Monetary Policy and the Economy Q1-Q2/22

Call for applications: Klaus Liebscher ­Economic Research Scholarship

Please e-mail applications to scholarship@oenb.at by the end of October 2022. Applicants will be notified of the jury’s decision by end-November 2022.

The Oesterreichische Nationalbank (OeNB) invites applications for the “Klaus ­Liebscher Economic Research Scholarship.” This scholarship program gives out­standing researchers the opportunity to contribute their expertise to the research activities of the OeNB’s Economic Analysis and Research Department. This contribution will take the form of remunerated consultancy services.

The scholarship program targets Austrian and international experts with a proven research record in economics and finance, and postdoctoral research experience. Applicants need to be in active employment and should be interested in broadening their research experience and expanding their personal research ­networks. Given the OeNB’s strategic research focus on Central, Eastern and Southeastern Europe, the analysis of economic developments in this region will be a key field of research in this context.

The OeNB offers a stimulating and professional research environment in close proximity to the policymaking process. The selected scholarship recipients will be expected to collaborate with the OeNB’s research staff on a prespecified topic and are invited to participate actively in the department’s internal seminars and other research activities. Their research output may be published in one of the department’s publication outlets or as an OeNB Working Paper. As a rule, the consultancy services under the scholarship will be provided over a period of two to three months. As far as possible, an adequate accommodation for the stay in Vienna will be provided. 1

Applicants must provide the following documents and information:

  • a letter of motivation, including an indication of the time period envisaged for the consultancy
  • a detailed consultancy proposal
  • a description of current research topics and activities
  • an academic curriculum vitae
  • an up-to-date list of publications (or an extract therefrom)
  • the names of two references that the OeNB may contact to obtain further information about the applicant
  • evidence of basic income during the term of the scholarship (employment contract with the applicant’s home institution)
  • written confirmation by the home institution that the provision of consultancy services by the applicant is not in violation of the applicant’s employment contract with the home institution

1 We are also exploring alternative formats to continue research cooperation under the scholarship program for as long as we cannot resume visits due to the ­pandemic situation.

Nontechnical summaries

in English and German

Nontechnical summaries in English

Past and future development of euro cash in Austria – resilience in light of technological change and economic crises

Anton Schautzer, Helmut Stix

In this article, we discuss how the demand for and the use of cash has changed in Austria since the euro cash changeover in January 2002 and what can be expected for the future.

Given the enormous technological innovations, it comes as no surprise that cash use for payments has declined in the last 20 years. But cash payments are still dominating in Austria, both in value and number. In 2000, 93% of all payment transactions were conducted in cash; in 2020, the percentage dropped to 63%.

In contrast, the overall circulation of euro cash in the euro area has increased substantially over the past 20 years, with increased hoarding and foreign demand as main reasons. Estimates indicate that more cash is being held than 20 years before, showcasing the importance of cash in times of crises as a safe haven with the financial crisis 2007/2008 and the COVID-19 pandemic being a case in point. Moreover, low interest rates during the past years might have increased the demand for cash as well.

In international comparison, Austria is among the more cash-affine countries; however, there are several other European countries with comparable levels of cash use. But are Austrians just lagging the development in countries with lower cash use? The authors say no. Cash use depends on many different factors. Survey data show that Austrians value and use cash for its properties: it is still an easy to use, economical, safe and inclusive means of payment and store of value. Thus, it is in the public’s interest to safeguard the role of cash as a key payment instrument. Therefore, adequate access to cash for consumers and to cash deposit facilities for merchants should be maintained. Also, paying in cash at any point of sale (POS) should remain possible, and measures ought to be taken to ensure cost efficiency along the supply chain of cash.

Owing to progressive digitalization, a downward trend in cash use can be expected for the next years; albeit the decline might be less pronounced in certain population groups who will continue to predominantly pay in cash. Though cash use is expected to decrease, overall, cash will likely remain a very important payment instrument.

From SEPA to the digital euro: payments past, present and future

Johannes Asel, Simone Mingione, Petia Niederlaender, Georg Nitsche

With this study, we address the growing relevance of electronic payments in Austria and in the euro area 20 years after the introduction of euro cash in 12 EU countries at the time.

In this respect, we discuss the impact of innovations on electronic payments, the role of electronic payments in the European Union, the role of European companies in the current market environment, the impact of the COVID-19 pandemic on payment behavior and, last but not least, possible scenarios for the future.

In particular, we provide an overview of payments-related trends and regulatory developments. Furthermore, we offer an overview of recent empirical studies that underlines the rising importance of electronic payments for economic competitiveness and for economic growth in general.

With a view to recent changes in payment behavior in Austria and in the euro area, we outline two scenarios for the future of retail payments in the euro area, some 15 to 20 years ahead. Ultimately, these scenarios are meant to support policy-making decisions. The most likely scenario we expect to see ourselves in builds on the assumption that electronic payments will continue to rise in importance. An alternative scenario, which is more pessimistic, rounds off the picture.

As a service for our readers, we provide an annex with background information on relevant characteristics of electronic payments, for instance with regard to the value chain in retail payments. A number of industry and market classifications and information on market developments complete the overview.

How much cash is in crypto?

Beat Weber

In its 2008 white paper, bitcoin is called “electronic cash.” Bitcoins exist only in digital form and are generated by computer networks. The white paper also mentions that bitcoin operates on a “peer-to-peer” basis, suggesting that people may exchange bitcoins without any third parties in between. Such third parties are also referred to as intermediaries. In addition, bitcoins are said to be inflation free because their number will ultimately be limited to 21 million coins.

In contrast, recent EU legislation refers to bitcoin and similar projects as “crypto assets.” Since bitcoin’s introduction in 2008, thousands of similar crypto projects have come into being. Crypto is short for cryptography. In computing, this term refers to the use of special codes to keep information safe in computer networks. Cryptography plays an important role in the design of bitcoins and similar crypto projects.

The exchange rate between bitcoins and euro cash has been going up and down very much. So, what do we know about the relationship between bitcoins and cash? A closer analysis reveals that the bitcoin white paper – as well as many users of crypto assets – use the terms “cash,” “peer-to-peer” and “inflation” in a sense that differs from general usage. This may lead to misunderstandings.

But first things first. Bitcoin does have a few things in common with conventional currencies: (1) bitcoin is also a unit of value, (2) people may own and transfer amounts in this unit of value and (3) bitcoins may be traded against currencies on markets. Yet, when it comes to economic value, we see that bitcoins differ fundamentally from cash, that is banknotes and coins or bank deposits and e-money in official currency. Official currencies are issued and backed by official responsible bodies that work to keep the value stable and ensure that the currencies are generally accepted. Therefore, the term “cash” applies to bitcoin, which has been praised for being anonymous, only in a very limited sense, if at all.

Another big difference is that official currencies are used as money in a given economy or economic area. Money provides people with what is called purchasing power, that is they can buy goods and services for money. If the purchasing power of a currency decreases over time and people get fewer goods or services for their money, we talk of “inflation.” In the bitcoin white paper, however, “inflation” is used to define the increase in the number of bitcoins. For lack of ­information on an economy in which bitcoins may be used in a predefined and predictable way as money, information about changes in the number of bitcoins does not provide any clues about how the value of bitcoins will develop.

As to “peer-to-peer,” this term is applicable to cash because people may exchange cash among themselves without any help from intermediaries or tools. This is not the case with bitcoins, however. People wanting to transfer bitcoins to another person cannot do so without third parties, or intermediaries, checking the transfer. Based on a system of competing volunteers, such intermediaries validate bitcoin transactions while controlling for counterfeits and register all bitcoin transactions in a record-keeping system called “blockchain.” In fact, the crypto sector is teeming with intermediaries offering services, some of which are widely used.

To sum up, having analyzed the abovementioned key terms, we may conclude that whenever terms associated with money are used in the context of bitcoin and similar crypto projects, we should always bear in mind that crypto differs importantly from official currencies and therefore cash.

A digital euro and the future of cash

Martin Summer, Hannes Hermanky

Should the European Central Bank (ECB) offer a new digital means of payment to all citizens in the euro area, namely a digital euro? This question has started to attract more and more attention – not only among experts, but also in the wider public. What plays an important role in the public debate is the fear that the launch of a digital euro might ultimately abolish cash. Yet, the question is really about what role central banks will and should play in the monetary system in the digital age.

First, we provide an overview of the institutional architecture and the current monetary system. This system is made up of two tiers: (1) the central bank at the top issues cash on behalf of the state and provides commercial banks with accounts. By conducting monetary policy, the central bank ensures that money, as the legal tender in a specific economic area, retains its value over time. This type of money is called central bank money. (2) Commercial banks create private money by extending credit to companies and households. In addition, commercial banks obtain money from the central bank in cashless form in exchange for securities. Companies and people may pay either with cash, i.e. central bank money, or digitally via their banks and bank accounts.

Next, we discuss the topical literature on digital central bank money – frequently referred to as central bank digital currencies (CBDCs). We also highlight the views of key institutions, such as the ECB and the Bank for International Settlements (BIS). Overall, the following strategic question plays a pivotal role: In an increasingly digital future, how can central banks withstand the competition from new issuers of private money, above all international big techs in the platform-centered internet economy? As a side benefit, CBDCs might increase price competition in the market for card payments that is dominated by a few big players. Another argument is the aim to guarantee universal access to central bank money in a world that has an increasing need for digital payments. Importantly, not one of the documents we examined refers to cash as a technologically outdated means of payment. Instead, the issuers of central bank money voice their commitment to ensure cash supply also in the future.

Arguments why it might be a good (or bad) idea to offer digital central bank money that is accessible to all are bound to be very abstract. This is why we also discuss the technological and institutional ways in which a digital euro could be implemented: (1) as deposit accounts, in the same vein as conventional bank accounts, (2) as digital bearer instruments, much like cash, just in digital form, or (3) blockchain technology, known from bitcoin and similar models. Each of these possible implementations has advantages and disadvantages; so we concentrate in particular on the issues of transaction data privacy, monetary and financial stability as well as security.

We conclude by explaining why cash, irrespective of a future digital euro, will continue to play an important role. For users, cash offers practical advantages that cannot be fully replicated digitally. Cash has a central and important legal function in the payment system; changing that would have serious consequences. Last but not least, cash is a robust means of payment that requires no internet availability, fully operational end devices or permanent energy supply.

Should the use of cash be limited?

Matthias Schroth, Mara Vyborny, Lisa Ziskovsky

In 2021, the European Commission proposed to introduce an EU-wide upper limit for cash transactions, namely EUR 10,000. In this study, we examine arguments for and against putting a ceiling on cash payments. We also consider current legislation on cash limits. Some EU countries have already restricted cash transactions at the national level. In addition, we highlight the importance of cash and the critical functions it fulfills as legal tender.

We find that national cash ceilings have had little effect so far. For this reason, it remains questionable if an EU-wide cash ceiling would help achieve the goal of the European Commission – to combat money laundering and illegal activities, including terrorism financing. A uniform cash ceiling might, however, distort competition in the internal market. ­According to the proposal of the European Commission, the EU member states would still be able to apply different, i.e. stricter, national cash limits.

One aspect deserves special attention in the debate about cash limits. Cash is the only legal physical means of payment. As such, it fulfills indispensable economic functions in payments and as a store of value. Moreover, cash promotes ­financial inclusion and protects privacy. The COVID-19 pandemic has driven home that, in times of crisis, people trust and rely on cash.

In light of these arguments, we should relieve the pressure on cash instead of imposing legal restrictions on cash payments. Importantly, consumers should always be free to choose the means of payment.

The use of euro cash as a store of value in CESEE

Marc Bittner, Thomas Scheiber

Ever since euro banknotes and coins were first issued in early 2002, euro cash has also been circulating outside the euro area. In fact, the use of euro cash outside the euro area has been on the rise. According to a study by the European Central Bank (ECB), as much as 30% to 50% of the total value of euro banknotes in circulation is held by people outside the euro area. Individual savings account for a large part of euro holdings abroad – also in Central, Eastern and Southeastern Europe (CESEE). In 2002, the euro largely replaced the Deutsche mark, US dollar and Austrian schilling as a safe and trusted store of value in CESEE. In the region, people had been using foreign currency in addition to the local currencies for a long time, given that, in the 1990s, currency crises, banking crises or hyperinflation had destroyed their trust in the local currencies.

Yet, even after the economic systems had stabilized, rebuilding trust took time. So, why do people in CESEE continue to save in euro? What does this imply for the effectiveness of national monetary policy or for financial stability? The OeNB started in 1997 to seek answers to these questions by commissioning representative surveys of individuals in CESEE. In this study, we summarize the findings from these surveys of the past two decades and analyses that drew on the survey data. This allows us to shed light on the use of euro cash in CESEE from 2002 to the end of 2021. In Southeastern Europe, euro cash is mostly held for saving purposes. People in Poland, Czechia and Hungary mainly hold euro cash for traveling to the euro area. In most CESEE countries, the euro is only rarely used for payments, which is why we focus on the role of euro cash for saving purposes.

