What Factors Keep Cash Alive in the European Union?

This paper aims to analyze the determinants of cash usage in a selection of European Union (EU) countries over the 2003-2016 period, based on a set of technological, socioeconomic, and socio-cultural indicators. Our results reveal the existence of region-specific determinants. Thus, in EU advanced countries cash usage is driven by the availability of payment instruments, such as the diffusion of ATMs and electronic funds transfers at points of sale (EFTPOS), the level of economic development and income inequalities. In contrast, cash usage in Central and Eastern Europe (CEE) countries is positively associated with higher levels of perceived corruption and the uncertainty generated by the financial crisis. Moreover, the propensity to use cash in CEE countries is inversely related to technological progress, expressed in terms of mobile users. All analyzed countries show a negative relationship between cash usage and education. Moreover, alternative payment media play an important role. In particular, payment cards act as substitutes in both regions, whereas direct debit reveals a negative impact on cash usage in CEE countries and credit transfer curbs cash usage in EU advanced countries