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The Dutch Payments Association has reported that the gap between the costs of cash and debit card payments in the Netherlands is widening, with significant implications for both consumers and merchants.
Between 2017 and 2023, the average cost of a cash payment more than doubled, increasing from €0.29 to €0.61, while the cost of debit card payments remained steady at €0.17, according to a study commissioned by the Dutch Payments Association, which represents a variety of banks and fintechs operating in the country.
The payments lobby group warns that cash transactions are now more than three times as expensive as debit card payments, so despite the fact that business groups often highlight the cost of card fees, there has been a shift in cost efficiency for businesses.
Although inflation and rising wage costs have contributed to an overall 22 percent increase in the average transaction cost (from €0.23 in 2017 to €0.28 in 2023), the growing popularity of contactless debit card payments has kept their costs low, according to the association.
In addition, contactless payments now account for 62 percent of all transactions in the Netherlands, with 76 percent of payments made by debit card overall.
In contrast, cash payments have declined to just 19 percent of total transactions, down from 24 percent in 2020, although the average value of a cash payment has risen to €22.31 as fewer, larger cash transactions occur.
The importance of sector
The Dutch Payments Association’s research revealed significant cost disparities across sectors.
In the catering industry, cash payments cost €1.36 on average, nearly triple the €0.50 cost incurred by retailers. This difference is largely due to additional labour costs in handling cash and the reliance on self-depositing methods.
Retailers, meanwhile, benefit from more efficient cash-handling processes, whereas smaller merchants such as mobile traders are enduring high fixed costs and declining cash usage, further driving up their per-transaction costs, the trade association says.
Opportunities do exist for merchants to streamline operations and reduce cash-handling expenses.
For example, the Dutch Payments Association recommends the adoption of smart cash machines and professional cash transport services as methods for merchants that have proven effective in reducing costs.
The lobby group says that merchants such as retail stores and petrol stations have kept cash-handling expenses at just 2 percent of turnover compared with 6 percent for smaller merchants in industries such as catering.
The report also reveals that credit card payments constitute a smaller share of overall transactions than debit cards and cash, and remain the most expensive payment method, at €1.41 per transaction. This is due to the higher average transaction values and acquirer commission fees.
Going against the regulatory grain
Across the world, cash use has become an increasingly political issue, with governments in countries such as Australia, the UK, Ireland, Norway and Sweden all pushing access to cash initiatives.
Some, such as Australia, Ireland and the UK, are mandating cash acceptance in targeted sectors, such as for essentials; others, such as Norway and Sweden, see cash as a resilience and security issue, given the risk of outages for payment systems.
In the EU, Fabio Panetta, a former European Central Bank (ECB) official and now governor of the Bank of Italy, and Mairead McGuinness, the European Commission’s outgoing financial services appointee, have both declared in speeches that “cash is king”.
Ultimately, however, at what cost? Consumers are increasingly less interested and merchants look to be becoming increasingly disincentivised.
Powerful impact
The growing disparity between the cost of cash and debit card payments has a significant impact on merchants in the Netherlands, particularly small and medium-sized enterprises (SMEs).
For merchants, the higher cost of cash payments places additional financial strain on firms, with sectors such as catering and mobile trade facing the greatest burden, as they contend with high fixed costs, labour-intensive cash-handling processes and relatively small turnovers.
This dynamic pressures merchants to adopt more cost-efficient practices or shift their payment preferences toward digital options such as contactless debit card payments, which have emerged as the cheapest and most efficient method.
From a consumer perspective, the shift towards digital payments reflects broader behavioural trends in the Netherlands and elsewhere in Europe, with debit cards, particularly contactless options, having become the dominant payment method.
However, countries contending with increasing digital payments use in the EU come up against another issue: the Single Currency Package.
Dropping at the same time as the EU’s Payment Services Package, the Single Currency Package includes legislation intended to expand cash acceptance across the trading bloc.
This includes a legislative proposal on the legal tender of euro cash to safeguard the role of cash, ensuring it is widely accepted as a means of payment and remains easily accessible for people and businesses across the euro area.
However, as the Dutch Payments Association’s findings reveal, the package looks like it may risk coming too late for a Europe where preferences are fast changing.