Holding euro cash as a store of value is still widespread in Albania, Croatia, North Macedonia and Serbia. At a median amount of some EUR 600, Croatia reports the highest amount, followed by Romania and Serbia, with around EUR 450 each. Since 2007–08, the share of euro cash in total currency in circulation has decreased visibly in the ten CESEE countries under review. Nevertheless in 2020–21, about as much euro cash as local currency was reportedly circulating in both North Macedonia and Serbia. In Central and Eastern Europe, by contrast, the euro’s share had already dropped below 10% in 2007–08. At the individual level, euro cash continues to play an important role in Southeastern Europe – especially for the relatively large group of individuals with small savings. Even among the relatively small group of banked savers in Southeastern Europe, between 27% and 48% of survey respondents on average said that they hold more than half of their savings in cash – and mostly in euro.

We found that the demand for euro cash in CESEE is still mainly driven by (1) a lack of credibility of the long-term stability of the local currency, (2) network effects, i.e. the use of euro cash is widespread in the country, and (3) a lack of trust in the stability of the banking system. We therefore assume that, also in the foreseeable future, euro cash will continue to play a role as a safe haven asset in CESEE.

Nontechnical summaries in German

Vergangene und zukünftige Entwicklung des Euro-Bargelds in Österreich – Beständigkeit in Zeiten technologischen Wandels und wirtschaftlicher Krisen

Anton Schautzer, Helmut Stix

In diesem Artikel wird der Frage nachgegangen, wie sich die Nachfrage nach und die Nutzung von Bargeld in Österreich seit der Euro-Bargeldeinführung im Jänner 2002 entwickelt hat und welche zukünftige Entwicklung erwartet werden kann.

Angesichts der enormen technologischen Innovationen ist es nicht verwunderlich, dass die Verwendung von Bargeld für Zahlungen in den letzten 20 Jahren gesunken ist. Während im Jahr 2000 noch 93 % aller Zahlungstransaktionen bar durchgeführt wurden, waren es 2020 etwa 63 %. Dennoch überwiegen Barzahlungen in Österreich nach wie vor, auch wertmäßig betrachtet.

Bei der Nachfrage nach Bargeld sieht es anders aus: Der umlaufende Bargeldbetrag ist im Euroraum in den letzten 20 Jahren deutlich gestiegen – hautsächlich wegen der zunehmenden Bargeldhortung und Auslandsnachfrage. Schätzungen zufolge wurde in Österreich zuletzt mehr Bargeld gehalten als vor 20 Jahren. Diese Entwicklung spiegelt die Bedeutung von Bargeld in Krisenzeiten wider. Die Finanzkrise 2007/2008 und die COVID-19-Pandemie haben gezeigt, dass Bargeld als sicherer Hafen angesehen wird. Zudem dürfte sich die Bargeldnachfrage auch durch das über längere Zeit sehr niedrige Zinsniveau erhöht haben.

Im internationalen Vergleich zählt Österreich zu den bargeldaffinen Staaten. Allerdings gibt es im Euroraum etliche andere Staaten mit einer vergleichsweisen Bargeldverwendung. Doch hinkt Österreich jenen Ländern hinterher, die deutlich weniger Bargeld benutzen? Die Autoren sagen nein. Die Verwendung von Bargeld hängt von vielen verschiedenen Faktoren ab. Umfragedaten zeigen, dass die Österreicherinnen und Österreicher Bargeld wegen seiner Eigenschaften schätzen und verwenden – es ist und bleibt ein einfach zu verwendendes, günstiges, sicheres und inklusives Zahlungs- und Wertaufbewahrungsmittel. Aus diesem Grund liegt es im öffentlichen Interesse, für eine weiterhin starke Rolle des Bargeldes einzutreten. Das bedeutet, dass für Konsumentinnen und Konsumenten ein adäquater Zugang zu Bargeld beibehalten werden muss und dass für den Handel entsprechende Möglichkeiten für Bargeldeinzahlungen benötigt werden. Zudem muss gewährleistet werden, dass Bargeld nach wie vor universell akzeptiert wird und dass der Bargeldkreislauf kosteneffizient gestaltet wird.

Aufgrund der fortschreitenden Digitalisierung ist in den nächsten Jahren mit einer abnehmenden Bargeldverwendung zu rechnen. Bei manchen Bevölkerungsgruppen wird die Bargeldnutzung deutlich sinken, andere werden weiterhin vorwiegend bar bezahlen. Der zu erwartende rückläufige Trend dürfte jedoch nichts daran ändern, dass Bargeld insgesamt ein sehr wichtiges Zahlungsmittel bleiben wird.

Zahlungsverkehr im Wandel: von SEPA zum digitalen Euro

Johannes Asel, Simone Mingione, Petia Niederlaender, Georg Nitsche

20 Jahre nach der Einführung von Euro-Bargeld in zunächst 12 EU-Staaten untersuchen wir die steigende Bedeutung des unbaren Zahlungsverkehrs in Österreich bzw. im Euroraum.

Insbesondere thematisieren wir Auswirkungen von Innovationen auf den unbaren Zahlungsverkehr, die Rolle des unbaren Zahlungsverkehrs in der Europäischen Union, die Rolle von europäischen Unternehmen im aktuellen Marktumfeld, die Auswirkungen der COVID-19-Pandemie auf das Zahlungsverhalten und mögliche Szenarien für die Zukunft.

Wir beschreiben hierzu zahlungsverkehrsrelevante Trends und regulatorische Entwicklungen. Mit einem Überblick über aktuelle empirische Studien unterstreichen wir weiters die große Bedeutung des unbaren Zahlungsverkehrs für die Wettbewerbsfähigkeit und das Wirtschaftswachstum von Volkswirtschaften im Allgemeinen.

Im Hinblick auf aktuelle Veränderungen im Zahlungsverhalten in Österreich und im Euroraum wird anhand von ­Szenarien dargelegt, wie die Entwicklung des Zahlungsverkehrs im Euroraum für die nächsten 15 bis 20 Jahre aussehen könnte. Letztlich geht es darum, entsprechende Implikationen für Entscheidungsträger abzuleiten. Neben einem Basisszenario, das von einer zunehmenden Bedeutung des elektronischen Zahlungsverkehrs ausgeht, wird auch ein Alternativszenario mit einer deutlich negativeren Entwicklung skizziert.

Ein Anhang bietet den Leserinnen und Lesern abschließend zusätzliche wichtige Hintergrundinfos zu relevanten ­Charakteristika des unbaren Zahlungsverkehrs, im Besonderen zur Wertschöpfungskette im elektronischen Kundenzahlungsverkehr. Eine Reihe von Branchen- und Marktklassifizierungen und Angaben zu Marktentwicklungen runden das Bild ab.

Wieviel „Bargeld“ steckt in Krypto?

Beat Weber

Bitcoin wird in seinem ursprünglichen Konzeptpapier aus dem Jahr 2008 als elektronisches Bargeld („electronic cash“) bezeichnet. Bitcoins existieren nur in digitaler Form und werden von Computernetzwerken erzeugt. In dem Papier wird auch behauptet, dass Privatpersonen Bitcoins untereinander ohne zwischengeschaltete Mittler – also ohne Intermediation bzw. Intermediäre – nutzen können („peer-to-peer“). Außerdem seien Bitcoins vor Inflation sicher („inflation-free“), weil ihre Stückzahl auf 21 Millionen begrenzt ist.

Ein neues EU-Regelwerk für den Krypto-Sektor spricht hingegen von Kryptowerten – auf Englisch „crypto assets“. Bitcoin hat mittlerweile einige Tausend Nachahmer gefunden. Krypto leitet sich von dem Wort „Kryptografie“ ab, mit dem in der Informatik die Entwicklung und Bewertung von Verfahren zur Verschlüsselung geheimer Daten bezeichnet wird. Kryptografie spielt in der Konstruktion von Bitcoin und ähnlichen Projekten eine wichtige Rolle.

Der Umtauschkurs von Bitcoin in Euro-Bargeld schwankt sehr stark. Wie steht es also um das Verhältnis von Bitcoin und Bargeld? Eine genauere Analyse zeigt, dass die Begriffe „cash“ (Bargeld), „peer-to-peer“ (von Hand zu Hand, also von Privatperson zu Privatperson und damit ohne Intermediär) und „inflation“ im Bitcoin-Konzeptpapier – und von vielen Nutzerinnen und Nutzern von Kryptowerten – anders als allgemein üblich gebraucht werden. Das kann zu Missverständnissen führen.

Bitcoin hat einige Gemeinsamkeiten mit einer Währung im üblichen Sinn: (1) Es weist eine eigene Werteinheit auf, ­(2) Beträge in dieser Werteinheit können von Menschen besessen und übertragen werden und (3) auf Märkten gegen andere Währungen gehandelt werden. Bezogen auf den wirtschaftlichen Wert besteht allerdings ein wesentlicher Unterschied zwischen Bitcoins und Bargeld (Münzen, Scheinen) sowie elektronischen Bankguthaben in offizieller Währung. Hinter offiziellen Währungen stehen offizielle verantwortliche Stellen, die den Wert dieser Währungen stabil halten und für seine allgemeine Akzeptanz sorgen. Auf den vor allem für seine Anonymität gepriesenen Bitcoin passt der Begriff „Bargeld“ daher nur sehr eingeschränkt.

Ein weiterer fundamentaler Unterschied ist, dass offizielle Währungen in einem bestimmten Wirtschaftsraum Geld darstellen. Dieses Geld besitzt damit Kaufkraft und kann zum Erwerb von Gütern und Leistungen verwendet werden. Nimmt die Kaufkraft einer Währung über die Zeit ab – bekommt man also weniger Güter oder Leistungen für sein Geld, spricht man von „Inflation“. Im Bitcoin-Konzeptpapier wird der Begriff „Inflation“ hingegen als Zuwachs der Menge an Bitcoins definiert. Ohne Informationen über eine Wirtschaft, die Bitcoin in einer bestimmten vorhersagbaren Art und Weise als Geld verwendet, sagt die Mengenentwicklung aber nichts über die Wertentwicklung aus.

Der Begriff „peer-to-peer“ ist auf Bargeld in offizieller Währung insofern anwendbar, als es zwischen Personen von Hand zu Hand ohne zusätzliche Hilfsmittel übertragen werden kann. Damit Bitcoins zwischen zwei Personen sicher übertragen werden können, müssen jedoch Dritte die Übertragung überprüfen. Solche Intermediäre führen im freiwilligen Wettbewerb Fälschungskontrollen durch und verbuchen die Übertragung in einem Bitcoin-Register, der „Blockchain“. In der Praxis sind zahlreiche Intermediäre im Krypto-Sektor tätig und bieten zum Teil vielfach genutzte Leistungen an.

Aus der Analyse der drei genannten zentralen Begriffe lässt sich folgendes Fazit ziehen: Wann immer bestehende ­Begriffe aus dem Geldwesen auf Bitcoin und ähnliche Kryptoprojekte angewendet werden, sollten diese wichtigen Unterschiede zu offiziellen Währungen nicht übersehen werden.

Digitaler Euro und die Zukunft des Bargelds

Martin Summer, Hannes Hermanky

Soll die Europäische Zentralbank (EZB) in Zukunft einen digitalen Euro als Zahlungsmittel für alle Menschen im Euroraum anbieten? Diese Frage wird nun immer öfter nicht nur in Expertenkreisen, sondern auch in der breiteren Öffentlichkeit diskutiert. Eine große Rolle in dieser Diskussion spielt die Befürchtung, dass es sich bei einem solchen Schritt um eine Initiative zur Abschaffung des Bargelds handeln könnte. Tatsächlich geht es aber vielmehr darum, wie sich Zentralbanken vor dem Hintergrund der digitalen Transformation im Geld- und Finanzwesen strategisch positionieren sollen.

Zu Beginn bieten wir einen Überblick über die institutionelle Architektur und die Funktionsweise des aktuellen Geldsystems. Dieses System besteht aus zwei Stufen: (1) Die Zentralbank an der Spitze gibt im Auftrag des Staats Bargeld aus und stellt den Geschäftsbanken Konten zur Verfügung. Sie stellt durch ihre Geldpolitik sicher, dass das Geld als gesetzliches Zahlungsmittel seinen Wert behält. Hier spricht man von Zentralbankgeld. (2) Die Geschäftsbanken schaffen privates Geld, indem sie Unternehmen und Privatpersonen Kredite gewähren. Außerdem besorgen sich Geschäftsbanken gegen Sicherheiten unbares Zentralbankgeld von der Zentralbank. Unternehmen und Privatpersonen können entweder bar mit Zentralbankgeld bezahlen oder über ihre Banken und Bankkonten unbare, sprich digitale Zahlungen tätigen.

