Italy Reshapes Pro-Cash Strategy Amid Surge in Digital Payment Adoption

Leading up to final approval, payments-related aspects of Italy’s 2023 budget were hotly debated.

One of those debates ended up with the government backtracking on an initial proposal to ditch fines for merchants that don’t accept card payments under €60 following heavy backlash, proposing instead to lower merchant fees for electronic transactions in a last-minute amendment to the rule.

The budget amendment says Rome will work to broker a deal between banks, payment companies and sellers to reduce fees on electronic transactions worth up to €30 ($32.55) for businesses with annual revenues of up to €400,000 ($433,940).

Should payment processors fail to come to an agreement to bring down costs for merchants by the end of March, the government intends to impose a so-called “solidarity contribution.” This levy will be equivalent to 50% of their proceeds from fees on payments of up to €30.

The government’s change of course follows criticism from the country’s central bank. In December, Fabrizio Balassone, head of the Structural Economic Analysis Directorate of the Banca d’Italia, told parliament that the government’s cash policy threatened efforts to tackle tax evasion and would favor the shadow economy.

Beyond dropping merchant fines for non-acceptance of electronic payments, Balassone was especially critical of a provision in the 2023 budget that raises the ceiling for cash payments.

From a previous limit of €1,999.99, the ceiling is being upped to €4,999.99, marking a significant diversion from the €999.99 limit that would have become effective under previous legislation.

Echoing Balassone, the European Commission (EC) in an opinion on Italy’s budget, broadly supported the government’s economic direction but raised concerns about both the higher threshold for cash transactions and the now-scrapped plan to allow merchants the option to not accept electronic payments under €60.

Italians Increasingly Embrace Digital Payments

Ultimately, while having the same end goal to lower payment fees for businesses, the new approach is more in line with EU orthodoxy.

Whereas the previous plan would have given some merchants an incentive to refuse low-value electronic payments, thus encouraging the use of cash, the more recent amendment will have little effect on how end consumers choose to pay.

In general, the findings of a recent PYMNTS report, “How The World Does Digital: Different Paths To Digital Transformation,” suggest that digital payment methods are on the rise in the country.

In the third quarter of 2022, the report found that about a fifth (20.4%) of Italian consumers reported paying for their last in-store purchase using a mobile wallet, an increase of more than two percentage points compared to the previous quarter.

Of the 11 countries surveyed, that figure places Italy in the top four when it comes to in-store mobile wallet usage.

What’s more, Italians show an even greater preference for digital wallets in their online transactions. Consumers in the country reported being more than twice as likely to use one online than they were to make payment in-store.

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