Payment radar

Ģirts Jansons, Deputy Head of the Cash Department, Latvijas Banka

Modern technological solutions are emerging in all areas of public life, and cash circulation is no exception. The Cashier's Office of Latvijas Banka was relocated to the building at Bezdelīgu iela 3 in Riga at the beginning of 2023. At the same time, an automatic coin deposit service was introduced. This service has been available for the second year already, and it is evident that it has been well-received by customers, with the number of deposited coins increasing steadily.

In 2024, an average of 916 customers per month used the coin deposit service offered by Latvijas Banka, compared to an average of 777 customers per month in 2023. In some months, the number of customers exceeded 1000.

The number of deposited coins reached 9.1 million in the first eight months of this year, compared to 8.25 million coins in the first eight months of 2023. Latvijas Banka's forecasts suggest that the total number of coins deposited in 2024 will exceed 13 million.

Almost half – 4.3 million – of the coins deposited in the first eight months of 2024 were 1 cent and 2 cent coins with the total value of 66.4 thousand euro. The total value of the coins deposited this year stands at 2.2 million euro.

These figures show that the residents appreciate the convenience and efficiency of the services provided by Latvijas Banka, as well as their speed: the funds are usually credited to the customer's bank account within a few seconds.

The Cashier's Office of Latvijas Banka (Bezdelīgu iela 3) offers free exchanges of any euro circulation coins, including small change for larger banknotes and coins and banknotes for banknotes of other denominations.

The self-service coin deposit machines are located in the building at Bezdelīgu iela 3.

Follow this instruction and save time:

• register for coin deposit in advance at siknauda.bank.lv to specify your bank account number and bank details;
• receive a user ID and create a password for authentication to use the self-service machine when depositing coins.

If you wish to deposit less than 100 coins, you can do so in person and receive euro banknotes and coins of your desired denomination. Customers willing to transfer the money to their bank account will receive it in a matter of minutes provided that the account is opened with the bank having introduced instant payments.

Business hours of the Cashier's Office of Latvijas Banka

• Monday–Thursday from 8:30 to 16:30;
• Friday from 8:30 to 15:30;
• on the days before holidays, the working day is an hour shorter (please follow the information published on the website www.bank.lv).

The Cashier's Office is located at Bezdelīgu iela 3, Pārdaugava.

Ilze Posuma, Member of the Council of Latvijas Banka

Improving access to financial services for every resident across Latvia has been a priority for Latvijas Banka in recent years. A number of Latvijas Banka's initiatives have already received support from the Saeima and the financial sector, with several significant measures set to be implemented in the near future to improve the economic security of the public in various crisis and everyday situations.

Latvijas Banka's "Payment radar" of autumn 2024 suggests that despite the growing adoption of modern payment methods, a significant portion of society still relies on traditional solutions. For example, 31% of the population do not use contactless card to make payments, while 33% do so infrequently – less than five times a week. Only 24% of the population use their smartphones to make payments on a daily basis. Older people and those living in the regions are less likely to use modern solutions. This underscores the significance of the priority set by Latvijas Banka, namely, ensuring wide-reaching access to cash and non-cash payment methods as well as availability of banking services across the country.

The latest developments in this area are the amendments to the Credit Institution Law which will facilitate the presence of banks in the regions and access to cash.

The amendments will ensure a greater physical presence of banks in the regions. The proposals aim to promote economic development throughout Latvia and facilitate the provision of financial services in the format preferred by Latvian entrepreneurs and residents. Since many people now use financial services digitally and this trend is expected to continue, there will be no return to the days when a bank branch was operating in almost every town for five days a week. At the same time, practical and flexible solutions will be explored to improve the presence of banks in the regions.

These measures will promote the financial inclusion of wider societal groups, improving their access to and the quality of financial services, as well as creating preconditions for lending growth in Latvia's regions. The measures are also expected to have an indirect effect. Driven by their desire to improve the efficiency of the solutions established and maintained to provide in-person financial services, banks may voluntarily offer other in-person financial services to both consumers and legal entities.

The amendments also establish the minimum requirements to ensure that bank customers are able to withdraw cash from their payment accounts. These include the requirements for the geographical distribution, number and minimum operating time of ATMs, as well as the limit on free cash withdrawals at ATMs. The law stipulates that a customer must have access to at least one ATM that is operated by a bank at a distance established by Latvijas Banka from any location in the territory of Latvia and that provides the cash withdrawal service for the customer.

These amendments build on the work accomplished in recent years. Already in September 2021, Latvijas Banka, the Finance Latvia Association and the four largest banks signed a memorandum of cooperation setting out the minimum requirements for ensuring access to cash payment services, including limitations on downsizing the ATM network. This has made it possible to stabilise the number and distribution of ATMs in recent years and is now mandated by law.

Furthermore, multiple steps have been taken to prepare for potential crisis situations. These include the identification of the network of the critical ATMs that will be prioritised for cash supply in a situation of crisis. Moreover, a crisis solution for interbank payments has been developed for instances of internet connectivity issues. Additionally, an offline crisis solution for payment cards will be launched next year. It will allow offline payment card transactions for purchasing essential goods up to 200 euro when there is no internet connection and POS terminals are therefore inoperative.

Latvijas Banka will continue to ensure that every resident of Latvia has access to the most convenient and common types of financial services and payment methods. Latvia's public has balanced habits in using money, and nothing suggests that this may change in the near future.