Als Nächstes diskutieren wir die aktuelle Literatur und Stellungnahmen der wichtigsten Institutionen, wie etwa der EZB und der Bank für Internationalen Zahlungsausgleich (BIZ), zu digitalem Zentralbankgeld. Insgesamt spielt folgende strategische Überlegung eine zentrale Rolle: Wie können sich Zentralbanken in einer zunehmend digitalen Zukunft gegenüber neuen, privaten Anbietern von Zahlungsmitteln, vor allem gegenüber international tätigen, großen Internetplattformen, positionieren? Eine untergeordnete Rolle spielen Überlegungen, durch einen solchen Schritt auch den Preiswettbewerb im oligopolistischen Markt für Kartenzahlungen – d. h. wenige Anbieter stehen vielen, relativ kleinen Nachfragern gegenüber – zu verbessern. Und auch die Sicherung des universellen Zugangs zu Zentralbankgeld in einer zunehmend digitalen Zukunft ist ein Argument. Die Abschaffung von Bargeld als einer vermeintlich überholten Zahlungstechnologie wird in den untersuchten Dokumenten kein einziges Mal angeführt. Ausdrücklich angeführt wird hingegen die Absicht, auch in Zukunft die Bargeldversorgung sicherzustellen.

Die Grundsatzdiskussion, ob digitales Geld für alle von der Zentralbank angeboten werden soll oder nicht, ist zwangsläufig sehr abstrakt. Wir gehen deshalb auch darauf ein, wie ein digitaler Euro in technologischer wie auch institutioneller Sicht konkret ausgestaltet werden könnte: (1) Als Kontenmodell, wie bei den jetzt gebräuchlichen und bekannten Bankkonten, (2) als digitales Inhaberinstrument, ähnlich wie Bargeld, nur in digitaler Form oder (3) mit einer Technologie, die Anleihen bei technologischen Komponenten von Bitcoin und ähnlichen Modellen nehmen würde. Jede dieser möglichen Umsetzungsvarianten hat Vor- und Nachteile; wir konzentrieren uns insbesondere auf die Themen Transaktionsdatenschutz, Geldpolitik- und Finanzmarktstabilität sowie Sicherheit.

Abschließend erklären wir, weshalb Bargeld unabhängig von einem digitalen Euro auch in Zukunft wichtig bleibt. Bargeld besitzt aus Sicht der Nutzerinnen und Nutzer praktische Eigenschaften, die nicht vollständig digital repliziert werden können. Bargeld hat eine zentrale und wichtige rechtliche Stellung im Zahlungssystem, die nicht ohne Weiteres und folgenlos geändert werden kann. Der Zahlungsverkehr profitiert außerdem von der Verfügbarkeit eines Zahlungsinstruments wie Bargeld, das nicht von Internetverfügbarkeit, funktionierenden Endgeräten oder einer permanenten Energie­versorgung abhängig ist.

EU-weite Obergrenzen für Barzahlungen – Für und Wider

Matthias Schroth, Mara Vyborny, Lisa Ziskovsky

Vor dem Hintergrund eines Vorschlags der Europäischen Kommission aus dem Jahr 2021, eine EU-weite Obergrenze für Barzahlungen in der Höhe von 10.000 EUR einzuführen, untersuchen wir, was für und gegen eine Deckelung von Barzahlungen spricht. Dabei berücksichtigen wir auch die aktuelle Rechtslage: In einigen EU-Mitgliedstaaten gelten nämlich bereits nationale Beschränkungen für Barzahlungen. Weiters gehen wir auf die essenziellen Funktionen von Bargeld als gesetzliches Zahlungsmittel ein.

Die derzeitigen nationalen Barzahlungsobergrenzen haben bisher wenig Wirkung gezeigt – so lautet das Fazit unserer Analyse. Es ist daher zu hinterfragen, ob eine EU-weit einheitliche Obergrenze, wie von der Europäischen Kommission beabsichtigt, Geldwäsche und illegale Aktivitäten wie etwa Terrorismusfinanzierung wirksam bekämpfen kann. Das Problem von Wettbewerbsverzerrungen im Binnenmarkt wird durch eine einheitliche Obergrenze für Barzahlungen wohl nicht gelöst. Schließlich sollen laut dem Vorschlag der Europäischen Kommission die unterschiedlichen nationalen Barzahlungsobergrenzen weiterhin bestehen dürfen.

Was häufig übersehen wird: Bargeld ist das einzige gesetzliche Zahlungsmittel, das physisch verfügbar ist. Es erfüllt unverzichtbare wirtschaftliche Funktionen – sowohl im Zahlungsverkehr als auch als Wertanlage. Bargeld steht darüber hinaus für finanzielle Inklusion und schützt die Privatsphäre. Die COVID-19-Pandemie hat deutlich gemacht, dass die Menschen insbesondere in Krisenzeiten Bargeld vertrauen und schätzen.

Angesichts dieser Argumente darf Bargeld nicht weiter verdrängt werden. Gesetzliche Beschränkungen von Barzahlungen würden dem Vorschub leisten. Verbraucherinnen und Verbraucher sollen stets die Möglichkeit haben, ihr Zahlungsmittel frei zu wählen.

Die Rolle des Euro-Bargelds als Wertaufbewahrungsmittel in CESEE

Marc Bittner, Thomas Scheiber

Seit dem Beginn der Ausgabe von Euro-Bargeld im Jahr 2002 zirkulieren Euro-Banknoten und -Münzen nicht nur im Euroraum. Der Umlauf von Euro-Bargeld in anderen Ländern ist sogar im Steigen begriffen. Laut einer EZB-Studie aus dem Jahr 2021 entfallen nicht weniger als 30 % bis 50 % des Euro-Bargeldumlaufs nicht auf den Euroraum. Einen großen Teil davon dürften wohl Privatpersonen zu Sparzwecken halten – so auch in Zentral-, Ost- und Südosteuropa (CESEE). Der Euro löste dort 2002 zum Gutteil die Deutsche Mark, den US-Dollar und den österreichischen Schilling als sicheres und vertrauenswürdiges Wertaufbewahrungsmittel ab. Die Verwendung von Fremdwährungen parallel zur heimischen Währung hat in CESEE eine lange Geschichte, da Währungskrisen, Bankenkrisen oder Hyperinflation das Vertrauen der Bevölkerung in die jeweilige Landeswährung in den 1990er-Jahren zerstört hatten.

Doch auch als sich die Wirtschaftssysteme nach den Krisenjahren wieder stabilisiert hatten, kehrte das verlorene Vertrauen nur zögerlich zurück. Warum sparen Menschen in CESEE weiterhin in Euro? Welche Auswirkungen hat das auf die Wirksamkeit der nationalen Geldpolitik oder auf die Finanzmarktstabilität? Seit 1997 untersucht die OeNB diese Fragen und lässt in CESEE repräsentative Umfragen von Privatpersonen durchführen. Die vorliegende Studie fasst die Erkenntnisse aus den Umfragen der letzten 20 Jahre und damit zusammenhängenden Analysen zusammen und beleuchtet die Entwicklung der Euro-Bargeldhaltung in CESEE seit dem Jahr 2002. Während in Südosteuropa Euro-Bargeld hauptsächlich zu Sparzwecken gehalten wird, wird es in Polen, Tschechien und Ungarn vor allem für Zahlungen auf Reisen in den Euroraum verwendet. Da in den meisten CESEE-Ländern nur mehr selten in Euro bezahlt wird, liegt der Fokus der Studie auf der Euro-Bargeldhaltung zu Sparzwecken.

Sparen in Euro-Bargeld ist in Albanien, Kroatien, Nordmazedonien und Serbien noch immer weitverbreitet. Die höchsten Medianbeträge weisen hier Kroatien mit rund 600 EUR sowie Rumänien und Serbien mit jeweils rund 450 EUR auf. Der Anteil des Euro am gesamten Bargeld­umlauf in den untersuchten zehn CESEE-Ländern ist seit 2007–08 in Südosteuropa deutlich zurückgegangen. Trotzdem dürften 2020–21 in Nordmazedonien und Serbien in etwa gleich viel Euro-Bargeld wie Landeswährung im Umlauf gewesen sein. In Zentral- und Osteuropa jedoch liegt der Anteil des Euro schon seit 2007–08 unter 10 %. Auf individueller Ebene spielt Euro-Bargeld in Südosteuropa weiterhin eine bedeutsame Rolle – insbesondere für den relativ großen Personenkreis mit geringen Ersparnissen. Aber auch in der relativ kleinen Gruppe von Personen, die sowohl Ersparnisse als auch ein Girokonto oder Sparbuch besitzen, geben in Südosteuropa im Schnitt zwischen 27 % und 48 % der Befragten an, dass sie mehr als die Hälfte ihrer Ersparnisse in bar halten (zumeist Euro-Bargeld).

Die Nachfrage nach Euro-Bargeld dürfte nach wie vor von folgenden Faktoren abhängen: (1) Zweifeln an der langfristigen Stabilität der Landeswährung, (2) dem Umstand, dass Euro-Bargeldnutzung im Land als üblich gilt, und (3) mangelndem Vertrauen in die Stabilität des Bankensystems. Wir gehen daher davon aus, dass Euro-Bargeld in CESEE auch in absehbarer Zukunft eine wichtige Rolle als sicheres Wertaufbewahrungsmittel spielen wird.


Past and future development of euro cash in Austria – resilience in light of technological change and economic crises

Anton Schautzer, Helmut Stix 2
Refereed by: Kim P. Huynh, Bank of Canada

In this analysis, we discuss how the demand for and the use of cash has changed in Austria since euro banknotes and coins were introduced in January 2002. Cash use for payments has ­decreased over the past 20 years, which is not surprising given the enormous technological advances. Despite this decline, cash remains the prevalent means of payment at the point of sale (POS) in Austria. Somewhat contrary to the downward trend in the use of cash for payments, the overall circulation of euro cash has increased over the past 20 years. In international comparison, Austrians are among the more cash-affine Europeans; however, there are several other European countries with comparable levels of cash use. We examine how cash use has developed among different sociodemographic groups and how Austrians view cash and noncash payment means.

With regard to the likely development in the near future, we discuss the critical factors which will contribute to a reduction of cash use and those which will contribute to maintaining a strong role of cash. We argue that cash has important features that are of value for society, such that it should be in the public’s interest to safeguard cash as a key means of payment. This requires maintaining adequate access to cash for consumers and to cash deposit facilities for merchants. Also, paying in cash at any POS should remain possible, and measures should be taken to ensure cost efficiency along the supply chain of cash.

JEL classification: E41, E50, D10, G11

Keywords: cash demand, euro currency in circulation, hoarding, payments, financial innovation

On the occasion of the 20th anniversary of the introduction of euro cash, we analyze how the importance of cash has changed and how it might change in the coming years. Any discussion of the development of cash over the past 20 years as well as deliberations about its future need to account for two major developments:

  • Technological innovations have increased convenience of electronic payments at a breath-taking speed: Smart phones are now ubiquitous 3 , and the technical capabilities of these devices make them ideal for deploying payment solutions. The rollout of the NFC technology, on cards and on mobile devices, has been considered a game changer in retail payments with the potential of challenging the dominance of cash for small-value transactions.
  • However, those innovations were superseded by a series of economic shocks. First, the global financial crisis of 2007/2008, which has eroded trust in banks and in the financial system; second, the sovereign debt crisis in the European Economic and Monetary Union (EMU) of 2012; third, a regime of low interest rates in developed economies, in general, and in the EMU, in particular; fourth, the outbreak of the COVID-19 pandemic and lately the war in the Ukraine. All these shocks have had repercussions on the demand and use of cash – e.g. cash demand is higher in times of uncertainty and when interest rates are low – and they might have repercussions on its future.

Where did we start 20 years ago and where do we stand now with respect to Austrians’ demand for and use of cash? In section 1, we present evidence about changes in the use of cash for payments and for nontransactional demand (i.e. hoarding). The main finding is that, overall, euro cash circulation has increased considerably over the past 20 years like it has done in many other countries. This development is in line with the fact that cash demand increases during times of heightened economic uncertainty and low interest rates, as it is a highly liquid safe asset that provides stability (with respect to the nominal value).

