Cashback, it seemed like a finished story but no: the government actually recognizes it the incentive value of electronic payments in Italy. But some changes will need to be made to make it more effective.
What is cashback and its suspension
We remind you that the measure provides for the refund of 10% of the amount spent for purchases in the store with a payment card. The incentive was introduced by the government chaired by Giuseppe Conte with decree no. 156 of 24 November 2020 and is part of the broader incentive plan for digital payments as a measure in favor of consumers Cashless Italia Plan. Cashback was immediately the subject of a wide media attention and, above all, had a strong political connotation. The measure was then suspended in the running by the current government chaired by Mario Draghi with decree-law no. 99 of 30 June 2021 for the second reference period (1 July 2021 until 31 December 2021).
October 28, 2021 – 12:00
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But cashback is no fit for the rich, that’s what really happened
The advantages of cashback for electronic payments
However, on the occasion of the hearing on Nadef, the same Minister of Economy Daniele Franco stressed that “Cashback has been a very important tool for electronic payments”, Explaining the importance of these means of payment, both because they are useful in containing tax evasion, as they are traceable, and because they are more efficient than cash.
According to data published by the Innovative Payments Observatory of the Politecnico di Milano, digital payments recorded a growth of 23% in the first half of 2021, the period in which Cashback was active, reaching 145.6 billion euros. The growth in the number of transactions is even more marked: it went from 2.3 billion card transactions in 2020 to 3.2 billion in the first half of 2021 (+ 41%). As a result, the average receipt also decreased sharply, from € 51.7 to € 45.7, marking a decrease of over 11% and indicating more frequent use of the card, even for smaller amounts. Considering the very negative first half of 2020 due to the lockdowns and the pandemic, it is necessary to compare the first half of 2021 with the first half of 2019 to understand if the cashback has really had an effect.
There was a growth of + 15% in terms of transactions compared to the first half of 2019, with a CAGR of 7.5%, slightly lower than the 2017-2019 CAGR of 10.7%. In terms of the number of transactions, we see growth of + 35% compared to the first half of 2019, with a CAGR of 18% in line with the CAGR 2017-2019. We can therefore say that in 2021 the 2020 gap was recovered and growth similar to the pre-pandemic period was maintained, an excellent result considering the dramatic drop in consumption (which has not yet returned to 2019 values). These are the first very positive evidences on a greater use of cards in the period of validity of the Cashback, however it is important to emphasize that structured and in-depth analyzes are necessary to evaluate the causal link between the increased use of digital payments and the incentive.
The return of cashback, but modified
Minister Daniele Franco at the MEF also opened the possibility of one extension of the measure in 2022, however, emphasizing the need for an analysis of the costs and benefits of Cashback and the possibility of introducing adjustments.
- According to the latest rumors, the Government would be hypothesizing to modify the program to allocate it only to the low-medium income groups.
- The changes also included a reduction in the minimum number of transactions required to access the bonus (initially at least 50 transactions were required per semester) and
- a reduction in the resources allocated to around 500 thousand euros per year, much lower than initially expected (around 4.75 billion euros for the three semesters, including SuperCashback).
Let us remember that this initiative had as its main objective that of changing the habits of Italians, indistinctly with respect to income, therefore the Government in defining a more limited target will have to ask itself if the initiative will still allow to maintain the set objectives.
It cannot be denied that the Cashback immediately presented some critical issues, so the Government’s willingness to make changes to relaunch it is certainly a positive sign, especially if, as said by Minister Franco, these changes will be based on an analysis of the costs and benefits. Among the critical issues that emerged from the first experimental period, the so-called Christmas Cashback, there are the necessary requirements to access the bonus.
Reduce digital barriers
It is in fact necessary to download the App IO, which presupposes the possession of a sufficiently advanced smartphone and the possession of SPID or Electronic Identity Card (CIE) for authentication, and to possess a payment card enabled for online purchases. All these requirements presuppose a certain predisposition to digital and a certain level of financial education, while the program, to be as effective as possible, should be easily accessible by all segments of the population, especially those less accustomed to the use of digital. to encourage them to use these tools, in some cases for the first time. One of the criticisms leveled at the program concerns the low level of membership: only 18% of the eligible population has signed up for Cashback for the first half of 2021 and only 16% has made at least one transaction valid for the purposes of the program.
