvia, writes in his commentary. On January 10 of this year, the US Securities and Exchange Commission approved 11 exchange-traded funds (ETFs) based on the most well-known crypto-asset, Bitcoin (BTC). ETFs are investment funds that are listed on the stock exchange and can consist of several asset classes such as stocks, bonds, currencies, commodities, etc. c.

The inclusion of cryptoassets in ETFs and coming to a “traditional” exchange will open up opportunities for a wider segment of the public to invest in BTC. Until now, acquiring crypto-assets was relatively complicated – it could be done in specialized exchanges or with the help of special digital wallets. The events of the last few months have contributed to rapid changes in the price of BTC, reaching historical records, but later the value retreated slightly.

“Current events in the world of cryptoassets indicate that we can expect significant fluctuations in value not only for BTC, but also for other cryptoassets, given the close interconnectedness of this market. Anyone who chooses to invest in crypto-assets must be aware of the risks associated with them and the various external factors that can affect the value of these assets,” emphasizes R. Vecbaštiks.

These developments are increasingly affecting the citizens of Latvia. The “Latvijas Faktu” survey of February 2024 shows that 94% of the population of Latvia have heard of crypto-assets (an increase of 9 percentage points during the year). During the year, the number of people who owned crypto-assets also increased from 4% to 7%.