Detrimental to overall demand, cash use for payments has declined markedly mainly because of an increased take-up of financial innovations. As a case in point, only 66% of Austrian residents possessed a debit card in the first quarter of 2002. Currently, debit card ownership is close to 100%. Back in 2002, 87% of Austrian survey respondents said that they had not shopped online yet. In the meantime, the respective share has plummeted to only 27% in 2020. In addition to these developments, the COVID-19 pandemic has had an adverse effect on the use of cash. However, despite these changes, cash continues to be the most important payment instrument in Austria.

But is Austria’s case an exception? An international comparison shows that it is not; however, among the highly developed economies, it is one of the more cash-­intensive ones.

In section 2, we take a closer look at how Austrians use and see cash, and how their behavior and opinion regarding cash have changed over time. A key finding of this analysis is a growing gap within society. 20 years ago, cash was used for payments relatively homogenously across sociodemographic groups. However, the ubiquitous availability of electronic payments has had a differential impact on society: while a growing share of the population has been taking up cashless payments, a considerable share of the population is still preferring cash. We expect this heterogeneity to further proliferate in the near future. This begs the question whether less and less Austrians will be using cash for payments.

In section 3, we discuss some of the main pros and cons of a declining cash use. After evaluating the arguments, we formulate what we expect for the next 10 years. A lot depends on how the payment infrastructure and hence relative costs of payment instruments will develop. Whether cash will continue to be easily accessible is central for the future development of cash as well. Moreover, there are unknowns (new technologies, economic and political instabilities) that need to be considered. Overall, we argue that there is a strong case for economic policy to maintain a level playing field across payment instruments and that consumers will still have the freedom of choosing between cash and different payment instruments. Section 4 concludes.

1 Cash developments over the past 20 years

1.1 Strong increase of euro currency in circulation

At the end of 2021, the total value of euro banknotes circulating outside the vaults of central banks was at EUR 1,544 billion. This compares with an overall value of EUR 358 billion at the end of 2002, the year of the euro introduction. At the end of 2004, euro banknotes in circulation amounted to EUR 508 billion, which probably serves as a better comparison due to cash changeover effects.

Chart 1 relates the development of currency in circulation to income (i.e. nominal gross domestic product), accounting for the fact that prices and income have also increased over the past 20 years. The resulting time series may be a reflection of the public’s desire to hold cash, given that they are free to choose cash over bank deposits (or other financial assets) and that central banks accommodate any demand for banknotes.

Chart 1 called “Currency in circulation in various economies” is a line graph showing the development of currency in circulation as percentage of nominal gross domestic product (GDP) from 1999 to 2020 for the following economies: the euro area, the USA, the United Kingdom, Japan, Canada, China and Sweden. The main takeaway from this chart is that currency in circulation is increasing in many advanced economies. In the euro area, currency in circulation rose from 4% in 2001 to about 13% at the end of 2020. The same goes for Canada and the United Kingdom, albeit on a smaller scale: Canada from about 3% in 2001 to about 5% in 2020, UK from about 2% in 1999 to about 3% in 2020. In the USA, currency in circulation stayed constantly at about 5% from 1999 to 2007, but experienced a gradual increase to about 9% in 2020. Japan, a country with a relatively high level of currency in circulation to begin with, registered a rise as well: from about 14% in 2001 to nearly 23% in 2020. However, two economies show a downward trending currency to GDP ratio: China and Sweden. In China, currency in circulation went from about 15% in 1999 to about 8% in 2019. The decrease in Sweden is from 4% in 2001 to about 1% in 2020.

Source: International Monetary Fund, European Central Bank, Federal Reserve Economic Data, authors’ calculation.

In the euro area, the currency (to nominal GDP) ratio increased from about 4% at the end of 2001 to about 13% at the end of 2021 – meaning it tripled. Its development in the early years of euro cash was influenced by the cash changeover in 2002 and the growing role of the euro as an international currency. As argued by Jobst and Stix (2017), the currency ratio may have risen until 2006 to catch up with the value that the German mark used to have, with the euro taking over the role of the German mark as an international currency.

Despite this peculiarity of the euro area time series, the underlying trend increase can also be observed in other large economies like the United States or Japan (see chart 1). In addition, in many other economies the currency ratio has remained stable or has grown slightly after 2008, for instance in Great Britain or Canada. 4 As shown by Jobst and Stix (2017), only a minority of economies has a downward trending currency ratio, e.g. Sweden, Norway or China.

The takeaway from this analysis is that cash is still being heavily demanded, not only in the euro area but also in many other economies. As discussed by Jobst and Stix (2017), this is related to (i) very low interest rates after the global economic and financial crisis, (ii) increased domestic hoarding, presumably to some extent as a consequence of increased economic uncertainty and (iii) increased foreign ­demand for euro cash (see also Rösl and Seitz, 2021). 5

The relative importance of the different uses of cash – most importantly for domestic transactions, for domestic hoarding or for nondomestic circulation – can only be assessed indirectly, though, given the anonymity of cash. According to Lalouette et al. (2021), between 30% and 50% of the value of euro banknotes was circulating abroad in 2019. Lalouette and Esselink (2018) as well as Zamora-Pérez (2021) estimate that roughly 20% of the total value in circulation is used for day-to-day transactions within the euro area and that about 7% are held in bank vaults. The remaining share is either hoarded domestically or, to a much lesser extent, lost. For Australia, Finlay et al. (2018) estimate that about 7.5% of banknotes are lost. All these estimates suggest that about 20% to 40% could have been held as a store of value within the euro area. However, these estimates refer to pre-pandemic times, and it is not clear how the different ways of using cash have since changed.

Chart 2 visualizes the relative share of each denomination in the total value of euro banknotes in circulation in the euro area over time (with the relative shares summing to 100% for each observation). The relative demand for each denomination has not been constant over time. In particular, the demand for EUR 50 banknotes has increased considerably (from 33% in 2004 to 44% of total banknotes in circulation at the end of 2021). The relative importance of the EUR 500 bill, which is assumed to be the banknote that is used most for hoarding, has been decreasing after its peak in 2009 (shortly after the global economic and financial crisis). The ECB Governing Council’s decision from May 4, 2016, to discontinue production of the EUR 500 banknote has induced a decrease of its circulation. 6 In turn, the relative importance of EUR 50, EUR 100 and EUR 200 banknotes has increased.

Chart 2 called “Share of denominations in the total value of euro banknotes in circulation” is a line chart consisting of two panels. The left panel shows the individual euro banknote denominations in percent of the overall value of euro banknotes in circulation at a monthly frequency from January 2002 to December 2021. The right panel shows the denominations grouped into small denominations (5 and 10 euro), medium denominations (20 and 50 euro) and large denominations (100, 200 and 500 euro), given in the same unit and for the same period of time. The left graph shows that between 2002 and 2021 the share of the 5 euro banknote decreased gradually from about 4% to 1%, the 10 euro banknote from about 9% to about 2% and the 20 euro banknote from about 18% to 6%. The 500 euro banknote starts with a share of about 14% and increased to about 35% in 2006, a value at which it had remained about until 2012 when the share started to decrease to a share of about 12% in 2021. Concurrent with the decrease in the share of the 500 euro banknote, the shares of the 50 euro banknote, the 100 euro banknote and the 200 euro banknote increased over time. Between 2002 and 2004, the 50 euro banknote had a share of about 32%. Between 2004 and 2010, this share remained nearly constant. From 2010, the respective share started to increase until about 44% in 2021. Starting with 2012, the 50 euro banknote has been the denomination with the highest proportion. The 100 euro banknote increased from about 16% in the beginning of 2002 to 24% at the end of 2021. Right panel: The proportion of small denominations (5 and 10 euro) started at about 13% in 2002 and dropped to about 4% in 2021. The medium denominations (20 and 50 euro) started at about 50% in 2002, decreased gradually to about 38% in 2010, after which the share started to slowly increase again to slightly more than 50% in 2021. The group of large denominations (100, 200 and 500 euro) had a share of about 37% in January 2002, which went to about 60% around 2010. Thereafter, the share slowly dropped again to less than 50% in 2021.

Source: European Central Bank.

The right panel of chart 2 illustrates the relative share of banknotes grouped by small, medium and large denominations. It shows that the share of small denominations declined from 5% in December 2004 to about 3% in 2021 – these banknotes are mostly used for payments, and their decline likely reflects the increased use of cashless payments. Furthermore, the share of medium denomination banknotes has considerably increased after 2008 and is now higher than the share of high ­denomination banknotes. We presume that EUR 20 banknotes are mostly used for transactions and that EUR 50 banknotes are both used for transactions and for hoarding.

What about cash circulation in Austria? With euro cash moving freely within the euro area, it is no longer possible to measure the amount of euro cash that is circulating in Austria. Instead, the Oesterreichische Nationalbank (OeNB) computes an approximate estimate of the amount of euro cash that is circulating within Austria, using banknote shipment data and return frequencies of banknote ­denominations (see chart 3). 7 Despite the cautious interpretation of the resulting estimates, two observations are evident: First, demand for euro cash went up in Austria as well, both in nominal and in real terms until the end of 2018, and ­declined somewhat thereafter. Second, the absolute amounts circulating per capita in Austria are relatively high. At the end of 2021, the amounts held by consumers, merchants and companies totaled about EUR 2,400 per Austrian resident. This compares with a euro area average of about EUR 2,100 (EUR 4,200 minus an assumed foreign circulation of 50%).

Chart 3 called “Euro currency in circulation in Austria” is a line graph showing the estimated amounts of euro currency in circulation per capita in Austria from 2002 to 2021. The population for the year 2021 is based on a forecast, and cash held in bank vaults is excluded. A blue line represents the estimated euro amounts, while a red line represents the estimated euro amounts in 2002 prices. The estimated amount of euro currency in circulation in Austria per capita rose from about 1,200 euro in 2002 to about 2,400 euro in 2021. It reached the highest value with about 3,000 euro in 2014, where it remained constant until 2018. The line representing currency in circulation in 2002 prices also starts at about 1,200 euro. The slope is similar to the estimated euro line, but the increase is less steep. In 2021, the respective value was at about 1,600 euro.

Source: Oesterreichische Nationalbank, Statistik Austria, authors’ calculations.

The reasons for the decline in cash circulation in Austria, in particular during 2020 and 2021, are not entirely clear. We suspect that the decrease is partly related to the pandemic-induced sharp drop in tourist visits to Austria. In 2021, it could also be linked to the increase in inflation rates. Furthermore, we presume that the population and the companies were de-hoarding due to short-time work, unemployment or loss of sales. The “normalization” after the COVID-19 pandemic will show whether the drop was related to the pandemic or whether it reflects a more persistent development.

Euro cash: a safe haven asset in uncertain times

Cash is the only form of central bank money available to the public. While the nominal return on cash is zero, it offers immediate liquidity and stability with regard to its nominal value. The mere feature of cash being a tangible asset which remains in the possession of the owner and which does not involve a third party (e.g. a bank) might also provide a feeling of security. This is particularly true in times of crises when asset prices fluctuate considerably or when trust in banks is low.

During the last 20 years, we have faced several situations of turmoil in Europe, e.g. the global financial crisis (2007/2008), the EU sovereign debt crisis (2012) and, most recently, the COVID-19 pandemic. Following the hypothesis that cash demand grows during crisis situations, the impact should be visible in the books of the central banks. We ­exemplify this by showing the temporal development of gross issuance figures, i.e. the value of banknotes brought into circulation in Austria (consisting of the ordinary issuance for transaction and store of value purposes as well as for the replacement of cash unfit for circulation).

Chart B1 1 called “Gross issuance of euro banknotes in Austria” shows a line chart with the value of individual banknote denominations issued by the Oesterreichische Nationalbank in million euro between January 2007 and December 2010 at a monthly frequency. The total of all banknotes started at about 3.3 billion euro in January 2007 and slowly increased to 6.1 billion euro in December 2010, with constant fluctuations. In October 2008, there was a sudden spike which reached about 10.5 billion euro. After just a month, the total value receded to the level before of about 5 billion euro. The lines representing each banknote denomination individually run approximately parallel on different levels. The 5, 10, 20 and 50 euro denominations run below 1 billion euro on a constant level with minor monthly fluctuations. The 500 euro line shows higher fluctuations with a spike in October 2008, temporarily shifting the value from about 1.5 billion euro the month before to about 5.5 billion euro. The 100 euro line increases slowly from about 1.8 billion euro in 2007 to about 2.3 billion euro in 2010. 

Source: Oesterreichische Nationalbank.

