"Payment Radar" of Latvijas Banka: instant payments affect people's habits

  • 2020-03-25
  • LB/TBT Staff

The most recent "Payment Radar" of Latvijas Banka suggests that the use of instant payments is growing at a relatively high rate, and the popularity of non-cash settlement supported by an increase in its user-friendliness continues to strengthen, but cash, at the same time, holds its position.

The present overview contains the latest information on money usage habits of Latvia's households, businesses and the public at large. The "Payment Radar" is published semi-annually and available on Latvijas Banka's website (http://www.bank.lv/en/tasks/payment-systems/payment-radar). Development of the proportion and interaction between non-cash and cash payments (as at February 2020) is the central measurement of the overview supplemented by more detailed numerical information and experts' commentaries.

The March edition of the "Payment Radar" suggests the following:

– with a gradual increase in the popularity of non-cash payments, the proportion of cash and non-cash payments settled by one resident of Latvia constitutes 36% and 64% respectively (in terms of the number of payments made);

– with the popularity of instant payments growing, they have already been used by 25% of the population, while 50% of Latvia's society are aware of them;

the possibility to make a payment by indicating the payee's mobile phone number only has been currently used by 11% of those employing instant payments, which have a high growth potential since AS SEB banka, in addition to AS Citadele banka, has also just connected to the Proxy Registry "Instant Links" of Latvijas Banka, but Swedbank AS and four large Estonian credit institutions are expected to connect to the Registry already in the coming weeks;

– the population's viewpoint concerning the future of 1 cent and 2 cent coins is still divided, i.e. 46% of the population believe that 1 cent and 2 cent coins should remain in circulation. However, it should be noted that the proportion of people having doubts regarding this matter has expanded to 27%;

to ensure clean and quality cash circulation, Latvijas Banka checked 152.3 million banknotes in 2019, replacing 24.0 million or 15.8% of them by new ones.

The "Payment Radar" employs the results of the population survey carried out by a market and social research agency SIA "LATVIJAS FAKTI" in February 2020. Aigars Freimanis, Director of SIA "LATVIJAS FAKTI", Deniss Fiļipovs, Head of the Payment Systems Policy Division of Latvijas Banka, Harijs Ozols, Latvijas Banka's Innovative Payment Services Manager, Jānis Blūms, Head of the Cash Department of Latvijas Banka and Ģirts Jansons, Deputy Head of the Cash Department of Latvijas Banka, have commented on the recent trends in the development of non-cash and cash use.

"Latvia's population is rather slow in changing its financial habits. Nevertheless, there are no grounds to regard our society as being conservative or prejudiced against new technologies," stresses Aigars Freimanis.

Both statistics of Latvijas Banka and sociological measurements reflect a robust upswing in the share of instant payments. "Not long ago, instant payments seemed like science fiction, but today they are taken for granted and actually have become a standard in the area of payments. Households and businesses transfer money at any time whenever needed, including weekends and holidays," Deniss Fiļipovs points out.

Another innovative payment solution, i.e. an opportunity to make interbank payments, indicating the payee's mobile phone number only without the need to know and enter the payee's current account number for each payment makes life more convenient. Harijs Ozols projects development of this service, pointing out that the Latvian Swedbank AS and Estonian Coop Pank AS, AS LHV Pank, AS SEB Pank and Swedbank AS, in addition to AS Citadele banka and AS SEB banka, will start to offer this opportunity to their customers in the coming weeks.

Following on from the discussion about the use of 1 cent and 2 cent coins in circulation, the "Payment Radar" offers infographics demonstrating the principle of rounding the total purchase amount which makes settlement more convenient without suffering economic losses. According to Ģirts Jansons, bringing the idea, which is currently implemented in several countries, to Latvia "would allow a reduction in cash processing costs, would ease the work of cashiers, would bring down the number of coins to be minted, thus saving natural resources, as well as it would make buyers' everyday life more convenient since their wallets would contain less coins."

The crisis caused by the coronavirus (COVID-19) has led people to think more about their exposure to the external environment, which can be a potential transmission pathway of viruses. One of the things people use in their daily lives and touch on a regular basis is also cash. Jānis Blūms confirms that "central banks, irrespective of the spread of viruses, constantly ensure the availability of clean and quality banknotes and coins to the population. Cash, which during its life cycle returns to Latvijas Banka, is subject to the highest level inspection, and the worn-out or damaged banknotes and coins are destroyed. The received coins are also checked and prepared for recirculation."

For more extensive expert commentaries, see http://www.bank.lv/en/tasks/payment-systems/payment-radar