Restricting cash flow will reduce the shadow sector of the economy

In recent days, the Russian Finance Ministry has been actively discussing an initiative to establish a limit for payment transactions using cash funds. In this case, the different levels of the limits are referred to: 600 thousand, 300 thousand or even 100 thousand roubles.

We note that card payments currently make up a relatively small share of the total payments from individuals. International comparisons of the scope and the number of users of methods of non-cash retail payment allow us to formulate the assumption of high growth potential of the market of banking cards and card payments in Russia. However, despite the rapid growth in the number of payment cards, their use for non-cash payment for goods and services is still low. The lions share of transactions are done by people paying in cash they've withdrawn with their card

The main barriers of accessing the full cycle of non-cash turnover, are the insufficient dissemination of the payment card market infrastructure, lack of confidence in banks, and concerns caused by lack of awareness of the reliability and safety of one's own funds in the implementation of non-cash transactions for goods and services or multiple cash withdrawals.

In addition, our studies have not been able to reveal the fundamental obstacles for the transition of trade enterprises in the acceptance of card payments. In this situation, legislative restrictions of cash payments seem fully justified, especially since it does not affect everyday spending, but it will solve a number of problems of economic development. In particular, our estimates suggest that the distribution of the use of payment cards for settlements and payments can solve the problem of providing liquidity to the banking sector without the involvement of the Central Bank of Russia (even in the face of a deep economic crisis). In addition, the decline in the proportion of cash turnover will reduce the shadow economy.

P. V. Trunin, Ph.D. in Economics, Head of Monetary Policy Department