When looking at the banknote gross issuance in Austria between January 2007 and ­December 2010, the figures show a striking increase of the issuance of the EUR 500 (pink line) and to some extent also of the EUR 100 (green line) banknotes. This rise was limited to September 2008 (bankruptcy of Lehman Brothers), when financial markets became extremely volatile and trust in banks eroded (Knell and Stix, 2015). In turn, asset holders switched to a low risk, stable and highly liquid asset: cash. In ordinary circumstances, gross issuance of the EUR 500 banknote in Austria was oscillating around EUR 1.5 billion per month. In September 2008, it peaked, reaching almost EUR 5.5 billion, which was four times the usual level at that time.

Chart B1 2 called “Daily banknote issuance in Austria” is a line graph showing the banknote issuance in million euro from February to April 2020 in Austria on a daily basis. Between February and the first half of March, the banknote issuance oscillated between 200 and 300 million euro. With the beginning of the COVID-19 pandemic, it temporally increased to 1.2 billion euro before it dropped to the initial level at the end of march.

Source: Oesterreichische Nationalbank.

Another example of cash being the payment instrument of choice during times of crises is the beginning of the COVID-19-pandemic. Between January and the first half of March 2020, the OeNB issued on average euro banknotes with a total face value of EUR 200 to 300 million per day. Furthermore, right after the announcement of Austria’s federal government to impose a lockdown, people responded with excessive demand for essential products like food and care products – as well as for cash: From March 12 to March 18, 2020, issuance increased sharply. On March 17, the OeNB’s cash issuance reached more than EUR 1.2 billion, which is five times the usual level.

1.2 Cash use for transactions has declined

How has the use of cash for payments changed over the past 20 years? For its anonymity, cash use for payments can only be estimated. One possibility to do so is to conduct payment diary studies, i.e. large scale surveys among Austrian residents in which the participants record all transactions over a one-week period (excluding recurring payments such as rents, insurance premia, etc.). The OeNB has one of the longest histories of consecutive payment diary studies, with the first conducted in 1996 (Mooslechner and Wehinger, 1997). Later studies were conducted in 2000, 2005, 2011, 2016 and 2020/2021 (Mooslechner et al., 2002, 2006 and 2012; Höpperger and Rusu, 2022). In the following, we will compare results from the studies of 2000, 2011 and 2020. 8

Chart 4 shows the cash share of payments in terms of the number of transactions and in terms of the value of transactions. Transactions refer to point of sale (POS), remote (e.g. internet purchases) and person-to-person (P2P) transactions. For the sake of temporal comparability, we exclude all transactions that were paid via bank transfers in the studies of 2011 and 2020 (the share of these payments is relatively small).

In the year 2000, 93% of all payment transactions were conducted in cash (7% with cards and cheques). This share declined to 63% at the end of 2020. A similar drop can be observed for the value of recorded transactions. In 2020, about half of the value of all payments was conducted in cash.

There are three main takeaways from these results:

  • First, cash use has declined significantly. Over the 20 years from 2000 to 2020, the average annual decrease was 1.5 percentage points (pp) per year for the cash share in value terms.
  • Second, despite this drop, cash is still of significant importance for everyday payments. In terms of the number of transactions, it is still the most frequently used payment instrument in Austria.
  • Third, the decline was not linear, as chart 4 might suggest. In particular, we think that the share of cash ­payments changed relatively slowly between 2011 and 2019. The COVID-19 pandemic, however, brought about a sudden and significant drop in the use of cash for payments. Box 1 provides an overview of the development from 2019 to 2021.
    Chart 4 called “Share of cash payments in Austria” shows in a bar chart the cash share by the number of transactions and the cash share by the value of transactions in percentage points for the years 2000, 2011 and 2020. The shares are derived from three Austrian payment diary survey studies. For comparability, bank transfers are excluded in 2011 and in 2020. Overall, cash shares declined between 2000 and 2020 in number and value of transactions. The cash share by number of transactions decreased from 93 percent in 2000, to 83 percent in 2011 and to 63 percent in 2020. The cash share by value of transaction decreased from 82 percent in 2000, to 68 percent in 2011 and to 50 percent in 2020.

Source: Payment diary surveys of the Oesterreichische Nationalbank, authors’ calculations.

Looking at table 1, two major changes in cash use become evident:

  • First, consumers are using payment cards gradually more for smaller purchases. This can be seen in table 1, as the average card payment amount declined from EUR 73 in 2000 to EUR 43 in 2020. In turn, the average amount of cash payment went from EUR 29 in 2000 to EUR 18 in 2020. 9
  • Second, the share of consumers who use payment cards has grown substantially, which becomes apparent when looking at the share of cash-only consumers, i.e. consumers who recorded zero noncash payments in the respective 7-day payment diary study, which decreased from 67% in 2000 to 30% in 2020. In turn, the share of consumers who used noncash payment means for more than half of their transactions increased from 2% to 26%.
    Table 1: Payment behavior over time  
    2000 2011 2020
    Average cash payment amount (EUR) 29 23 18
    Average debit card payment amount (EUR) 73 53 43
    Share of cash-only consumers (%) 67 47 30
    Share of consumers with more than 50% of noncash
    transactions (%)
    2 7 26
    Cash holdings in wallet (mean, EUR) - 142 123
    Cash holdings in wallet (median, EUR) - 107 81
    Share of consumers holding less than EUR 50 (%) - 25 31
    Source: OeNB payment diary surveys, authors’ calculations.
    Note: Average cash and debit card payment amounts and cash holdings
    in wallet amounts from 2000 and 2011 were inflated to prices from October 2020.

The changing demand for noncash payments is also driven by the supply of card accepting payment terminals and vice versa. The number of POS terminals increased from about 40,000 in 2000 to about 134,000 at the end of 2020. 10

The literature has shown that cash use and cash demand are closely related – a declining share of cash transactions implies that consumers carry less cash in their wallets. We find that the median amount that survey respondents carried with them was EUR 107 in 2011. 11 This value decreased to EUR 81 in 2020. In countries where the cash share of payments is significantly lower than in Austria, e.g. Sweden, Denmark, Canada or Australia, a high share of consumers makes almost all payments by card and carries just small amounts of cash for precautionary reasons. To see whether this behavior is observable in Austria as well, we have computed the share of consumers holding less than EUR 50 in their wallets. This share was 25% in 2011 and increased to 31% in 2020. Thus, holding only small amounts of cash for precautionary reasons is not (yet) a predominant behavior in Austria.

COVID-19 pandemic: sudden and strong decline in the use of cash that ­rebounded after easing of lockdown measures

An alternative method to measuring the use of cash for payments via survey data is to refer to payment card transaction data and to cash shipment data. The salient advantage of this approach is that it provides estimates at a high (in our case weekly) frequency. The disadvantage is that it rests on strong assumptions regarding velocity, hoarding and touristic cash flows, which is why a reliable longer time series cannot be constructed. However, with the outbreak of the COVID-19 pandemic, this approach was adopted to monitor the state of the economy, or rather private consumption (for further details, see Fenz and Stix, 2021). As a by-product, these estimates can be used to compute the implicit cash share (in value terms) for POS transactions.

Chart B2 1 shows our weekly estimates of how the cash share developed in 2019, 2020 and 2021. All values are smoothed (4 week moving average) and indexed by the mean cash shares in calendar weeks 5 to 12 of 2019. Although it should be noted that the uncertainty associated with these estimates is high and that the resulting numbers should only be seen as approximations, the temporal development is informative about the use of cash for POS transactions.

The share of cash in payment transactions (in value terms) declined strongly by about 25%, after the lockdown measures were imposed in Austria in spring 2020 (red line in comparison to blue line). The increase in card spending was driven by debit cards, and by contactless debit card payments in particular. For the latter, the limit for payments not requiring a PIN was raised from EUR 25 to EUR 50. Until the end of summer 2020, when lockdown measures were eased, cash use recovered somewhat in line with a “normalization” of consumption patterns (services, restaurants, travel). During the second and third lockdown at the end of 2020 and in the early months of 2021, the cash share dropped again. Overall, after the strong ­decrease in 2020, the cash share stabilized in 2021 relative to 2020. For example, in summer 2021, when no strong COVID-19 restrictions were in place, the cash share was somewhat lower but close to the respective value in summer 2020 (green line in comparison to red line).

The basic pattern that cash use first declined after March 2020 and then rebounded during summer 2020, but not to the same level that had prevailed before March 2020, could also be observed in other countries, e.g. in the Netherlands (Jonker et al., 2020), Italy (Ardizzi et al., 2020) and Canada (Chen et al., 2021a).

Chart B2 1 called “Estimated share of cash at POS (moving averages)” is a line graph showing an estimate of how the value share of cash for transactions at POS (short for point of sale) in Austria conducted with cash, debit or credit cards had changed for the years 2019, 2020 and 2021 on a weekly interval. The payment cards comprise only domestically issued cards. The values are indexed with the average of calendar weeks 5 to 12 in 2019 defined as 1. The data show a strong decline of cash payments during the pandemic lockdowns, especially the first lockdown in spring 2020. It was followed by a moderate recovery of cash use. Starting at an index of about 1 in week 5 of 2019, the estimated share of cash at the POS slowly decreased to a local minimum of about 0.94 in calendar week 16, before it again increased to the initial level. Starting from calendar week 37, again it slowly decreased to a minimum of about 0.92 at the end of the year. At the beginning of 2020, the index increased from about 0.94 to slightly above 1 in calendar week 4, before it strongly decreased over spring to about 0.76 in calendar week 19. From calendar week 20 onwards, the index slowly increased to about 0.9 until calendar week 36, before it decreased again to 0.81 in calendar week 52. In 2021, the index increased in the first 5 calendar weeks from about 0.8 to about 0.9, before it declined to 0.75 in calendar week 21. From here, it slowly increased again to 0.81 at the end of 2021.

Source: Payment card issuers, Oesterreichische Nationalbank.

1.3 A country of cash use – is Austria exceptional?

The evidence presented so far shows that cash is still playing a very important role in Austria – both as a store of value as well as a means of payment. This raises the question: how does Austria compare to other countries?

In 2019, the European Central Bank (ECB) conducted a payment diary survey study in (almost) all member countries of the euro area (ECB, 2020). It allows us to provide a harmonized cross-country comparison. Since this study differs in several important dimensions from the OeNB payment diary studies, we stress that the resulting cash shares cannot directly be compared with the cash shares presented earlier.

Chart 5 shows that the respective cash share found for Austria (58%) is somewhere in the middle range of all euro area economies but markedly above the euro area average (48%). Cash use in Austria is close to cash use in southern European countries like Italy, Greece, and Portugal but somewhat higher than in Germany (51%). The gist of chart 5 is that Austria is not exceptional regarding the use of cash for payments.

Chart 5 called “Share of cash at the POS and P2P (by value)” is a bar chart, showing the cash share in terms of the value of transactions for point of sale (POS) and for person-to-person (P2P) payments in percentage points of selected European countries and the euro area average. The data are derived from a payment diary survey by the European Central Bank. The countries are ordered from highest percentage share (Cyprus and Malta with 73%) to lowest percentage share (the Netherlands with 22%) from left to right. Austria lies in the middle range with 58%, markedly above the euro are average with 48%. Italy ranks one position behind Austria with about the same percentage share. Spain, Latvia, Slovenia, Slovakia, Greece and Lithuania rank on position 3 to 8 with shares between 62% and 66%. From position 11 to 20 (in sequence: Ireland, Portugal, Germany, Estonia, Belgium, Finland, France and Luxembourg), the shares decrease consistently to about 24%. 

Source: European Central Bank (2020) figure 1 and chart 1; sources cited therein: European Central Bank (2019), De Nederlandsche Bank and the Dutch Payments Association (2019), Deutsche Bundesbank (2017).

While the figures from the ECB (2020) refer to the pre-pandemic payment behavior, two studies provide insights about the change in payment behavior during the years of the COVID-19 pandemic for Switzerland and Germany (SNB, 2021 and Deutsche Bundesbank, 2021; in both studies, interviews were conducted in fall 2020). These two country results are interesting, as the cash share was rather similar in Switzerland, Germany and Austria before the pandemic.

The Swiss National Bank (SNB) (2021) reported that the cash share (in terms of the number of transactions) had fallen from 70% in 2017 to 42% in 2020. ­Deutsche Bundesbank (2021) recorded that the cash share had dropped from 74% in 2017 to 60% in 2020. A comparison of the results from the ECB payment diary study from 2019 (ECB, 2020) with the OeNB payment diary study from 2020 for Austria reveals a decline of cash share from 79% in 2019 to 63% in 2020. However, this comparison should be considered with precaution, as stated before. 12

Thus, the cash share fell strongly in all three economies, and contactless card payments were the key force in this development. In Austria and Germany, the ­decline was quite similar, while in Switzerland, it was considerably stronger. We are unaware of studies that analyze the causes of this divergent development. However, it would be interesting to pursue the question whether the stronger decrease in Switzerland was caused by a higher willingness of Swiss residents to take up payment innovations, by a differential change in consumption behavior during the pandemic or by external circumstances (e.g. whether merchants in Switzerland steered customers away from cash stronger than in the other countries; see ­Höpperger and Rusu, 2022).