Reducing these barriers as much as possible would make the measure more accessible to all. The forced stop, however, interrupted a natural growth path: the number of registered users was constantly growing. In the first three months (from December 2020 to February 2021) 7.9 million Italian citizens were enrolled, with a daily growth of about 8,500 citizens, up to 8.9 million citizens enrolled at the end of June 2021. had been kept active, the number of members would have reached 10-11 million in the second half of 2021 (20% of the population).
To date, however, as mentioned, the rumors do not concern changes to the registration procedure. On the other hand, one of the changes proposed by the government would seem to be that of allocating the bonus to low-medium income groups, to avoid that the measure excessively incentivizes the wealthiest families, aggravating economic disparities. Attention to economic equality is certainly a positive factor, but it must be based on real evidence. On paper, looking at the Cashback rules, it would not seem like this, because access to reimbursement is based on the number of transactions carried out and not on the amount spent: it was necessary to reach 50 transactions with a payment card, of any amount, even small. Furthermore, limiting access to the incentive based exclusively on income could be misleading, because the purpose of the maneuver is to encourage the use of digital payments among the entire Italian population, so the focus should be on the initial degree of use of payments. digital, in such a way as to concentrate resources where it is required, i.e. on citizens with a low level of use of digital payments, who are not necessarily those with a lower income.
In addition, income represents a further necessary requirement to access the bonus and it is essential to carefully study how it is verified, to avoid it translating into an additional barrier to entry, once again jeopardizing the participation rate in the initiative.
Cashback in the black sectors
Alternatively or in addition, the Government could consider promote incentives in those product categories where the underground economy is most present. It will certainly be necessary including the most innovative payments in the cashback made with smartphones in NFC mode that in the first half of 2021 were penalized.
Why it is important to encourage digital payments in Italy
Finally, it is necessary to underline once again why it is desirable to adopt a solid policy to encourage digital payments in Italy.
On the one hand, digital payments represent a factor of modernity of the entire country system, as they allow to offer innovative services that cash hinders or even precludes, think for example of the great contribution that online payments made to eCommerce during the first phase of the fight against the pandemic. Digital payments are then more fast and safe compared to cash.
On the other hand, digital payments are seen as a useful tool in the fight against tax evasion. The underlying hypothesis is that cash makes it possible not to declare some transactions, facilitating tax evasion, while digital payments, being traceable, make it more difficult to hide transactions and therefore also to evade. Tax evasion is a problem in Italy that must be addressed in a structural way. As highlighted in the Report on the results achieved in the field of measures to combat tax and social security evasion published by the Ministry of Economy and Finance, in 2018 the loss of tax revenues amounted to 90.6 billion euros, of which 32 billion euros attributable to VAT evasion. Countering this tax evasion is important, because it produces negative externalities for the country: it subtracts resources allocated to the public budget, alters the rules of competition in the market, facilitating dishonest economic operators and introducing distortions and finally aggravates the tax levy on honest taxpayers, which is they have to face a higher tax burden in order to compensate for the evasion of dishonest taxpayers.
Finally, Italy is in a backward position in terms of digital payments compared to the rest of the European Union. According to data from the European Central Bank, in 2020 Italy reached 80.7 card transactions per capita, with a growth of + 3.7%. This growth is a positive sign, especially in the face of the drop in consumption recorded in the year (-11.8% according to Eurostat, even -13% according to Confcommercio), indicating an increase in the penetration of cards in consumer spending by Italians. . However, the comparison with the other countries of the Union worsens from year to year. Not only is Italy well below the European average, equal to 145.8 card transactions per capita, but it has lost another position in favor of Germany, ranking 25th (out of 27) in the ranking by number of card transactions per capita. Behind Italy are only Romania (52.6 transactions per capita) and Bulgaria (32.3 transactions per capita), which however continue to record high growth rates, respectively + 21.1% and + 7.3%.
The hope is that this growth trend in digital payments will accelerate in the coming years, driven by the post-pandemic economic recovery, but also by the Italia Cashless Plan.
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