# The role of cash in tackling the issue of financial inclusion in Europe
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2019-01-29
Category: FINANCE
Category URL: https://financedigest.com/category/finance
Meta Title: Financial Inclusion in Europe: Closing the Gap for Unbanked
Meta Description: Discover how 40 million Europeans without bank accounts are being left behind in the booming eCommerce market and what can be done to bridge the gap.
URL: https://financedigest.com/role-cash-tackling-issue-financial-inclusion-europehtml

![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/udo-1736839193241-compressed.jpg)

[Udo Mueller, CEO paysafecard](https://stories.paysafe.com/author/udo-mueller-ceo-paysafecard/) 40 million Europeans are still unable to access a bank account. Increasingly, this means they’re unable to participate in the mainstream economy. Could permitting them to pay online using cash help reduce the gap?

**The dark side of the e-commerce boom**

Maplin. Toys ‘R’ US. Claire’s. These are just three of many high-profile retail brands in the UK that [found themselves in administration](http://www.retailresearch.org/whosegonebust.php) in 2018.

It’s no secret then that brick-and-mortar stores are battling an unfavourable climate. Meanwhile, eCommerce seems to be thriving at their expense. Forrester reckons online sales [growth in Europe is outstripping brick-and-mortar retail](https://www.financedigest.com/uk-retail-sales-growth-slides-as-omicron-hits-cbi.html "UK retail sales growth slides as Omicron hits – CBI") by 10 to 1 and will account for €378 billion sales a year by 2021.

What’s bad news for brick-and-mortar [retailers is often touted as a win for consumers](https://www.financedigest.com/direct-to-consumer-the-rite-of-passage-for-retail-in-2022.html "Direct to Consumer: the rite of passage for retail in 2022"). Indeed, it’s consumers themselves who are [driving eCommerce](https://www.financedigest.com/how-fintech-is-becoming-the-driving-force-of-ecommerce.html "How FinTech is becoming the driving force of eCommerce") growth. Buying online is often cheaper, quicker and more convenient. So it’s no surprise that [58% of consumers](https://www.paysafe.com/lostintransaction2018/) across the US, Canada, UK, Germany and Austria prefer to shop online.

But while eCommerce is undoubtedly empowering consumers, it’s also having an unexpected downside.

Whether your preferred online payment method is a [credit card](https://www.financedigest.com/credit-cards-how-to-choose-a-credit-card.html "Credit Cards: How to choose a credit card"), debit card or mobile wallet, this often presupposes access to a bank account. And where does this leave the 40 [million Europeans who don’t](https://www.financedigest.com/dont-make-a-60-million-excel-mistake.html "Don’t make a  million excel mistake") have one?

**Financial inclusion in Europe: a** [state of the union](https://www.financedigest.com/ukraines-first-lady-to-be-guest-of-honor-at-eu-state-of-union.html "Ukraine’s first lady to be guest of honor at EU State of Union")

For many of the unbanked, lack of access to a [bank account](https://www.financedigest.com/scams-avoided-how-to-prevent-bank-account-scams-in-2023.html "Scams Avoided: How to Prevent Bank Account Scams in 2023") is often a vicious cycle.

There are three requirements to [open a bank account:](https://www.financedigest.com/how-accountants-can-improve-financial-planning-and-results-through-open-banking-to-help-smes.html "How accountants can improve financial planning and results through Open Banking to help SMEs") money, proof of ID and proof of address. Although it sounds straightforward, providing one, two or even all three requirements can be challenging to some, such as migrants and undeserved communities.

An example is the UK where there is no ID card system, therefore banks require proof of address such as a Council Tax bill, recent [bank or credit card](https://www.financedigest.com/goodbye-plastic-hello-titanium-why-metal-bank-cards-are-the-future-of-finance.html "Goodbye plastic, hello titanium: why metal bank cards are the future of finance") statement or utility bill. However, newcomers to the country are unlikely to have any of these documents and [seeing as it may be difficult to obtain them without a bank](https://www.financedigest.com/europes-banks-brace-for-russia-fallout-while-u-s-banks-see-limited-pain.html "Europe’s banks brace for Russia fallout while U.S. banks see limited pain") account in the first place, this can place them in an insurmountable chicken-and-egg situation.

Even where bank account penetration is high, access isn’t guaranteed. Such as Denmark which topped the World Bank’s list in terms of accounts per citizen in 2017, only ranked 18th in terms of access on [BBVA’s multidimensional index of financial inclusion](https://www.bbvaresearch.com/en/publicaciones/measuring-financial-inclusion-a-multidimensional-index/). The reason? A dearth of physical bank branches in easy-to-reach locations. So, whilst account ownership is [currently healthy](https://www.financedigest.com/healthy-fat-free-snacks-market-2022-outlook-current-and-future-industry-landscape-analysis-2031.html "Healthy Fat-Free Snacks Market 2022 Outlook, Current and Future Industry Landscape Analysis 2031"), it is not difficult to envisage a future where this isn’t the case.

