Preferences for non-cash payments: Cultural differences in the Eurozone

After the international financial crisis of 2007/2008, the payments industry has introduced new technologies and a variety of instruments to offer high speed payment services. On the international level, non-cash payments are important for cross-border transfers like remittances made by migrants. The dynamic development of non-banking networks and cashless money transfers are a major concern of international financial organizations such as The World Bank, financial sector regulators and governments.

In our paper we want to analyze the impact and size of cashless financial transactions in Europe. Within the Eurozone there exist huge differences. The basic hypothesis of our paper is these differences go back to cultural issues. Therefore, we assume that cultural dimensions are important to understand the characteristics of given payment systems. We start with a literature review on the advantages and risks of specific payment schemes. In a second step we present stylized facts on the European Union (EU)/Eurozone’s major payment systems. Data about the features of the national payment systems is gathered from the European Central Bank. In the analytical part of the paper we quantify the importance of cultural issues to understand differences in national payment systems. To measure cultural differences, we use the Hofstede data source. Especially, we focus on the risk dimension. The expected result is that the size of non-cash payments primarily depends on the cultural dimension of risk avoidance. These findings might have far reaching implications for the understanding of cross-border financial transfers such as remittances. In addition, the findings might be important to understand the impact of digitalization on the financial sector.