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Italy Scraps Cashless Campaign

Categories : Cash is a public good, Cash is efficient, Cash is the first step of financial inclusion
July 27, 2021
Tags : Cash Payment Limitations, Digital payments, Italy, Regulation
The Italia Cashless initiative was launched in December 2020 and rewarded those who favour digital payments over cash. The new government, led by former ECB President Mario Draghi, has terminated the programme.
Guillaume Lepecq

Chair, CashEssentials

This post is also available in: Spanish

A €5 Billion Programme in Favour of Digital Payments

The Italia Cashless initiative offered an automatic 10% refund from the state to citizens making in-store purchases with a payment card or smartphone app. It included a lottery mechanism with prizes for shoppers who total the highest number of transactions. The previous government led by Giuseppe Conte had earmarked 1.75 billion euros for the scheme for 2021 and three billion for the following year.

A Disproportionate Programme with a Potentially Adverse Impact on Cash

The ECB had been critical of the scheme and argued the Italian government should have consulted it. On his last day in office at the Executive Board of the ECB, Yves Mersch wrote to the Italian Minister of Economy and Finance on 14 December, emphasizing that “Against this background, the ECB considers that introducing a cashback program for electronic means of payment is disproportionate in the light of the potentially adverse impact on the cash payment system that such a mechanism could have and because it undermines the objective of having a neutral approach to the different means of payment available.”

The ECB also reminded the Italian government of its “obligation to consult the ECB in the future where applicable.”

The Italian Treasury pressed on nonetheless with the plan adding the ECB opinion was not binding. “The formal remarks made by Mersch do not appear to be justified,” the Treasury said according to Reuters.

A Poorly Designed Policy, Favouring Wealthy Households

The Government of Mario Draghi has scrapped the initiative from the 30th of June, arguing that the policy was poorly designed and favoured richer households with less propensity to spend, reports Reuters. The programme was initially scheduled to last until June 2022.

Furthermore, while the measure was initially aimed at reducing tax evasion, critics have reported that it has encouraged users to divide a single purchase into multiple payments to inflate the number of transactions and reach the threshold for reimbursement. This had forced the government to exclude micro-transactions from the programme.

According to The Local, some 7.85 million people have signed up for the scheme, and 5.89 million have qualified for cashback of up to €150, i.e., less than 10% of the population.

Limits on Cash Payments Persist

Scrapping the Cashless Italia campaign should certainly be viewed as a positive signal towards a fair and inclusive payments ecosystem. However, Italy – and many other countries – continue to impose limits on cash payments, and the thresholds have been lowered over time. On 1 July 2020, the limit was reduced from €3,000 to €2,000 and is due to be lowered to €1,000 from 1 January 2022. It is high time these limits be dropped as well.

Mario Draghi’s signature is present on billions of euro banknotes as former President of the European Central Bank.


This post is also available in: Spanish