4.2 Digital payments, cash and cheques

4.2 Digital payments, cash and cheques

“Digital Payment” is a broad term which covers the transfer of value electronically, without the use of paper based instruments such as cash or cheques. The European Commission has noted that “most of the new digital payment solutions are still largely based on traditional cards or bank transfers, irrespective of whether they are offered by incumbent banks, card companies, financial technology firms (FinTechs), or BigTechs”.[1] Digital payments have become more prominent in the Irish payments ecosystem, as demonstrated by the rise of such payments in Ireland to over 1.8bn transactions in 2021. This increase in digital payments is due to a number of factors including the increasing range of digital services on offer in the Irish market, and consumer preference over the Covid-19 pandemic.

The 2018 Indecon report noted that;

“Ireland is ranked 10th out of 27 European countries for the combined use of card payments, credit transfers and direct debits, and is ahead of the EU average. Ireland’s overall ranking reflects a high ranking in terms of card usage (8th). The highest usage of electronic payments can be seen in Sweden and Finland followed by the Netherlands. The figures for SEPA include payments related to traditional banks, but also new entrants such as Revolut and N26, while the card payment statistics include payments using ApplePay or GooglePay. Despite the growth in electronic payment, cash and cheques continue to be important payment mechanisms in Ireland. Since 2012, however, there has been a notable reduction in the annual number of ATM withdrawals per capita, and a fall in the number of cheques issued per capita. The evidence suggests that Ireland is currently experiencing a very marked change in behaviour and a move towards electronic-based payments.”[2]

This sentiment is supported by Central Bank data based on provision of services by bank and non-bank PSPs (i.e. entities licensed to provide payment services such as a post office), headquartered in Ireland. Figure 1 demonstrates that the number of digital payments have more than tripled in the period 2014-2021.

Figure 1: Total domestic non-cash electronic payments volume by proportion of payment instrument

Source: Central Bank of Ireland Payment Statistics / ECB Data Portal

The NPS uses ATM withdrawals as a proxy measure for cash spending due to data availability issues and the complexity in tracking cash transactions. When looking at ATM withdraws, Figure 2 and Figure 3 illustrate the decline over the last number of years. The volume of ATM withdrawals in Ireland have declined from a high of 192 million in 2018 to a low of 86 million in 2021 as highlighted in Figure 2.

Figure 2: Breakdown of cash withdrawal volume

Source: Central Bank Payment Statistics 2021 / ECB Data Portal

In fact, Figure 3 indicates that the number of withdrawals with an ATM card is a fraction of what it was 20 years ago. In 2000, the average Irish person used their ATM card to make a withdrawal 42 times a year. By 2021 this had fallen to six withdrawals per year, which is lower than the euro area average of nine.

Figure 3: No. of ATM withdrawal per cards issued by resident PSPs[3]

Source: Central Bank Payment Statistics 2021 / ECB Data Portal

The decreasing number of ATM withdrawals per card, is contrasted with the growth in the average value, which has been on an upward trajectory, as shown in Figure 4. In January 2015 the average withdrawal amount was €118 which grew to €154 by January 2023, of course this is influenced by a number of factors, besides payment instrument preference, such as inflation.

Figure 4 Average monthly ATM withdrawals

Source: Central Bank of Ireland Debit and Credit Card Statistics

The use of cheques has seen a marked decline since 2016 when the overall number of cheques lodged in the country for the year reached high of 47m as compared to 2021 this had fallen to 20m as demonstrated by figure 5.

Figure 5: Number of domestic cheques sent per year