The (Changing) State Of Cash In Greece

Cash is still big in Greece, but could it be headed the way of the ancient drachma (RIP)? According to new research, a massive financial crisis and new regulations have wreaked havoc on the state of cash in Greece, with the country’s cash share falling by more than 25 percent since 2002. Find more insights, along with an interview with Babis Ermidis, head of payments at the National Bank of Greece, inside the hot-off-the-presses Global Cash Index™ Greece Analysis.

Stringent austerity measures, a collapsing stock index, shuttering banks and capital control were just some of the many problems that marked the recent gradual collapse of the Greek economy.

In 2015, broadcast images of Greeks swarming the banks to collect pensions and withdraw money painted a grim picture of a dysfunctional financial system that lacked the technological ball bearings to disseminate funds and provide banking services to its customers.

And as the looming economic crisis pushed banks to shutter for three weeks, the need for plastic cards to disperse funds was felt widely and strongly in the nation of 11.5 million people.

In July of that year, as Greek banks reopened their doors, they began issuing a large number of debit cards to assuage the effects of the cash crisis in the country.

The National Bank of Greece (NBG), the second-largest lender in the country, issued close to 400,000 debit cards to its customers. The move was followed by many other major banks issuing several hundreds of thousands of debit cards.

While the issuance of debit cards gave respite to merchants struggling in a cash-strapped market, it relieved consumers of the pains of tight capital control.

“The picture here changed overnight,” said Babis Ermidis, head of payments at the NBG. “We are not as cash-intensive as we used to be.”

PYMNTS caught up with Ermidis to get the scoop on the state of cash in the cities and towns of Greece, how the financial landscape changed since the crisis last summer and how he sees payments evolving in the country.

Looking back at the years when cash was primarily the only choice of payments in the country, Ermidis reflected on the perils of the shadow economy that had long stalled digitization and adoption of electronic payments.

This economy has always been deep in the skin of Greek society, Ermidis told PYMNTS. Solely relying on cash made it fairly easy to evade taxes and avoid money transfer rules. Moreover, it helped avoid the 2–3 percent transaction fee that is synonymous with the use of debit cards, he said.

Managed mostly with cash, the shadow economy has represented a large part of the mainstream Greek economy for over a decade. In a report, Friedrich Schneider, an economics professor at Johannes Kepler University, estimated the size of it in Greece at €52 billion in 2005, which was 26.3 percent of the country’s gross domestic product (GDP).

It also enabled wealthy citizens to stash money in offshore accounts and avoid paying close to 40 percent in income taxes — a standard for most Greek citizens. In 2012, Schneider estimated that Greek citizens were hiding close to €70 billion in Switzerland and nearly €20 billion in Britain. The rest of the taxable income was hidden in bank accounts in the U.S. and the Cayman Islands, according to The New York Times.

In an effort to bring back cash into the country, tax administrators in Greece are now taking strong measures to nab tax evaders. Earlier this year, Greek tax authorities reportedly seized close to a half-million bank accounts that contained nearly €1.6 billion and foreclosed a large number of properties owned by debtors.

After a huge outflow of cash from its banking system during the crisis, the banks are now finally seeing money returning. People were withdrawing cash, putting it under their mattresses or sending it abroad, but then, with capital controls, the country saw a period of relative stability, Ermidis said. Now, with those controls loosening, Greece is “at a turning point where we have a marginal increase in the deposits month by month, but it’s small,” he added.

The relaxation of capital controls is likely to attract €3 billion–€4 billion in fresh deposits, George Chouliarakis, Greece’s deputy finance minister, said earlier this year, Financial Times reported.

As of now, Greeks are allowed to withdraw up to €420 from their bank accounts each week. However, other control limits are expected to remain in place to enable the government’s push for use of plastic cards for daily transactions.

With the government leading initiatives to digitize the country’s economy, cash is not the king in Greece anymore, Ermidis said. Consumers must make most of their payments through plastic money, electronic transfers or direct debit because they don’t have enough cash on them to pay for all their expenses, he added.

Nevertheless, plastic cards are still far from representing a significant share in payment methods. In 2015, Greeks used a total of €99 billion in cash, compared to €60.96 billion spent through cards, according to PYMNTS’ analysis of the state of cash in Greece.

However, with the slow and steady rise of debit cards, use of cash is projected to continue declining. By 2020, it is estimated that cash share will represent 47.9 percent of Greece’s GDP.

“Cash will be used less and less,” Ermidis said. “I think that now it’s going to the skin of the Greeks to use electronic means.”

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About The Index

The Global Cash Index™, a Cardtronics collaboration, focuses on the use of cash for making payments and as a payment method that equally plays a role with cards, checks, direct debit and other methods of settling up between consumers and businesses. Unlike most reported estimates of cash, our proprietary data analysis focuses on the use of cash for making payments rather than hoarding.



The PYMNTS Cross-Border Merchant Friction Index analyzes the key friction points experienced by consumers browsing, shopping and paying for purchases on international eCommerce sites. PYMNTS examined the checkout processes of 266 B2B and B2C eCommerce sites across 12 industries and operating from locations across Europe and the United States to provide a comprehensive overview of their checkout offerings.

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