How Do You Spend Your Money? Malta Issues Cheques 10 Times The EU Average As Cash Remains The Most Popular Payment Method

The government's rebate cheques seem to have had a massive effect

Lovin Malta Money Spending Cheques

The government insistence to distribute around 200,000 tax rebate cheques (which some critics would classify as a bribe) has had an incredible effect, seeing Malta use cheques at 10 times the rate of the EU average.

Hovering just under 4.8 million in 2018 or 12 cheques per person, the popularity of the payment method appears to be growing, actually up from the previous year. All of this while the use of cheques is dropping across Europe.

Despite not being an efficient payment method due to the long clearing cycle and the very labour-intensive and costly processing involved, cheques' popularity may be due to the fact that they're free and could allow some form of anonymity.

The figures are part of a payment survey conducted in the Central Bank of Malta’s annual report, which has been able to shed some light on the sometimes close-guarded methods of how people are spending their money.

In age where digital transfers seem to be all the rage, why does cash remain the most popular payment method?

The study, based on a systematic sample of 500 Maltese households covering 1,118 respondents, found that cash remains the predominant and most popular payment instrument among all age groups. However, while older people seem to prefer cash, younger generations seem to use each payment method relatively equally.

This is mostly attributed to their different spending patterns, with younger people more likely to spend their money on leisure goods and services rather than on energy or housing.

The trust in cash as a payment method is also apparent, with around 70% of households felt there was no risk in cash payments, despite that cash is actually exposed to risks of theft and counterfeiting.

So why don’t people use electronic payments?

Despite the growth of digital payments and the emergence of credit/debit cards, cash does reign supreme, which is may be due to the reluctance of the general public to change habits, but could also reflect lack of availability of alternative electronic means of payment by suppliers or service providers.

The survey also noted that while electronic payment instruments/channels are highly efficient and convenient, there may also be constraints from the business community in accepting non-paper means of payment.

In fact, direct debit accounts for just 2.8% of transactions, which is lower than EU average of 10.2%.

When asked about what makes them use a particular payment instrument alternative to cash or cheques, the majority of respondents (60.2%) answered that they would consider convenience first, followed by efficiency (36.7%) and safety and security (30.7%).

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There’s a lack of information on payment methods

Finally, the survey indicates that there is lack of information on the various payment instruments and their benefits. This could explain why some households have a strong preference for using the traditional payment instruments such as cash.

The study suggests putting forward a nationwide educational campaign that would inform the general public and the business community on the features, advantages and risks associated with the various payment instruments/channels which could better assist economic agents to make more informed decisions and better choices when effecting payments.

However, this would need to also be accompanied by policies aimed at increasing the diffusion of electronic means of payments by suppliers and service providers to their customers.

What do you make of these findings?

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Written By

Julian Bonnici