In a broader, international comparison, many English-speaking countries have a considerably lower cash use than the average of European countries (Bagnall et al., 2016). For example, in Australia the cash share (by transactions) decreased from 62% in 2010 to 27% in 2019 (Caddy et al., 2020). In Canada, it declined from 54% in 2009 to 22% in 2020 (Chen et al., 2021b). The USA saw a decrease from 40% in 2012 to 26% in 2019, followed by 19% in 2020 (Greene and Stavins, 2021).

In Europe, several countries have lower cash use than Austria. In the Netherlands, the cash share decreased from 65% in 2010 to 32% in 2019 and further to 21% in 2020 (De Nederlandsche Bank and Dutch Payments Association, n.d.). The Nordic countries are often considered the forerunners of cashlessness. In surveys, Swedish respondents were asked how they had settled their last purchase (before the interview). In 2010, 39% of respondents stated that they had paid in cash; this share dropped to 9% in 2020 (Sveriges Riksbank, 2020). 13

Regardless of the pre-pandemic level of cash use, these numbers show that the use of cash for payments declined in all said countries shortly after the onset of the COVID-19 pandemic.

In general, economists have identified the main reasons why consumers use and hold cash (Shy, 2022). However, knowledge about and understanding of cross-country differences are much less profound. For instance, the argument that inhabitants of country X use less cash because they are more tech-affine remains a claim unless researchers provide convincing, causal analyses. We presume that a multitude of factors influences how cash-affine a country’s population is, including the institutional environment (costs of payment instruments for merchants and consumers, costs of acquiring and depositing cash, density of card terminal network), culture, perceived security (risk of burglary), history, the size of their shadow economy, etc.

2 How do Austrians use and view cash?

2.1 Cash use in socioeconomic groups

Has the decline in the use of cash been homogeneous across socioeconomic groups? To answer this question, chart 6 shows cash shares (in value terms) in 2000, 2011 and 2020 by education, income, age and municipality size.

Chart 6, “Share of cash payments by sociodemographics”, shows the cash share for payments in Austria in four different bar plots for education, income, age and municipality size for the years 2000, 2011 and 2020 by value in percent. Cash share among highly educated persons is generally lower than among those with a low education level. However, it declined over the years regardless of education level. The same goes for the cash share grouped by income, meaning high income less cash share but also declining regardless of income level. Cash share decreased among all age groups as well, widening the gap between younger and older persons with the latter making generally more payments in cash than the former. By size of municipality, among smaller villages the cash share was greater than among larger cities in 2000. In 2020 however, the share was very similar across all municipality sizes and had dropped regardless of size. The main takeaway of this chart is that, irrespective of education, income, age and municipality size, the overall cash share decreased from 2000 to 2020. Exact percentage of cash share for the years 2000, 2011 and 2020 by education: low education level: 83%, 81% and 57%; medium education level: 82%, 69% and 52%; and high education level: 73%, 57% and 40%. By income: low income: 82%, 71% and 57%; middle income: 77%, 69% and 52%; and high income: 74%, 62% and 40%. By age: aged 15 to 34: 78%, 58% and 41%; aged 35 to 54: 80%, 65% and 43%; and aged 55 or more: 82%, 74% and 57%. By municipality size: up to 5,000 inhabitants: 84%, 68% and 48%; 5,000 to 20,000 inhabitants: 78%, 62% and 49%; and more than 20,000 inhabitants: 75%, 67% and 51%.     

Source: Payment diaries of the Oesterreichische Nationalbank, Maaslechner et al. (2012), Höpperger et al. (2021).

In Austria, income and/or education are strongly correlated with cash use, conforming to evidence from other countries (Bagnall et al., 2016 and Shy, 2022). For example, in 2020 the cash ratio was at 40% for persons with high income,
and 57% for persons with low income. 14 In terms of temporal changes, the cash ratio declined from 2000 to 2020 by 34 pp for persons with high income and by 25 pp for persons with low income.

The chart also shows that cash use in 2020 was rather similar in rural and in urban areas. However, the cash share declined significantly stronger in municipalities with up to 5,000 inhabitants (–36 pp) than in municipalities with more than 20,000 inhabitants (–24 pp). Most likely, this reflects a growing acceptance of payment cards in rural areas. 15

Cash use differs substantially by age groups. In 2020, the cash share was 57% for persons aged 55 years or older and 41% for persons aged between 15 and 34 years of age. Regarding the former, the cash share had dropped by 25 pp since 2000, and regarding the latter, the decrease was 37 pp. Interestingly, differences between age groups were rather small in 2000 (owing to a lack of alternatives to cash). However, in light of the quicker take-up of new technologies by younger persons, it is remarkable that the cash share is still 41% for persons under the age of 35 years.

2.2 How do Austrians view and rate cash?

Why do Austrians use cash for their payments? The OeNB payment diary study of 2021 elicited the features of payment instruments that are perceived as most important by survey respondents. These features are ranked by their importance in chart 7 (from top to bottom). Subsequently, respondents were asked how cash, debit card payments with PIN code and contactless debit card payments without a PIN code (NFC) fulfilled each of these features in their opinion.

Chart 7 shows that Austrians view cash very positively with respect to the seven most important attributes. As regards ease of use, the most important feature, cash and debit cards are rated equally well, though, contactless payments are viewed slightly more favorably; payment speed yielded a similar result. A higher share of Austrians rated cash better than debit cards and contactless payments regarding the following, three attributes: “does not involve extra costs,” “preserves privacy of personal data” or “gives clear overview of expenses.”

Chart 7 called “How consumers rate cash, debit cards and contactless card payments” is a bar chart illustrating how consumers rated cash, debit cards and contactless cards regarding the seven most important properties of a payment instrument. The properties are ranked from top to bottom by importance starting with 1) “easy to use”, followed by 2) “not causing much hassle in case of fraud or theft”, 3) “quick payment speed”, 4) “preserves privacy of personal data”, 5) “widely accepted”, 6) “does not involve extra costs” and lastly listed 7) “gives clear overview of expenses”. For each attribute, horizontal bars show the percentage of respondents who considered the respective attribute as “very much” or “much fulfilled”. Don’t know answers were coded as missing which implies that survey respondents know each payment instrument well enough to provide a rating. The main takeaway from this chart is that Austrians view cash very positively with respect to the seven most important payment instrument attributes. Exact percentage of each property rated with “very much” or “much fulfilled”: “easy to use”: cash and debit cards each 90%, contactless cards 94%; “not causing much hassle in case of fraud or theft”: cash 60%, debit cards 57%, contactless cards 51%; “quick payment speed”: cash 86%, debit cards 88%, contactless cards 92%; “preserves privacy of personal data”: cash 94%, debit cards 63%, contactless cards 62%; “widely accepted”: no data for cash, debit cards 86%, contactless cards 78%; “does not involve extra costs”: cash 92%, debit cards 65%, contactless cards 64%; “gives clear overview of expenses”: cash 86%, debit cards 72%, contactless cards 65%.

Source: Payment diary study 2021 of the Oesterreichische Nationalbank.

Regarding the results for 2021, readers should note the following: First, the survey in 2011 asked the same set of questions, but back then cash received a more positive rating than debit cards on all features (contactless payments did not exist yet). Thus, the share of people who view cards more positively has considerably increased over time. Second, the fact that don’t know answers were treated as missing means that only responses with a rating were considered for the results. This might seem like a technicality but does affect the results, as, e.g., respondents who do not know/use contactless payments would usually not give a rating for an attribute. Therefore, the results are biased towards the view of card users. If don’t know ­answers were not ignored, cash would rank first for all features, with the exception of payment speed.

Chart 8 called “How younger and older consumers rate cash and contactless card payments” is a bar chart showing the share of respondents who considered four of the seven most important properties of a payment instrument as “very much” or “much fulfilled” in percent by age. The selected properties are “easy to use”, “not causing much hassle in case of fraud or theft”, “quick payment speed” and “preserves privacy of personal data”. The four grouped bars are 1) “age 51 or older: cash”, 2) “age 51 or older: contactless”, 3) “age 16 to 35: cash” and 4) “age 16 to 35: contactless”. The group of persons aged 51 or older have a similar rating of around 90% for both cash and contactless cards regarding “easy to use” and “quick payment speed”. For these two properties, the group of persons aged between 16 and 35 gave contactless cards a better rating than cash: “easy to use” 96% versus 86% and “quick payment speed” 92% versus 79%. Percentage of “not causing much hassle in case of fraud or theft”: age 51 or older: cash 62% and contactless 49%; age 16 to 35: cash 62% and contactless 47%. Percentage of “preserves privacy of personal data”: age 51 or older: cash 95% and contactless 59%; age 16 to 35: cash 92% and contactless 59%.  Therefore, regarding these two payment instrument attributes, both age groups rated cash better than contactless cards.

Source: Payment diary study 2021 of the Oesterreichische Nationalbank.

Moreover, chart 7 represents the average rating of payment instruments across the population. It is evident that persons with a cash preference view the various features very differently than persons who prefer payment cards. As these preferences are correlated with age, chart 8 compares the rating of cash and contactless cards for persons aged 51 or older and for persons below the age of 35. We chose to compare cash with contactless card payments, as the latter have grown in importance. Older persons rate cash and contactless card payments almost identical with respect to ease of use and payment speed. Younger persons rate contactless card payments higher than cash regarding these two attributes, which is consistent with the lower cash use of younger persons. With respect to the hassle in case of fraud and theft and the privacy of personal data, both younger and older respondents ranked cash better than contactless card payments. 16

3 Factors determining the future of cash: a cautious look ahead

We have seen a decline of cash use in Austria over the past 20 years, which is in line with an apparent international trend. Whereas the trend in cash use in Austria is comparable to other advanced economies, in particular Germany, the decrease was significantly smaller than in other economies, e.g. the Netherlands, Sweden or the English-speaking countries. This raises the question: will Austria move towards substantially more cashlessness, following those countries that are already farther down the road?

We have mentioned that the reasons for these diverging country trends have not been understood comprehensively, and we will also not be able to provide new insights. However, we can elaborate the factors that we perceive as critical for the future development of cash. Based on these factors, we then formulate what we expect for the next 10 years – albeit this outlook is a very cautious attempt: A lot depends on how the payment infrastructure and hence relative costs of payment instruments will develop. Also, the question whether cash will continue to be easily accessible and universally accepted by merchants is central for its future as well. Moreover, there are many unknowns like new technologies, economic instabilities, administrative limits on cash use, how access to cash and privacy preferences will change, etc. Lastly, the inherent difficulty of predicting our future payment behavior is manifested by previous predictions about the demise of cash – which often were quite wrong.

3.1 Factors supporting a future decrease in the use of cash

3.1.1 Demographic forces

Younger persons are faster in adopting and using new payment technologies than older persons (e.g. Brown et al., 2021). Chart 9 illustrates how age affects cash use, or more precisely, how payment behavior has changed by birth cohorts since 1996, allowing for a comparison of, e.g., persons who were born in the 1950s with persons who were born in the 1970s. It shows that cash use has decreased for all birth cohorts. However, the decline is stronger among the younger birth cohorts and the weakest among older cohorts. 17 In addition, we have mentioned before that younger consumers rate card payments as more convenient and faster than cash payments. Now, it seems that older persons too see cash and cards as equally convenient.

Overall, these findings suggest that cash use will continue to decline, as the share of younger birth cohorts will grow in the population. Moreover, we expect that the older cohorts too will continue to increasingly shift to noncash payment means, as they will become more comfortable with new payment technologies. A case in point are countries like Denmark, Australia or Canada, where older persons substantially reduced their use of cash, albeit they continue to be less willing to take up new payment technologies than younger persons (e.g. Caddy et al., 2020; Chen et al., 2021b; Danmarks Nationalbank, 2022).

Chart 9 called “Share of cash payments in Austria by age cohorts” is a line chart showing the cash share in value terms in percent derived from five Austrian payment diaries from 1996 to 2020. The data shows the cash share of payments of four birth year groups: 1) 1982 to 1991, therefore persons aged between 5 and 14 years in 1996; 2) 1972 to 1981 (aged 15 to 24 in 1996); 3) 1952 to 1971 (aged 25 to 44 in 1996) and; 4) 1937 to 1951 (aged 45 to 59 in 1996). For all birth cohorts, the cash share is decreasing over time, with differences in baseline and slope. For birth years between 1982 and 1991 (aged 5 and 14 in 1996), only two data points for the years 2011 and 2020 are available. In this period, the share of cash payments decreased from about 60% to about 40%. The largest drop in the cash share is registered for birth years 1972 to 1981 (aged 15 to 24 in 1996) from about 90% in 1996 to 35% in 2020. Birth years 1937 to 1951 (aged 45 to 59 in 1996) had a share of about 85% that decreased to 60%. The share of cash payments from birth year 1952 to 1971 (aged 25 to 44 in 1996) decreased from about 80% in 1996 to about 55% in 2020.

