To Pay (by Card) or Not to Pay

A battle over payment cards will forever mark the summer of 2023 in the Czech Republic. Is paying by credit card a fundamental human right, or is the saying that "Cash is King" still true?

Contactless payment concept.
Photo: Halfpoint / stock.adobe.com

It was supposed to be a quiet summer, the hottest one in recent years. People who opted for vacations or just domestic trips were soon met with icy showers. What is common in major cities, for example, is not the norm across the country. We are talking about card payments in this case.
Thus, a great battle over cashless payments has erupted. Some consider card payments a basic consumer right; others consider cash to be that right. The public debate has turned from arguments of convenience to discussions about tax evasion. What has been the background to this debate, and are Czechs more likely to pay by card?

Cashless is carefree

By watch, phone, or credit card. Czechs prefer to pay in this way. According to banks, contactless payments increased by over 10% year-on-year in June 2023. The development of the number of payment terminals in the Czech Republic also corresponds to this. In the first quarter of 2022, there were 292 thousand; in the first quarter of 2023, there were already over 306 thousand.

Although it does not seem so, the Czech Republic is one of the most developed markets in the payment card field and related technologies. Roman Kotlán, executive director of the Association for Payment Cards, commented: “When we relate this payment method to the number of inhabitants, the Czech Republic is the world’s top country in the number of transactions made by card or mobile phone.”

And then, how do the aggregate numbers speak? In 2022, Czechs made over 2.4 billion transactions with payment cards. Thus, for every inhabitant, 160 transactions per year were made last year. If we take only the adult population, it translates to 360 transactions per year.

Cashless equals unfree

The Czech Republic currently has 709 billion crowns worth of banknotes and coins, equivalent to 28.8 billion euros. That is more than 2.7 billion banknotes and coins. And that is a lot. The most common banknote, with 34.7% of the cash, is the 2000 CZK bill. This value is equivalent to around 80 euros.

Moreover, the Czech koruna as a currency has a long history. It was established in 1919 when it was the currency of the common state of Czechs and Slovaks. In 1993, the Czechoslovak koruna was divided into Czech and Slovak koruna. Czech banknotes, which feature historical personalities of the Czech lands, have accompanied the Czechs since the very beginning of the independent state.

The most powerful argument for keeping cash as a means of payment is the appeal to the freedom that this style of payment brings. One is not reliant on the electricity or signal that payment terminals need. While this may seem like a trivial argument, it is an everyday reality for people living in remote areas of the Czech Republic or high in the mountains.

Irreconcilable conflict

It is these two worlds described above that clashed in the summer of 2023 in a fierce battle over which of the means mentioned above of payment should be preferred by the majority. The arguments ranged from rationality to speculation and accusation.

Proponents of card payments have straightforwardly framed the debate: card payments are convenient and simple, minimize contact, and reduce transaction costs. For example, 43% of Czech respondents to the Visa survey cited the speed that card payments bring.

Conversely, they point out that making card payments impossible in 2023 is at least laughable. Some individuals then pointed out that some companies that only accept cash may then use this payment method to avoid paying taxes. Simply, what is not recorded is not taxed.

Advocates of maintaining cash then point out that in some areas, it is simply impossible to pay by card. These are, for example, the aforementioned remote areas or mountains. Another important argument is that of savings. Research shows that people who pay with cash spend much less than people who pay with cards.

Another argument is the technological barrier that older people cannot overcome. But the most important argument for most people is the sense of privacy and freedom of paying with cash.

Rewrite the Constitution! Cash is king!

The two groups clashed not only in restaurants and shops but also in the media and the political arena. Each side proposed changes to legislation that would support their position. Those favoring card payments proposed a law that would anchor the ability to pay by card as a fundamental right.

Similarly, the advocates of paying with cash have done the same. But they went several levels higher. They went straight to the leadership of one of the Czech political parties, which, following this initiative, proposed an amendment to the Constitution. This amendment would then ensure the right to pay in cash.

The petitioners wrote: “The proposed constitutional amendment responds to concerns about efforts to gradually restrict and then abolish the possibility of cash payments. Cash payments are an important tool, not only economically, but also as a way to ensure the privacy and freedom of citizens from the absolute possibility of controlling their payments for various goods and services.”

A cooling debate

Just as quickly as the debate began at the beginning of the summer, it ended at the end. Both groups have returned to their preferred payment methods, and the media-political discussions are again devoted to other topics.

However, the heat of the professional debate that this topic brought is still visible today. People have become more concerned about privacy and corporate control of tax payments. However, the debate on tax evasion was refuted by several experts right from the start. For example, Martin Slany, chief economist at DRFG, noted that Germans pay more in cash than Czechs, and no illegal activity occurs.

Thus, card or cash payments have once again shown that Czechs can always get excited about something very quickly but also give up on the topic very quickly.

Marek Koten

A Ph.D. student in economics, specializing in nuclear energy from the Czech Republic, he also serves as a political consultant to the Czech government and the U.S. Republican Party.

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