Is there a digital divide in payments? Understanding why cash remains important for so many

This article uses comprehensive ECB survey data to examine the narrative that a general shift towards digital payments is generating a sharp divide in payments behaviours, creating a binary world of digital “haves” and analogue “have-nots”. Our analysis challenges this narrative, revealing a more complex reality of payment behaviours at the point of sale. We focus on lack of ownership of the primary tools enabling digital payments in the euro area: debit or credit cards and payment accounts. In particular, we examine the group of people who lack at least one of these tools (either a debit or credit card or a payment account), assessing their cash payment patterns and their socio-demographic profiles against the rest of the population. The findings establish that cash remains a significant part of the payments ecosystem, even among people with both cards and accounts. Additionally, we show that the group of people without either cards or accounts has a diverse demographic profile. The analysis also assesses the reasons behind not having at least one of these two tools to enable digital payments. We show that perceived physical banking presence (defined as considering it easy to reach a bank branch or an ATM) is of limited importance, suggesting that personal choice or other demand-side factors may be of greater importance. We also show the relevance of payment habits through the persistence of cash habits even after the coronavirus (COVID-19) pandemic. The results are in line with the cash and retail payments strategies of the Eurosystem, which emphasise the need for a balanced approach that accommodates both the enduring role of cash and digital innovation. JEL Classification: E41, O33, E42, E58, O52