Back On Track As ECB Reveals Post-Pandemic Payments Spike

July 27, 2022
Card payments are one of the big winners of a post-pandemic bump in transaction volumes across the EU, increasing 17 percent in 2021, according to the latest annual payments statistics released by the European Central Bank (ECB).

Card payments are one of the big winners of a post-pandemic bump in transaction volumes across the EU, increasing 17 percent in 2021, according to the latest annual payments statistics released by the European Central Bank (ECB).

COVID-19 had a significant impact on how people want to pay, a theme that almost all national competent authorities and banking associations across the EU have since highlighted.

In particular, the shift toward digital and contactless payment forms, and the increasing decline of cash, has been well documented.

Although this digital shift and move away from cash was welcomed in most parts of the payments industry, in many markets around Europe it helped to mitigate overall falling demand for payments.

During these challenging times, consumers were simply not making as many payments overall as businesses shut up shop and national lockdown policies drove customers away from the high street.

In the latest annual statistical release from the ECB, known as the Bluebook, however, there is ample evidence that economic life is returning back to normal on the continent following the pandemic.

In 2021, overall non-cash transactions increased 13 percent during the year to 143bn, representing a five-year high growth rate. This compares to just 4 percent growth in 2020, and significantly above the 9 percent annual average rate of growth between 2017 and 2021.

Card payments, in particular, were one of the big winners of this post-COVID bounce. Following a major slump in 2020 when card payments increased by just 3 percent — well below the five-year average — there was a major reversal in fortunes in 2021 as the number of transactions climbed by an impressive 17 percent.

Payment firms' revenue is typically derived from the value of card payments. The good news for these firms is that the bounce here was equally impressive. With flat growth in 2020, the total value of card payments increased 15 percent in 2021 to €2.7trn.

Card payments were by far the most popular non-cash payment method in the EU, accounting for 49 percent of the total number of non-cash payments. Following Brexit, France has taken over the mantle of the UK as the EU’s largest cards market, accounting for 22 percent of these payments made in the region.

The number of credit transfers also saw a significant jump in 2021, increasing 10 percent (double the growth rate of 2020), to 35bn.

However, despite this strong growth, there are no signs that instant payments are making significant headway.

According to the European Payments Council, SEPA Inst. transactions account for around 11 percent of SEPA credit transfers, which VIXIO estimates as 2.7bn transactions.

The lack of significant development of instant payments usage in the region has triggered a sense of urgency among EU policymakers who are keen that the payment method becomes "the new normal", as set out in the European Commission’s 2020 Retail Payments Strategy.

Brussels is due to issue new regulations on the matter in the autumn of this year.

Regional variation

Payments in the EU, for the most part, are heavily concentrated among the region’s largest economies, such as France and Germany, which combined account for 38 percent of all non-cash payments (compared with 42 percent of EU GDP).

However, it is perhaps surprising that the third largest non-cash payments market in the EU is Poland, well above much larger economies in the region, such as Italy, Spain and the Netherlands. There were 11.5bn non-cash transactions made in Poland in 2021, up 18 percent on the previous year.

The other major payment instrument used across the EU is direct debit, which accounted for 20 percent of total non-cash payments. However, usage and popularity of this payment method vary significantly from market to market.

In some markets direct debits are not offered at all or are unpopular with consumers who do not trust billers to take money directly out of their accounts. In others they are common practice.

By far the largest market for direct debits is Germany, which accounted for just under half of all payments made using this instrument in 2021 across the EU.

In Germany, direct debits are also accepted at retailers via the ELV system, whereby a consumer can authorise a merchant to debit their account at the point of sale. As a result, Germany is the only country in Europe (and possibly the world) where direct debits are the most popular form of non-cash payment method, accounting for 43 percent of all transactions in 2021.

The highest share of card payments as a percentage of the total number of non-cash payments in 2021 was found in Portugal at 72 percent. Part of the explanation here is that in Portugal it is not uncommon for consumers to pay bills, buy tickets and initiate other payments via an ATM using their card.

Meanwhile, the total number of automated teller machines (ATMs) in the euro area decreased by 4.2 percent to 280,000.

The reduction in ATMs has been a running theme in Europe’s access to cash debate. For example, last year, the Bank of Lithuania negotiated with financial institutions in the country to double the number of cash facilities in a year.

However, in Banque de France’s 2021 Access To Cash report, the central bank concluded that ATM reductions were mostly limited to heavily populated areas and meant that it was “not likely” to affect the overall population’s access to cash withdrawal services.

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