In a post about the remarks by the Governor of the Bank of Sweden, I alluded to some research (commissioned by MasterCard) from Dr Laura Rinaldi from the Centre for Economic Studies at Leuven University. She found that it is indeed true that not only do customers see cash as being “almost free”, but that proper cost-based pricing would shift debit cards from being 4% of retail transactions in Europe to a quarter as I mentioned. But she goes on to say that this shift would add 19 basis points to the European economy. That’s good news for most people, surely. Not for the people I was chatting to about it a couple of days ago, because I was speaking at a conference about ATMs. I’m not sure if they’re going to support my campaign to end the menace of cash as the first opportunity.
What’s also interesting about Dr. Rinaldi’s research is that she says that the European economy would grow by an additional 9 basis points because moving to e-payments would reduce the “shadow economy” which is, naturally, based on cash. When Proton was launched in Belgium — Proton is the most successful of the European e-purse schemes to date (ie, not terribly successfull) — I do recall a number of people at the time saying that one of the reasons for the poor usage figures was the size of the informal economy in Belgium. I wonder to what extent the evolution of digital money will be influenced by the debate about the “legality” of the transactions?