No. 144 - Why are payment habits so heterogeneous across and within countries? Evidence from European countries and Italian regions

In Italy the use of cash is still predominant; the number of cashless transactions per capita has increased over the last few years, but it is still below the European average. Moreover, the use of payment instruments is quite diversified across the Italian regions. The aim of this work is to arrive at a better understanding of the underlying reasons for the slow adoption of electronic payment instruments in Italy by comparison with the other European countries and to evaluate whether the territorial duality that characterizes the Italian economy can explain the extensive use of cash. To this end we use different models for cash, electronic payments, payment cards and e-commerce.
Our findings indicate that a pivotal role in explaining Italy's lag in abandoning cash is played by development factors, such as innovative capability and income per capita. Surprisingly, although the shadow economy is important, it is not decisive in explaining the limited use of electronic retail payment instruments.