Reinis Vecbaštiks, Modern Payments Expert, Latvijas Banka

The digital euro project is currently in its preparation phase following a two-year investigation phase that concluded on 18 October 2023. The preparation phase will run until 31 October 2025. It aims to lay foundations for the potential issuance of a digital euro. These preparations include the development of rules for the digital euro payment scheme and the selection of service providers capable of developing the infrastructure necessary for the digital euro. During this phase, the Eurosystem (the European Central Bank (ECB) and the national central banks of the euro area) is also conducting a broader technical analysis of the envisaged functionalities and technical aspects of the digital euro, such as its offline functionality.

To ensure that the public in Latvia is well-prepared for the introduction of the digital euro and to coordinate the project's progress in our country, Latvijas Banka has established the Latvian Digital Euro Forum. It brings together experts, companies, and representatives of the relevant institutions to gain insights into the progress of the digital euro project, its potential introduction, and contribution to the economy and society. It will also address the risks and discuss the regulation under development.

The digital euro project is a euro area-wide initiative aimed at introducing a new – digital – form of central bank money. In addition to the existing means of payment (cash and electronic transfers), the digital euro would expand opportunities for all euro area citizens to make electronic payments seamlessly across European countries, also using the central bank money.

The introduction of the digital euro would impact payment service providers, companies that would be able to accept digital euro payments, as well as individuals. Successful implementation of the digital euro project requires cooperation between the public and private sectors, so that the project's progress also delivers practical benefits to Latvian companies and the public as a whole.

The first event of the Latvian Digital Euro Forum – a seminar organised by Latvijas Banka – was held on 25 September this year, featuring Evelien Witlox, Head of the ECB's digital euro project. She provided an in-depth overview of the digital euro project, its latest developments and the ECB's future plans.

The digital euro project is progressing in line with the pre-defined timetable and milestones. In a project of such scale, we also address a number of challenges in ensuring that the digital euro meets the expectations of its potential users.

One such issue – a priority throughout the project – is the privacy and data protection of the digital euro users. The Eurosystem is committed to ensuring the highest possible privacy standards for electronic payments, offering a solution currently unmatched in the private payment market. This means that the Eurosystem must be at the forefront of privacy-enhancing technologies and the opportunities they offer to apply the best solutions to the digital euro payments.

Moreover, offline use of the digital euro is also envisaged, and this, too, is not possible in the current market. Offline payments would offer privacy levels comparable to those of cash payments and provide an alternative to electronic payments that does not rely on an internet connection. However, developing an offline solution is a complex task that also requires close cooperation with the private sector to ensure it is secure, accessible, and user-friendly. To achieve this, the Eurosystem is researching both the technologies already on the market and those under development and testing. Close cooperation with the European Union legislators is also ongoing to tackle the challenges related to accessing secure elements of smart devices required for offline payment operations.

Given that the digital euro is a project of the entire European Union, the Eurosystem's technical work progresses alongside the work of the European Union legislators. In June 2023, the European Commission published a proposal for a digital euro regulation, which is currently under review by the European Parliament and the Council of the European Union. The digital euro regulation will be the basic document determining the political, technical, and usage aspects of the digital euro.

For more information on the digital euro project, its aims, and benefits, see the ECB website: Digital euro (europa.eu).

Zita Zariņa, Member of the Council of Latvijas Banka

In mid-September, the ECB released its latest Companies' Survey on Cash, a survey on the euro area companies' views on the use of cash. This is the second survey of its kind, and the results obtained were compared with the data from the survey of 2021 when it was first conducted. The survey reaffirms what Latvijas Banka has already highlighted: cash has been, is and will remain an important means of payment, including in Latvia. As a central bank, we will make sure that this public demand is met and the economy is supplied with cash.

What are the findings of the survey? First, cash is the most accepted means of payment in the euro area, with 88% of companies accepting cash payments. These are followed by payment cards and credit transfers, accepted by 85% and 78% of companies respectively. Among companies that accept cash payments, 94% expect to continue doing so for at least the next five years.

Second, euro area companies were asked to specify their preferred means of payment. 37% of companies preferred card payments, while 25% preferred cash payments, and 21% preferred credit transfers.

Third, when asked about the criteria for choosing a payment method, companies cited security (94%) and reliability (92%) as the most important factors. Companies generally viewed cash to be better in terms of the processing costs, reliability and privacy.

Compared to the 2021 results, the cash and payment card acceptance rates have both declined by 8 percentage points (from 96% and 93% respectively). Overall, the share of companies not accepting cash has increased from 4% to 12%.

A separate analysis of Latvia's indicators confirms, once again, that our society maintains balanced habits in using money, with both cash and non-cash payments playing important roles. 77% of Latvian companies accept cash payments and 73% – payment cards. Meanwhile, the acceptance rate for credit transfers is 47%, notably below the euro area average. Moreover, Latvian companies favour card payments, with 33% citing them as their preferred payment method. Cash payments are the next most preferred option, favoured by 21% of Latvian companies.

In this "Payment radar", Ilze Posuma discusses the measures implemented by Latvijas Banka to ensure access to financial services. The measures align with the priority set by Latvijas Banka, namely, ensuring wide-reaching access to cash and non-cash payment methods as well as availability of banking services across the country. As a note, the Saeima has reviewed the amendments to the Credit Institution Law, which will also enhance access to cash and support the preservation of the ATM network.

The survey commissioned by Latvijas Banka and conducted by SIA Latvijas Fakti in August 2024 shows that 86% of respondents are satisfied with the options available for withdrawing cash from their bank accounts, representing a 2 percentage point increase from the previous survey conducted in February 2024. This indicator has remained stable for several years since Latvijas Banka and the financial sector agreed on measures to preserve the ATM network across the territory of Latvia. The provisions, previously established in the form of a memorandum of cooperation, are now mandated by law.

Please, see the full ECB's Report on the use of cash by companies in the euro area in 2024 (europa.eu).