They ask to reduce the use of cash and promote digital payments to end informality

According to a survey carried out by the Association of Argentine Banks (ADEBA), in the third month of the year a total of $900 billion was withdrawn from ATMs, while bank users also withdrew values ​​of around $600 thousand at the window. millions. In addition, cash deposits were made for $1,800 billion.

For the banking association, the high level of use of cash notes constitutes a problem that affects the development of the economy in different aspects.

On the one hand, its use favors the informality of the economy since payments made in cash “are not traceable nor are they recorded”, unless those involved decide to leave a record of the transaction. In this regard, they state that cash “promotes non-formal operations in the economy, associated with tax evasion and ‘black’ hiring”.

In turn, its use generates high costs due to the issuance and destruction of money by the Central Bank of the Argentine Republic (BCRA). “During 2020, only the expenses in materials for monetary issuance amounted to US$ 118 million”, they explained from ADEBA and added that the expenses of hoarding, transportation and destruction of cash must be added to this.

They also state that it implies a higher operating cost with respect to digital money since “it is made more expensive by receipt, classification, conditioning, hoarding and transportation of bills.” The cost of transporting money is one of the main expense items of financial entities, they detailed.

Likewise, the process of creating, handling, transferring and disposing of cash “ it is highly polluting”, as indicated by an investigation by the European Central Bank, which estimated that the carbon footprint associated with the use of Euro banknotes is equivalent to the consumption of a 60-watt lamp or the 1 km journey in a gasoline car per each of the inhabitants in the euro zone. “If that figure is extrapolated to Argentina, the carbon footprint caused by the use of cash in Argentina per year is equivalent to having 20,000,000 lamps lit a day or a car making 1,000 laps of the earth,” they graphed from ADEBA .

Another of the negative aspects of its use is that it exposes its users to theft “which often constitute serious crimes and can even cause death.”

In addition, they emphasized that it makes financial inclusion difficult, since by receiving cash payments they do not enter the formal financial circuit and are excluded from the financial system. In this way they are marginalized from the benefits generated by financial inclusion and remain in a state of vulnerability.

This last point has as a correlate another negative effect that has to do with the fact that it affects the banking of the economy. By not entering cash into the formal circuit, it is impossible to have accredited bank deposits and therefore financial entities cannot determine the “lending capacity” of the financial system towards the subject. “As a part of the savings remains outside the banking system, its capacity to generate loans is reduced and this determines a lower degree of bankarization,” they deepened.

From ADEBA they pointed out that among the causes that explain the high use of cash, the following stand out:

• “Tax on bank credits and debits on bank transactions: The operations carried out within the banking system are affected by a tax that makes the operation more expensive (credits and debits). On the contrary, the use of cash does not pay any tax. In this way, society perceives that cash is cheaper than electronic money, although in reality it is the other way around. Electronic money is more efficient and cheaper than cash.”
• “Withholdings and perceptions of IIBB, VAT and other taxes. Banks act as a withholding agent for both the national government and the provinces, such as VAT and IIBB. These taxes make the use of electronic money “expensive” compared to cash, which is free of these levies”.
• “BCRA provision that determines free cash deposits and withdrawals for individuals and MiPymes companies, regardless of the amount. Depositing and withdrawing cash seems free to most users, regardless of the amounts. However, depositing and withdrawing cash within the financial system generates high costs for financial institutions, when it could be done with electronic money in a much more efficient and less expensive way. The movement of cash makes the operation of the financial system more expensive; is undoubtedly counterproductive for financial inclusion. BCRA regulations “subsidize” the use of cash to the detriment of electronic money”.
• “Lack of a comprehensive “fight against cash” policy that involves all levels of government. The use of cash affects the whole society. Consciousness must be taken of the high economic, social and environmental costs generated by the use of cash, in order to then articulate a comprehensive policy between the public and private sectors to “combat” the use of cash.”
• “Limited financial education. Financial education is a fundamental pillar to achieve true financial and social inclusion. The lack of knowledge about the benefits of using electronic money, digital payments and financial services in general, make people decide to use what is “known”, but less efficient: cash”.

About Javier Bolzico, President of ADEBA, expressed that “the use of cash causes more damage to us as a society than we realize; informality, insecurity, financial exclusion and environmental impact are just some of its effects”.

The entity that brings together the banking entities expressed an express request so that the government, the private sector and society as a whole find a way to address the problem and reduce the use of physical money to its minimum expression. “The government, the private sector and society as a whole must work in coordination with the aim of reducing the use of cash,” Bolzico pointed out.

Currently, due to the development of technological tools, the conditions to bring digital payments closer to a greater portion of the population are given. It is time to act.