Source: Oesterreichische Nationalbank.
3.1.2 Growing importance of new payment technologies

The pace of technological progress in the field of retail payments over the past 20 years has been indeed astonishing, and it is evident that this development has ­reduced cash use. In particular, the contactless NFC technology, which allows for fast and convenient payments, will further challenge the role of cash for small value payments.

But how big is the impact of new technologies? It is an empirical challenge to separate the causal effect of a new technology like contactless payments from a general trend that is prevailing regardless of this new technology. 18 Brown et al. (2021) use data from Switzerland to provide estimates of the causal effect of contactless payment cards in the early years of their introduction. They show that ­increasingly convenient card payments (contactless card payments versus PIN-based card payments) cause a sizable growth in the use of payment cards, which is stronger among younger than older consumers. Additionally, the rise in card use is much more pronounced among consumers who had already used payment cards before the new technology existed, whereas previous nonusers of payment cards are still not using cards.

There are three broader conclusions that can be drawn from these results. First, the effect of a new payment technology depends on how convenient consumers assess new payment technologies vis-à-vis other payment instruments, in particular cash. As long as the consumers’ perceived convenience of cash payments does not deteriorate much, we expect that the overall use of cash will continue to decline only gradually. Second, some consumers do not perceive new payment technologies as an enhancement and will continue to be cash-affine. Third, Brown et al. (2021) report that, overall, the causal effect that contactless cards had on cash use was relatively modest 19 compared to the general trend away from cash, irre-­spective of contactless cards. Their estimates suggest that between 2016 and 2018 the annual trend decline in the Swiss cash ratio (in value terms) was around 2 percentage points.

A similar, general trend away from cash in Austria would imply that the cash share (in value terms) would decrease from 50% to 30% in ten years’ time. However, the assessment of Brown et al. (2021) has to be put in perspective, as they refer to the pre-pandemic situation. The COVID-19 pandemic could have increased the perceived convenience of contactless cards relative to cash for concerns about hygiene or risk of infection and hence has had a detrimental effect on the use of cash (Alvarez and Argente, 2022; Höpperger and Rusu, 2022; Jonker et al., 2020). In addition, merchants motivated customers to use noncash payment instruments. Both of these circumstances led to a considerable reduction in the use of cash, which seems to have stabilized in 2021 (see box 2).

What can be expected for the coming years? One scenario is that the longer-­term, pre-pandemic trend towards a decrease in cash use might not have changed much and will also prevail during the coming years. Another scenario is that the declining trend will be somewhat stronger after the pandemic, reflecting the growing importance of new payment technologies and “comfort with technology effects”. On balance, we think that the latter is more likely to happen. But even then, cash will remain an important payment instrument in ten years’ time, presuming that there are no strong shifts in how consumers assess the convenience of each payment instrument.

3.1.3 Increasing interest rates and inflation

The past years were marked by low interest rates and low inflation rates. During 2021, and much stronger in the first months of 2022, inflation has picked up, and a rise in interest rates cannot be excluded. As cash bears no interest rates, holding it increases opportunity costs 20 , thus lowering its attractiveness as a store of value. Hence, the amount of currency in circulation is rather likely to be adversely affected. As regards the use of cash as a payment instrument, the opportunity costs of holding cash for transactions arise from a comparison with the interest rate on transaction accounts. We think that increases in interest rates or inflation, as long as they do not surpass the levels observed during the past 20 years, will not have a large impact on the transactional demand for cash. First, cash balances held for transaction ­purposes are not large (see table 1). Second, interest rates on transaction accounts used to be rather low. Third, part of the higher opportunity costs of cash could be cushioned by “optimizing” withdrawals, i.e. by increasing the frequency of cash withdrawals.

3.1.4 Possible introduction of digital currencies by central banks

Central banks worldwide are considering offering a digital alternative to physical cash, commonly referred to as central bank digital currencies (CBDCs) (Hermanky and Summer, 2022). The effect of a digital euro or US dollar on cash use, should it be introduced, depends to a large extent on its concrete design features and how cash-like it will be.

As these features are unknown as of now, it is highly speculative to assess how CBDCs would affect payments in general and the transactional demand for physical cash in particular. It is well conceivable that CBDCs would partly replace card payments and some cash payments as well, especially if they meet people’s demand for convenience, privacy, etc. (Huynh et al., 2020). We note that these possible developments are a priori neither positive nor negative; but they foreshadow that the form in which consumers will hold central bank money could change. However, by the very nature of digital money, it will not be possible to replicate all features of physical cash (Shy, 2022; Krueger and Seitz, 2018). We expect that there will always be some demand for cash due to its high degree of privacy (Garratt and Van Oordt, 2021; Kahn et al., 2005).

The effect of CBDCs on cash hoarding will depend on holding limits for CBDCs. Presumably, these could be relatively low such that cash demand for hoarding purposes will not completely vanish.

3.2 Factors preventing or slowing a future cash decrease

3.2.1 Dense withdrawal network and no direct withdrawal fees

From the perspective of consumers, the main costs of cash are shoe-leather costs, i.e. the time and effort to withdraw cash. Other matters of cost like the costs of holding cash for payments or the risk of theft can be considered to be relatively small (in Austria). The dense cash withdrawal and cash deposit network in Austria has contributed to the high share of cash payments. 21

To assess the current status of access to cash, the OeNB estimated travel (route) distances from main residences (i.e. from all populated 100x100 meter grid cells in Austria) to the nearest ATM (Stix, 2020). Results for 2020 show that 67% of Austrian residents have to travel less than 1 km to reach the closest ATM. For 83%, the distance is less than 2 km, and 97,2% have an ATM within 5 km. On average, these findings suggest that the majority of ATMs and bank branches lies within a rather reasonable travel distance. In addition, most ATMs do not charge any withdrawal fees, regardless of whether the ATM operator is associated with the client’s bank.

However, this situation could change, thus worsening access to cash, mainly in rural areas. Digitalization and cost pressure have led banks to close branches – a trend that can also be observed in other countries. At the end of 2020, about 28% of Austrian municipalities did not have a bank branch, a rise from about 13% in 2002. Among smaller municipalities with less than 2,000 inhabitants, some 43% of municipalities had no bank branch at the end of 2020 (compared with 21% in 2002). Closing the last bank branch in a municipality could mean the removal of the last ATM as well. 22

In light of this trend, the future development might involve complementary sources to access cash like “cashback” or “cash-in-shop” services 23 via retailers (ERPB, 2021). It remains to be seen how access to cash will change in the coming years. In any case, we consider a dense withdrawal and cash deposit network as vital for the convenience of cash.

3.2.2 Universal acceptance of cash

Cash incorporates a number of unique features and functions, both from a user perspective and a payment system perspective. It is inclusive, as it provides payment and savings options for people with limited or no access to digital payment methods. Payments can be made offline without electricity and a payment device, which is an important backup feature, enhancing resilience, e.g. when electronic means of payment are (temporarily) unavailable due to natural disasters, power failures, wars, etc. Moreover, cash allows for instant person-to-person payments and serves as a store of value. As people can keep or spend it without involving a third party for (electronic) verification, autonomy and privacy are favorable characteristics of cash. 24 , 25 Also, cash provides immediate power to discharge from payment obligations without dependence on central verification. Furthermore, it is a claim on the central bank and therefore does not entail credit risks whereas noncash (digital) money is a claim on a private bank (private money). As public (cash) and private (noncash) money are always exchangeable at par, cash contributes to the public’s confidence in private money.

From a payment system perspective, banknotes are the only form of legal tender. This implies mandatory acceptance at full face value of banknotes and coins, unless payer and payee agree on a different payment method (freedom of contract), and the right to discharge payment obligations with cash. 26

Given the abovementioned unique features of cash, its legal tender status and the fact that cash infrastructure constitutes a public good, it must be in the interest of policymakers and decision-making bodies to ensure that cash continues to be universally accepted. 27 The product cash is per se not profit-oriented, contrary to all other forms of private monies, where different stakeholders compete against each other. Hence, said stakeholders may perceive cash as a competitor and could be interested in pushing back the use of cash. Therefore, the universal acceptance of cash in the future is not self-evident but needs to be supported by authorities – although this is currently of no urgent concern in Austria. This means ensuring availability of and access to cash as well as preventing disproportionate restrictions, cost inefficiencies or lack of infrastructure.

3.2.3 Valuable characteristics of cash

Cash is safe, simple to use, bears low costs, allows for fast payments, can be used for person-to-person payments, maintains payers’ anonymity and might be helpful to control one’s budget and prevent overspending. Many consumers – emphasizing many, meaning not all – might stick to using cash not out of habit but because they find the features of cash favorable. Therefore, a fraction of consumers will continue to use cash for its characteristics, though we can expect that card or mobile payers will grow relative to cash payers, as is evident from countries with a much lower cash share such as the Netherlands, Sweden, the UK or Canada.

3.2.4 Central banks should take an active role

Central banks take care of the distribution, the safety and the security (e.g. counterfeit resilience) of cash. Typically, they have a neutral stance toward the different means of payment, leaving it to consumers to decide freely which payment instrument they prefer.

Market participants offering noncash alternatives have an interest in expanding their market share among payment instruments. Varying from country to country, certain actions have put availability and acceptance of cash repeatedly under pressure: campaigns for the use of new (digital) means of payment, campaigns against the use of cash (due to the pandemic among others), legislative initiatives (cash payment limits), profitability aspects, etc. In recognition of the important role of cash, the Eurosystem has formulated its cash strategy consisting of four key strategic goals:

  • Continue providing an efficient supply of cash;
  • Ensure universal acceptance of cash and its broad availability;
  • Provide innovative and secure euro banknotes; and
  • Reduce the environmental impact of the cash cycle (regarding raw materials, transportation, production, etc.).

In our view, there are additional supportive measures that central banks can undertake:

  • Explain as well as promote the public value of cash and take a clear stance against negative branding;
  • Cooperate with stakeholders in the cash cycle (banks, cash-in-transit companies, retailers) and encourage innovative ideas about the cash cycle for more efficiency and effectiveness;
  • Monitor developments in the cash cycle (bank branch networks, ATM networks, cash lodgment facilities, cashback and cash-in-shop services, etc.) to facilitate policy decisions;
  • Support initiatives (legislative or nonlegislative) for safeguarding access to and the universal acceptance of cash; and
  • Support research activities to better inform policy decision-making regarding cash.

4 Conclusion

We have discussed the main developments regarding the demand for and the use of cash in Austria over the past 20 years. Our main finding is that the use of cash for payments has declined; nevertheless, cash has remained the single most important payment instrument. We have shown that cash is valued by consumers for its characteristics. In international comparison, Austrians are among the more cash-affine Europeans, however, comparable levels of cash use are observed in several other European countries. These facts are in stark contrast to claims about the nearing end of cash, that cash is outdated or that consumers continue to use cash just out of habit, reflecting a passive entrenched behavior.

Are Austrians just lagging the development in countries with lower cash use? In our view, no, because cash use depends on a multitude of influencing factors that differ substantially among countries, e.g. how relative costs change for consumers, merchants and banks. What we have learned through the COVID-19 pandemic is that cash use can decline abruptly. However, during pre-pandemic times the temporal changes were much more modest and gradual. Under predictable circumstances, cash use is likely to drop over the next 10 years, as new technologies will be taken up and used more. Yet, we expect cash to remain important in the near future, although to a varying extent across sociodemographic groups.

Cash is an easy to use, cheap, safe and inclusive means of payment and store of value. From the payment system perspective, there are several distinctive advantages of cash: its resilience to internet failures, power blackouts, cyberattacks as well as its possible functioning in times of natural disasters. Moreover, it is an inclusive means of payment, allowing for access to payments for people with limited or no access to digital payment methods. Cash is currently the only way to hold central bank money. Its convertibility with private money at par contributes to the public’s confidence in private money. 28 Not least, it is a tangible representation of national sovereignty – and euro banknotes and coins are the most tangible representation of European Monetary Unification.

The production and distribution of cash involves considerable fixed costs. If cash use were to decline strongly, maintaining the cash infrastructure would drive up the per-transaction costs. In such a scenario, at a certain tipping point self-­enforcing trends away from cash could set in, further accelerating the decline 29 – a development not as hypothetical as it may sound, with some low cash use countries being a case in point. In Sweden, regulatory measures have already been taken to maintain access to cash, and in the Netherlands, discussions about safeguarding an adequate cash payment infrastructure have been arising (Spaanderman, 2020).