**The [rise of the gig economy](https://www.financedigest.com/imfs-georgieva-sees-darkening-outlook-for-global-economy-rising-recession-risks.html "IMF’s Georgieva sees ‘darkening’ outlook for global economy, rising recession risks") and its impact on financial inclusion**

In the [age of mobile banking](https://www.financedigest.com/how-fs-organisations-can-enter-the-new-age-in-digital-banking.html "How FS Organisations Can Enter The New Age in Digital Banking"), lack of access to physical bank branches might not seem like a deal-breaker. Interestingly, 6,000 bank branches [closed down in in 2017 across the EU as more consumers are primarily using their smartphones to manage their financial](https://www.financedigest.com/fast-track-financial-close.html "FAST-TRACK FINANCIAL CLOSE") lives.

However, the unintended, and often ignored, consequence of this [digital evolution is that a larger part of the population is being shut out of the financial system](https://www.financedigest.com/the-role-embedded-finance-systems-will-play-as-commerce-goes-increasingly-digital.html "The Role Embedded Finance Systems Will Play as Commerce Goes Increasingly Digital"). Lack of access has [become an issue only for those without a bank](https://www.financedigest.com/are-banks-destined-to-merely-become-infrastructure-providers-in-the-banking-industry-of-the-future.html "Are banks destined to merely become infrastructure providers in the banking industry of the future?") account at all.

It’s also affecting the exploding community of ‘gig economy’ workers.

Leaving aside irregular and unpredictable income, which can preclude [access to financial products](https://www.financedigest.com/why-make-fintech-products-accessible-for-all.html "Why Make Fintech Products Accessible For All?") such as credit cards, many gig economy workers are mainly paid in cash. In the UK alone, the [Taylor Report](https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/627671/good-work-taylor-review-modern-working-practices-rg.pdf), an independent study commissioned by the government, estimates that up to £6 billion worth of wages are paid in cash each year.

**Bank accounts: only one piece of the puzzle**

Over the past decade, the EU has made a huge push towards financial inclusion, including putting rules in place that allows its citizens the [right to a basic bank account](https://europa.eu/youreurope/citizens/consumers/financial-products-and-services/bank-accounts-eu/index_en.htm%23shortcut-0-right-to-a-basic-bank-account).

Measures such as these are vital, especially in an age where we’re [shopping online](https://www.financedigest.com/increasing-trend-of-online-shopping-to-create-new-growth-opportunities-for-stretch-sleeve-and-heat-shrink-labels-market-says-tmr.html "Increasing Trend of Online Shopping to Create New Growth Opportunities for Stretch Sleeve and Heat Shrink Labels Market, Says TMR") for both luxuries and essential everyday items, such as groceries. Otherwise, the gap between the [digital economy and those who can participate in it risks](https://www.financedigest.com/feature-africas-mobile-money-taxes-risk-driving-poor-out-of-digital-economy.html "FEATURE-Africa’s mobile money taxes risk driving poor out of digital economy") turning into a chasm.

But are more bank accounts the only answer? According to a report by the [UK Financial Inclusion Commission](http://www.financialinclusioncommission.org.uk/facts), probably not.

The Commission’s findings [paint a stark picture](https://www.financedigest.com/trade-finance-the-small-brush-to-paint-the-big-picture.html "Trade Finance: The Small Brush to Paint the Big Picture"). 50% of the unbanked [don’t want a bank](https://www.financedigest.com/dont-play-second-fiddle-how-disruptor-banks-can-leverage-music-and-audio.html "Don’t Play Second Fiddle: How Disruptor Banks Can Leverage Music and Audio") account. And at least 15% of the newly banked close or abandon their account due to higher losses in fees and charges than their advantages from having an account. These findings are echoed by the [ATM Industry Association](http://www.cashrepository.com/wp-content/uploads/2017/04/Cash-and-Financial-Inclusion-31-MAR-2017.pdf), which notes that the cost of maintaining a bank account can make having one financially impracticable.

However, although having a bank account is essential, access to it is just as important. As the number of physical bank branches continues to drop, making it more difficult to convert cash into a digital format, thus it’s just not practical for many to participate in the online economy unless they are able to use their cash online.

**[Moving forward:](https://www.financedigest.com/life-is-moving-forward-china-declares-new-covid-phase.html "‘Life is moving forward’: China declares new COVID phase") the role of cash in promoting financial inclusion**

In the payments space, the death of cash is often considered a foregone conclusion. An event that’ll happen sooner, rather than later.

However, the truth is that cash is far from dead. In the UK, [2.7 million people](http://uk.businessinsider.com/cashless-society-bank-of-england-chief-cashier-cash-not-decline-2017-10) rely almost entirely on cash. And, across the EU as a whole, [68% of transactions](https://www.ecb.europa.eu/pub/pdf/scpops/ecb.op201.en.pdf) are still paid for using notes and coins.

With this in mind, and given that the global e-commerce market is set to grow by [US$4878 billion by 2021](https://www.statista.com/statistics/379046/worldwide-retail-e-commerce-sales/), cash plays a vital role in promoting financial inclusion. Providing a simple, safe and flexible [way to pay](https://www.financedigest.com/four-innovative-ways-to-pay-for-products-online.html "Four Innovative Ways to Pay for Products Online") with cash online can bridge the gap between unbanked and underbanked consumers and the online marketplace that’s becoming an increasingly essential part of the mainstream economy.


---
This blog is powered by Superblog. Visit https://superblog.ai to know more.
---