In a world of e-payments, Italians defiantly cling to cash


Buskers on the cobblestones of Naples belt out a postwar Neapolitan classic, Tu vuo’ fa’ l’americo, a teasing song about a local who wants to seem like a trendy American, drinking “whisky and soda” and dancing “rock and roll.” 

Almost 70 years later, the song still captures a certain cultural resistance to modernity in this country, expressed most recently in Italians’ sluggish transition to electronic payment from cash.

In other major economies, dropping coins into the hats of street performers would be one of just a handful of cash-only situations — but not in Italy.

The country ranks near the bottom in Europe in digital payment adoption, and is among the 30 most “cash dependent” major economies in the world, in the Cash Intensity Index (ICC).

Despite lagging behind the rest of Europe in the move away from cash, Italy is poised to repeal requirements for merchants to take credit or bank card payment.

In its 2023 draft budget, the government of far-right Prime Minister Giorgia Meloni has included a measure to permit stores, taxis and other businesses to refuse electronic payment for purchases under 60 euros (about $85 Cdn).

The measure will also lift the legal ceiling for cash payments from 1,000 to 5,000 euros ($7,000).

According to the opposition and economists, the move will fuel the black economy in a country where annual tax evasion amounts to about 100 billion euros ($145 billion), according to Italian Treasury data.

During the 2022 election campaign, Georgia Meloni, who is now Italy’s prime minister, railed against electronic payment requirements. (Guglielmo Mangiapane/Reuters)

Yet many small business owners welcome the new measure, and insist it’s not about evading taxes.

“Of course I accept cards, especially because it’s what tourists want to pay with,” said Alfredo Russo, who runs a fried food and pizza shop in the historic centre of Naples, a city renowned for its underground economy. 

“But the requirement in place now, where we can’t say no to cards for smaller amounts, is excessive.”

‘A war against the poor’

The current law, passed by former prime minister and ex-president of the European Central Bank Mario Draghi, fines businesses that refuse to offer electronic payment for less than 30 euros ($40), along with four per cent of the transaction amount.

Like many merchants, Russo resents the commission of 1.95 per cent he pays to the bank on electronic payments.

“Targeting small businesses for not taking cards for small amounts is a war against the poor,” he said. “The government should focus on going after the big evaders.”

As he complains, a customer hands Russo a euro coin for a bottle of water, and chimes in, saying even if small businesses do hide some of their cash intake, it’s a way to compensate for over-taxation. 

“It’s not like people are getting rich this way,” the woman said. “They’re just scraping by.”

The owner of this Nativity store in Naples, who did not want to be identified, said that ‘for small purchases, it’s not worth the hassle’ to have an electronic payment system. (Megan Williams/CBC)

In a nearby store that sells Nativity scene figurines, two middle-aged American tourists enter and ask the owner if he takes cards.

“No,” he said.

After the customers leave, the owner, who asked CBC not to reveal his name, said, “If we’re talking about a bigger purchase — say, over 30 euros — then fine. But for small purchases, it’s not worth the hassle. I don’t have a phone line, which would be an extra cost, and cell reception is bad here, so I have to go out into the street to process the payment.”

Tracing purchases

Azzurra Rinaldi, an economist at Rome’s Sapienza University, commiserates with small businesses facing inadequate infrastructure and trying to keep afloat in an economy that has lurched from crisis to crisis over the past quarter-century.

“But we have a major problem in this country with the traceability of purchases,” Rinaldi said. “I know this is an effort, but each of us has to do their own part. The whole world is going one way [with electronic payments] and we are going the other way.”

According to the Bank of Italy, the average Italian consumer uses cards half the number of times as the EU average. The average amount Italians charge on their cards — 47.50 euros ($68) — is among the highest in Europe, an indicator that for smaller purchases, they’re still paying cash.

During the election campaign, Meloni railed against electronic payment requirements on TV talk shows and Facebook, calling the commissions “an illicit gift to banks” and “a hidden tax” designed to swell bank coffers and digitally spy on Italian citizens.

Meloni’s planned 60-euro waiver, say economists, is targeted at her base.

“It’s a gift to certain sectors, like taxi drivers, after the electoral campaign,” said economist Tito Boeri, a professor at Bocconi University in Milan. “They prefer not to accept cards so they can be paid in cash that they don’t declare.”

Indeed, reports of taxi drivers refusing card payments have risen, with one widely reported incident of a driver telling an ex-Olympic athlete as he dropped her off at the Genoa airport that “the party is over” for electronic payments in Italy.

Pressure from Europe to modernize

Still, outside Italy, Meloni is facing considerable pressure to backtrack on her proposed measure. 

Italy is set to receive its third instalment of 200 billion euros ($285 billion) from the EU for its post-COVID National Recovery and Resilience Plan. But it comes with strings attached, aimed to push Italy to modernize: cracking down on tax evasion and updating its digital infrastructure, among the worst in Europe.

Azzurra Rinaldi, an economist at Rome’s Sapienza University, says small businesses, like this fruit stand in Naples, have struggled to keep afloat in an economy that has lurched from crisis to crisis over the past quarter-century. (Megan Williams/CBC)

Brussels has yet to issue an official statement, but with mounting concern over the tax evasion implications, Meloni said she would be willing to lower the electronic payment waiver from under 60 to under 40 euros.

Naples fruit vendor Pasquale Marta, who stacks bright blood oranges outside his shop, which has been in his family for a century, says Meloni’s announced decree won’t change much for him.

“More and more people want to pay with cards, so I’ll take cards,” he said. “I’ll still get by.”

Marta says it’s neighbours in Naples who are unemployed, forced to push carts selling everything from sunglasses and trinkets to fruit, that he worries about.

“How are they going to survive if they don’t sell in cash, under the table?” he asked. “How are they supposed to eat?”

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