Cash usage disparities within the EU : a study on the reasons behind the disparities

Abstract

Digitalization is changing the world in the field of payment methods. As these emerging methods are being adopted by more users, the need for cash reduces. However, digital payment method adoption rates vary drastically, even within the European Union. As digitalization is an effective tool to combat various shadow economy related phenomena, there is a need to understand why cash use rates remain so high in various regions. The aim of this thesis was to uncover whether a country’s wealth and the rates of corruption and money laundering affect the cash use rates among the European Union and its member states. Statistics on the research topics were collected through desk-based research and a comparative analysis was conducted to analyze the results. This study applies institutional theory as well as general economic and criminological concepts, building on previous literature on the research topics. The study reveals that while the wealth of a country and cash use rates doesn’t have a clear link between them, both corruption and money laundering indicates a link between them and higher rates of cash use in a country. The findings suggest that countries with stronger shadow economies use more cash, which translates to illegal practices in an effort to earn income, does slow down adoption of digital payment methods. This thesis is partly based on estimations, as not all crimes are caught, which need to be taken into consideration when using these results. The thesis has a small sample size (six countries) and doesn’t take historical and cultural factors into account.