We lived to see the day when this happens to cash payments in Hungary
2023 was not the best year for cash in the Hungarian economy, for at least three reasons:
- consumption has declined and the savings rate has risen, leaving the Hungarian population with less cash on hand for cash-flow purposes, holding roughly 80% of the total cash in the economy,
- cash withdrawals are declining in favour of card purchases: in terms of amount, the former fell to 36% from 40%, while the latter rose to 64% from 60%,
- cash held for savings has lost real value rapidly (5.5% from December 2022 to December 2023) due to high inflation, so some savers have re-channelled into yield-producing investments: the share of cash in the financial assets we consider as savings fell to 13.2% at the end of September 2023 from 14.9% at the end of 2022.
Of these, renewed growth in household consumption and a retreat in inflation project a renewed increase in cash use and holdings in 2024. But the longer-term trend, i.e. the unbroken rise in the importance of cards and their tokenised versions, such as mobile payments, promises the slow death of cash.
The amount of forint cash was HUF 8,168 billion at the end of 2023, according to data published by the central bank on Monday, while the amount of foreign currency was HUF 715 billion at the end of September. The former represents a 1.9% decrease and the latter a 1.3% increase compared with the end of 2022.
As with retail bank deposits that do not generate a meaningful return, the big change came in the spring of 2022: cash holdings have been rising steadily until then, but have been mostly flat since.
After the massive forint depreciation of 2022 came to a halt last year, speculative currency buying did not dominate last year, unlike the year before.
We looked at the ratio between cash withdrawals and card purchases. In terms of amount, the share of the former fell from 40% to 36% last year (or more precisely in the last four quarters covered by the statistics: September 2022 to September 2023.) Ten years earlier it was 72%, five years ago it was 56%.
In terms of the number of transactions, we have already made far more purchases by plastic than cash withdrawals. Between September 2022 and September 2023, 91 million cash withdrawals were made, broadly in line with the stagnating trend of recent years. The number of card payments, on the other hand, doubled in five years to nearly 1.75 billion per year.
The decline in the use of cash, or at least its decline in proportion, is a global phenomenon, with the Nordic countries leading the way to the extent that they no longer offer to buy their own currency in other countries.
Source: Landgeist
In November, it emerged that the far right in Hungary, like the Austrian Freedom Party, would like to include the right to use cash in the constitution. The news was noteworthy because the centre-right chancellor in Austria has also embraced the idea, and although the proposal has not yet been adopted there, government politicians in Hungary, including Prime Minister Viktor Orbán and Foreign Minister Péter Szijjártó, have recently been making positive comments about cash use.
In the meantime, the MNB and the financial sector are working to promote new cashless payment methods. However, this year's developments have been somewhat delayed. Banks were supposed to have completed the new data entry methods for the instant payment system by 1 February, but according to Portfolio, they have been postponed. The central bank has put off the deadlines for QR code, NFC and deep link payments to 1 September 2024, while the deadline for the mandatory introduction of payment applications, which have been declared the great enemy of "yellow check", has been changed to 1 April. ("Yellow checks" are postal payment slips that let people without bank accounts take care of payment transfers.)
Cover photo: Getty Images