As cash is of systemic importance and public value, its assessment cannot purely be based on a cost-benefit analysis and gives rise to active policymaking. A case in point: before the pandemic, critics advocated for a reduction of intensive care beds in Austria to cut costs – an assessment now revised. Bearing this example in mind, the relatively high cash intensity in Austria may prove advantageous. Therefore, adequate access to cash for consumers and to cash deposit facilities for merchants should be maintained. Also, paying in cash at any POS should remain possible, and measures should be taken to ensure cost efficiency along the supply chain of cash. Moreover, central banks can take a more active stance in highlighting the public value of cash. Actions like these may support an adequate level of cash use which, in turn, would ensure that consumers who prefer to pay in cash can continue to do so in the future.


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2 Oesterreichische Nationalbank, Cashier’s Division, anton.schautzer@oenb.at; Research Section, helmut.stix@oenb.at (corresponding author). The authors would like to thank the reviewer and participants of an internal seminar for very helpful comments. Opinions expressed by the authors of this study do not necessarily ­reflect the official viewpoint of the OeNB or the Eurosystem. ­

3 ©Apple Inc.’s iPhone was presented in 2007.

4 The strong increase in 2020 is mainly due to the sharp drop of GDP in course of the COVID-19 pandemic.

5 Typically, a distinction is made between transactional demand and nontransactional demand for cash. The latter arises from various sources, e.g. foreign demand, hoarding, precautionary demand, demand for shadow economy transactions, demand due to uncertainty, etc. As these two concepts overlap, we prefer to distinguish between domestic transactional demand, foreign demand and domestic hoarding (with hoarding being the residual demand that does not arise from the desire to conduct transactions and that does not arise from abroad). However, this does not solve the problem that the separation between transaction demand and domestic hoarding is difficult conceptually, e.g. if people save in cash for later purchases.

6 The issuance of the EUR 500 banknote was stopped across the euro area at the end of January 2019 with the ­exception of Germany and Austria, where such bills were issued until the end of April 2019. The EUR 500 banknote remains legal tender, though, and can be exchanged at cash desks of Eurosystem central banks for an ­unlimited period of time. The decision to discontinue the production and issuance of the EUR 500 banknotes was based on the assumption that they are (also) used for illicit activities (e.g. money laundering, terrorist financing). However, it is difficult to substantiate this assumption or the effectiveness of this measure against illicit activities. See Rogoff (2016) for arguments in favor of the discontinuance and McAndrews (2020) for counter-arguments.

7 Cross-border flows (e.g. via banknote wholesale traders) are largely excluded.

8 For the study in 2016, a different sampling procedure was adopted. Therefore, its results cannot easily be compared with the previous studies. Most survey interviews for the study of 2020/2021 were conducted in fall 2020 and a smaller share in 2021. We will henceforth denote this study as referring to 2020.

9 Transaction values from 2000 and 2011 were inflated with the consumer price inflation index to the respective value of fall 2020 to make the nominal values comparable over time.

10 Source: ECB, “Number of POS EFTPOS terminals - provided by resident PSPs - located in the reporting country - from Austria” (PSS.A.AT.S102.I00.I210.NT.U6.20.Z0Z.Z). This series is only available from 2014. Data for 2000 are taken from “Number of POS terminals - provided by resident PSPs - from Austria” (PSS.A.AT.S102.I00.I200.NT.X0.20.Z0Z.Z), which includes terminals provided by resident payment services providers abroad. Both series omit terminals by nonresident payment services providers in Austria.

11 This means that 50% of survey respondents carried less than EUR 107 with them. The average amount was EUR 142.

12 We note that results cannot easily be compared across countries, as the basis upon which the share is computed might differ across countries. Moreover, methodological changes in the interviewing mode (e.g. for Germany) can impede a comparison. In the case of Austria, the ECB study has a different sampling and interviewing mode than the OeNB payment diary study from 2020, making the results barely comparable. Thus, we stress that these results are just indicative and that readers should only consider the broad trend.

13 The basis for this international comparison is taken from figure 2 in Caddy et al. (2020). We thank J. Caddy, L. Delaney and C. Fisher for providing the underlying numbers. We have updated the respective values for 2020 and 2021.

14 Income groups are defined by terciles, meaning that, e.g., high income respondents represent 33.3% of the population and are defined as the third tercile group with the highest income.

15 Presumably, card acceptance was lower in 2000 in rural areas than in urban areas. This has changed with a now high share of POS (merchants, restaurants, etc.) accepting card payments in smaller villages as well.

16 Chart 8 does not include all features shown in chart 7. The results of the excluded features roughly resemble those of “privacy of personal data”.

17 Please note that chart 9 visually exaggerates the decline between 2011 and 2020.

18 A general trend towards a cash decline could be driven, for example, by a changing consumer behavior (caused by “comfort with technology effects”) or by more merchants offering POS terminals. Both circumstances would induce more card payments, irrespective of the new technology.

19 Of all the cash payments a consumer makes, only a relatively small fraction was replaced by contactless card payments. In addition, those replaced were small in value, thus limiting the impact on the overall cash share.

20 Opportunity costs are potential benefits that were missed out on because of choosing one alternative over another.

21 We presume that a worsening of access to cash will have detrimental effects on the convenience of cash (vis-à-vis cashless alternatives). Chen et al. (2021c) show that larger travel distances can also induce consumers to plan their withdrawals efficiently, e.g. withdrawing money during their errands.

22 It is important to note that the absence of an ATM in a given municipality does not necessarily imply that travel distances to the next ATMs are overly large, e.g. if an ATM is in a village nearby.

23 “[C]ashback: A cash withdrawal at the retailer’s checkout which is debited to the customer’s account and is made in conjunction with a purchase of goods or services. […] [C]ash-in-shop: A cash withdrawal or deposit at the ­retailer’s checkout which is settled through the customer’s account and is not being linked to a purchase of goods or services.” (ERPB, 2021, p. 41)

24 It is evident that cash is also used for illicit activities due to its high level of privacy. A thorough analysis of the associated issues lies beyond the scope of this paper. For a further discussion, see e.g. Rogoff (2016), McAndrews (2020) and Shy (2022).

25 Garratt and Van Oordt (2021) show that the privacy provided by cash payments improves welfare (see also Kahn et al., 2005).

26 The banknotes issued by the European Central Bank and the national central banks shall be the only such notes to have the status of legal tender within the Union.” (Consolidated version of the Treaty on the Functioning of the European Union, Article 128) “Where a payment obligation exists, the legal tender of euro banknotes and coins should imply: (a) Mandatory acceptance: The creditor of a payment obligation cannot refuse euro banknotes and coins unless the parties have agreed on other means of payment. (b) Acceptance at full face value: The monetary value of euro banknotes and coins is equal to the amount indicated on the banknotes and coins. (c) Power to discharge from payment obligations: A debtor can discharge himself from a payment obligation by tendering euro banknotes and coins to the creditor. [Commission Recommendation of 22 March 2010 on the scope and effects of legal tender of euro banknotes and coins (2010/191/EU)]

27 The Eurosystem Cash Strategy highlights the importance of universal acceptance of cash ( https://www.ecb.europa.eu/euro/cash_strategy/html/index.en.html ).

28 See also the speech by Fabio Panetta, Member of the Executive Board of the ECB, “Central bank digital currencies: a monetary anchor for digital innovation”, from November 5, 2021: https://www.ecb.europa.eu/press/key/date/2021/html/ecb.sp211105~08781cb638.en.html#:~:text=By%20providing%20a%20monetary%20anchor,protecting%20the%20value%20of%20money .

29 For example, if cash becomes too costly for some merchants, they could try to steer customers away from cash, which would lead to less consumers using and holding cash. If consumers hold less cash, they make fewer cash payments. If consumers make fewer cash payments, cash becomes more costly for some merchants and/or the number of ATMs will be reduced, etc. On the other hand, payment markets are characterized by considerable network effects that may slow down cash demand (Huynh et al., 2020; Huynh et al., 2022).

From SEPA to the digital euro: payments past, present and future

Johannes Asel, Simone Mingione, Petia Niederlaender, Georg Nitsche 30 Refereed by: Alfred Taudes, Vienna University of Economics and Business

This paper investigates the increasing importance of electronic retail payments for the euro area economy, including Austria. Looking back 20 years, we address payments-related developments and regulatory aspects and summarize recent studies and empirical data on selected economies that underline the growing importance of electronic retail payments systems for competitiveness and economic growth. Specifically, we analyze changes in payment behavior over time, most recently under pandemic conditions. Furthermore, we discuss the role of ­European players in the electronic retail payment value chain and outline success factors for electronic payment systems. Against this backdrop, we provide an outlook on the potential developments of electronic retail payments in the euro area, 15–20 years ahead. We present the most likely baseline scenario and an alternative scenario, and discuss related policy implications and possible solutions, such as the introduction of a digital euro. An annex offers a comprehensive overview of key characteristics of retail payments processes and systems.

JEL classification: G20

Keywords: retail payments, payment behavior, electronic payment systems, European payments autonomy

Effective and efficient as well as safe and resilient, electronic payment systems are undisputedly one of the critical backbones of modern market economies all around the globe. After all, we rely on such systems to transfer value between financial institutions in a secure and efficient manner, facilitate capital flows and investments, enable citizens and companies to purchase goods and services and governments to collect and make payments without the involvement of cash (Humphrey, 2019).

Due to the increasing globalization and digitalization of economic activities and the accompanying significant changes in customer preferences, the share of electronic transactions in the euro area, including Austria, has grown steadily relative to cash in recent years. Twenty years after the introduction of euro cash, electronic payment systems are more important than ever as the financial plumbing of the euro area’s market economies, highlighting the important roles of payment systems for the financial stability and strategic autonomy of all euro area and EU countries.

In this paper, we seek to answer the following questions: How have innovations and regulations impacted retail payment systems in Europe within the past 20 years? (Section 1.) What is the role of retail payments for the EU economies? ­(Section 2.) How has COVID-19 impacted customer and payment behavior in ­Europe and Austria? (Section 3.) What is the role of European players in the retail payment chain? (Section 4.) What are the likely scenarios for Europe’s future retail ­payments architecture (Section 5, which concludes the paper). On top of that, an annex provides an overview of today’s payment systems infrastructures and services.

1 How have innovations and regulations impacted retail payment systems in Europe within the last 20 years?

As a yardstick for analyzing the impact of innovation in payments on European economy, let us first emphasize the benefits retail payment systems are expected to provide. As put forward by Scott (2014, p. 69), the seven desirable benefits of retail payment systems are: “(1) finality and reversibility; (2) universality (ability to use at point of sale (POS) and remotely); (3) recordkeeping; (4) liquidity (maximizing interest earning assets); (5) security and safety; (6) financial inclusion and access; and (7) fungibility and ease of use.” Technological progress, financial innovation and changing consumer preferences have raised the importance of points (6) and (7) – access and ease of use – in particular. New market entrants foster innovation but also create lock-in effects and barriers for competition through the network effects they generate. Here is where the need for regulation comes in.

1.1 Twenty years of innovation in payments

Without any doubt, technological innovations over the past 20 years have hugely changed the payments landscape in Europe and beyond. Payments have been and continue to be the activity affected most by technological innovation (Petralia et al., 2019). In recent years, new payment methods, numerous new platforms and inter­faces have been developed and innovation is ongoing (Bech and Hancock, 2020).

Developments before the year 2000

If we look into the history of payment methods, cash has long been the predominant method of payment. When newly emerging plastic, credit and debit cards supplemented the cash-dominated payment landscape from 1950 onward, retail payments in particular started to become more diverse. The biggest game changer in this process has been the development of the internet – the networking infrastructure that connects devices together 31 – from 1960 onward, which opened the door for online shops and online payments. Early milestones (figure 1) include the first ever electronic business-to-business (B2B) transaction made in 1981 (Cashbook, 2020).

Figure 1, Beginnings of the internet /1980-1989), provides a timeline history of the early internet days, spanning the period from 1980 to 1989. The timeline displays milestone years and nodes representing these milestones. The key milestone in this period was the first ever business-to-business internet transaction in 1981. The node images are from ZDNet and the Oesterreichische Nationalbank.

In 1990, the World Wide Web (Web 1.0) came into being as a way of accessing information through the medium of the internet. The World Wide Web started as a proposal for a “hypertext project,” the idea being to link up large bodies of data to grant universal access to them (Berners-Lee and Cailliau, 1990). Figure 2 below gives a brief overview of the most important payments-related developments between 1994 and 1999.