Italy’s Digital Travel Payments Anomaly

The pandemic accelerated a global shift towards digital payments, but in Italy signs are emerging of a slowdown.

The country’s new prime minister, Giorgia Meloni, earlier this month wanted to give Italian merchants the right to refuse digital payments for transactions below €60 ($64), according to reports, arguing that the commission paid to banks or digital payment providers was too high.

The country’s previous government had introduced fines for shops that refused card payments. She also planned to raise the ceiling for legal cash transactions from $1,060 to $5,300, and suggested digital payments lead to “spying and profiling every habit of the citizens,” according to the Financial Times report.

The problem is that the European Commission wants more, not fewer, digital payments. It argues there’s less chance of tax evasion this way, while modernizing payments is also tied to conditions of its post-Covid National Recovery and Resilience Plan.

While on December 21, Italy’s parliament instead approved a potential measure that will impose a levy on payments firms and banks if they fail to lower fees on electronic transactions, the focus on cash looks likely to stay.

Against the Grain

Having cards refused would be problematic for most business travelers, as companies increasingly adopt digital payments for their employees. They’re designed to help business travelers spend less time filling out expense forms, or worry about carrying cash, and at the same time give companies a better handle on what’s being spent.

There’s also a safety advantage, as in case of an emergency, travelers can be tracked to where they make their purchase.

“These types of advancements are not nice-to-haves — it’s going to be a requirement in any country a business traveler finds themselves,” said Tim Russo, senior director of fintech partnerships and business development at TripActions, which issues its own card called Liquid.

“Rather than implementing a cash-first policy, the Italian government should be partnering with small businesses and consumers to find tech-forward solutions that can help eliminate operational overhead for small businesses like higher security risks for in-store employees, transfer of cash to banks, or tax evasion concerns.”

Now Italy’s government will no longer try to remove fines if a hotel or shop refuses a card payment, but will instead aim to broker a deal between banks, payment companies and retailers to reduce fees on electronic transactions worth up to $32 for businesses with annual revenues of up to $424,200 according to Reuters.

It will also impose a “solidarity contribution” equivalent to 50 percent of the net proceeds from those transactions if the parties fail to reach an agreement by March 31 on a “fair and transparent level of fees,” Reuters added.

However, as the political wrangling continues, one payments expert has argued cash still comes with hidden costs.

“The movement of physical cash is inherently more unsafe and harder to trace — and looked at from a purely economic perspective is actually more costly, once you factor in time and resources to achieve this, probably involving someone actually going into a bank or payments transfer center to deposit cash, and then the reverse at the other end,” said Spencer Hanlon, head of travel at tech payment firm Nium.

“In other words, there’s not much upside and a lot of downside to cash — ultimately pushing up prices up for consumers, while decreasing the protections and quality of the experience.”