It isn’t common to come across a 500 euro bill, but now it’s possible that they may disappear completely. In their last meeting, European Union economics and finance ministers (Ecofin) considered removing 500 euro bills from circulation. It is also being explored by the ECB. Why? To help reduce possible financing sources for illegal activities.
This step would not be taken in isolation but in conjunction with several others, such as setting a maximum amount that can be paid in cash. With these measures Ecofin intends to prevent “large bills or large amounts of cash from being used to finance terrorism,” as Eurogroup President and Dutch Finance Minister Jeroen Dijsselbloem affirmed when he arrived at the European ministers meeting. In fact, the Ecofin calls on the European Commission and ECB to explore implementing possible restrictions on 500 euro bills and to report its conclusions on May 1st.
This is not a new idea. The ECB is also considering removing 500 euro bills from circulation with the same goal in mind: tackle money laundering and the financing of illegal activities. ECB President Mario Draghi recently defended this idea on two separate occasions in the European Parliament, where he admitted that “there are questions on how best to implement a decision, and how to communicate this.” ECB Executive Board Member Benoît Coeuré told the German paper Rheinische Post that the ECB has, “fewer reasons for keeping the €500 note than we did when the euro was first introduced”, because electronic payments have become much more important.
In practical terms, it does not seem like the disappearance of 500 euro bills would have a major impact on the daily lives of European citizens since the majority of the population makes little use of these bills, even if they amass a large total value. The ECB estimates that, according to data from 2013, 500 euro bills in circulation comprise approximately 30% of the total value of euro bills on the market, with a value of €300 billion euros.
Is this a new sign pointing to the end of cash?
Authorities are starting to resist the use of cash, giving preference to other options such as credit card or digital payments, which are more efficient, safer from theft and more difficult to use in the informal economy
The disappearance of 500 euro bills is also one more example of the decline of cash to other forms of payment. Worldpay’s recent report is a case in point, estimating that the digital payment market will reach full maturity in 2016. It calculates that by 2019 digital wallets will surpass even credit cards and will be far greater than cash payments.
BBVA has been ahead of this transformation in the payment sector for a while now. Head of Global Payment Systems for BBVA, Mehmet Sezgin, reported in an July 2015 interview with Spanish newspaper El País that “we are heading towards a cash-less society. We want to go from coins to credit cards, and from credit cards to a cash-less society. We believe that one of the best ways of making this transformation happen is through cell phones.” This is the philosophy behind the bank’s mobile payment system, BBVA Wallet, which is currently operational in Spain, Chile, Mexico, the U.S. and Turkey.
Mehmet Sezgin (BBVA): We are heading towards a cash-less society. We want to go from coins to credit cards, and from credit cards to a cash-less society
Denmark on the horizon
On January 1, 2016, new legislation entered into force in Denmark that allows stores and businesses to refuse to accept payments in cash. This comes as part of the Danish Parlament’s plan to “eradicate cash”. With this measure, Denmark became the first country to set a deadline to stop using cash: 2030. Other Nordic countries seem to be following in their footsteps. In Sweden, 95% of retail purchases are cash-less.
Other interesting stories