Czechs are among the world leaders for so-called contactless cash payments. The use of such payments, such as on city trams and buses, is soaring and has sparked arguments about whether the writing is on the wall for traditional notes and coins issued by the country’s central bank.

Photo: icyjumbo via Foter.com / CC BY-NC-ND

The dash from cash. That in a nutshell was the theme of a recent expert seminar in Prague looking at the likelihood of cash giving way to card, cryptocurrency, electronic, and other types of payments.

Part of the fluster has been stirred up by some moves in Sweden towards becoming a cashless society. There are steps by the European Central Bank to phase out the highest denomination 500 euro note from 2018 on the grounds it’s often used in crime. And the most common argument used against cash is that it’s a great medium from crime and specifically tax dodging. On the other hand, the prevailing wisdom is that card and other cashless payments often leave a footprint that makes it a lot easier for tax offices to track what’s going on and to clamp down on crime and the grey economy.

The Czech Republic gives an interesting perspective to the debate since its stands out in the whole of Europe for the spectacular rise in so called contactless card payments for mostly fairly low prices goods and services where cash would have most often been used in the past. The world’s two biggest card companies, Visa and MasterCard, both remark the high uptake by Czechs of such payment. MasterCard said almost four out of five card payments in Czech shops, 77 percent to be precise, were contactless as early as 2015. That compared with a much slower take-up in many West European countries.

ʺCard payments are on the same level if you look at single tickets for public transport as the local Plzeň card and they exceeded the number of SMS tickets."



Martin Dolejš is head of commerce for the Czech Republic and Slovakia for the international card company, MasterCard. He says that there is an ongoing significant increase in non-cash payments in the country with a particular surge in so-called contactless card payments, where the card is just flashed in front of a scanner for the payment to take place with no PIN code or other manipulation required.

"If we look at the Czech Republic we can see a huge increase in payment card transactions and especially contactless transactions. The increase is very significant and huge and if we look at the total number of transactions we can say that more than 70 percent are contactless transactions. We can see that the Czech people like this kind of service and this kind of payment and it grows significantly every year.ʺ

Martin Dolejš, photo: archive of MasterCard

Dolejš says contractless card payments are opening up a whole range of sectors in the Czech Republic where card payments would previously have been too complex and time consuming.

ʺWe can see the huge increase in contactless payments opening the doors to other segments; in the government segment for example or public transport. We need contactless payments to provide quick services. This is very important and this education of this sophisticated market gives us the chance to open these segments, such as public transport, and bring some added value to card holders and make our lives easier and faster and save our time."

The West Bohemian city of Plzeň is for MasterCard an example of how contactless card payments have taken off and has provided inspiration for other Czech towns and cities to follow suit. Martin Dolejš again:

"We can look at Plzeň, it was one of the first cities in the Czech Republic and they equipped all their vehicles with contactless terminals. Currently, after two years, we can see huge growth in transactions. If you want a specific number, they already reached more than 190,000 transactions per month. That’s a huge growth. And currently card payments are on the same level if you look at single tickets for public transport as the local Plzeň card and they exceeded the number of SMS tickets. SMS tickets are a very famous solution here in the Czech Republic and cards exceeded this number.ʺ

A similar introduction of contactless payments has started in the north Bohemian city of Liberec with similar success. And MasterCard says the trend is clear in other Czech towns as cities as well. The capital, Prague, is set for a massive take off of contractless card payments on buses, trams, and the metro as well, according to the company.

"This is a kind of citizen card which brings some added value to people in the particular city or region.ʺ



MasterCard is also seeking to get card use, with or without contract, taken up by some of the youngest Czech citizens as well. A unique project was launched in the central Bohemian city of Kolín to introduce cards to elementary school pupils with the cards used for a wide range of purposes to the apparent applause of parents.

ʺIt is a very unique project in Kolín. We started with pupils in elementary schools and their parents are very excited by this project. It is a pre-paid card with added value. It is not only for payment but brings value to the students: it means I can assign my ticket for public transport to the card, use the card as a personal ID when pupils enter the school, for proof that I have lunch in the canteen, and they have special offers provided by selected merchants within the city. So this is a kind of citizen card which brings some added value to people in the particular city or region. It is not just a payment tool but brings something more. I don’t need any other cards, for public transport, for shops, or loyalty card; I need only one card and I can digitalise all this information and assign it to my existing payment card."

Other Czech councils have followed closely the card experiment in Kolín and, according to MasterCard’s Dolejš, they are looking to pave the way for similar cards for all citizens or for specific groups, such as the elderly.

Photo: stockimages / FreeDigitalPhotos.net

Dolejš says that the real and immediate profits to MasterCard from contactless payments overtaking cash are not that significant in themselves. More important is that fact that new markets for cards are opened up and these could encourage their much wider use:

"Our goal is to educate the market. We don’t have some huge increase [in earnings] from transactions in public transport using payment cards or as a personal IDs. It is not some huge income for Mastercard. We do business with banks, they are our clients, and so we are helping them to educate the market because once you use your card for public transport or other non-traditional business, then you will probably use it more in other common applications like for groceries and other uses. That’s our expectation.ʺ

But there are many who look on aghast at the possibility that cash could be squeezed, phased out or banned and that responsibility for a significant part of the economy and even more secrets about personal payment details could end up in a few corporate hands.

And the argument that cash is being significantly squeezed at the moment is questioned in the Czech Republic by the institution responsible for it, the Czech National Bank. Central bank board member, Oldřich Dědek, taking part in the seminar pointed out that cash use had been rising steadily in the country over the last decade although it did admittedly level out so far in 2017.

ʺOur goal is to educate the market. We don’t have some huge increase [in earnings] from transactions in public transport using payment cards or as a personal IDs.ʺ



And Dědek says the continued high use of cash, especially true of lower denomination notes, holds true for the euro zone and United States as well.

One of the arguments behind phasing out cash is, ironically, that it would make central bank’s life a lot easier by removing the cash escape root if they want to introduce so called negative interest rates. Such rates are already being used by some European banks to penalise those with large amounts on their accounts rather than spending or investing it. The Czech central banker says that indeed is one reason why negative interest rates are still used cautiously. The risk of a dash to cash is still a factor to be taken into account.