What Drives Cash Usage in Turkey?

The Central Bank of the Republic of Turkey (CBRT) carried out its first ever Methods of Payment Survey in September/October 2020. 2,400 people were interviewed and then asked to fill in a payment’s diary, 1,537 completed this. The diary only looked at cash payments at the point of sale. Recurring payments and online payments, for example, were not included.

The CBRT has issued Working Paper 1 21/35 drawing conclusions from this survey.

Cash usage

Turkey uses cash for 89% of daily transactions. For transactions under 20 TL (Turkish lira) at the time of the survey, 91% were in cash while for transactions over 100TL, 60% were in cash. The diary showed 1.2 transactions per day with 0.2 withdrawals. The average spend was 51 TL and average withdrawal 239 TL.

The average cash transaction was for 43 TL. In contrast the average debit card transaction was 108 TL and credit card 119 TL, providing evidence that cash is largely used for low value transactions. Half of transactions were for less than 30 TL.

Convenient pricing

The survey found there was a significant relationship between the denominational mix, convenient pricing and cash payment realisation. Convenient pricing being where pricing matches the currency denominations or at least a simple combination of them.

There was a higher frequency of transactions at the convenient price point, a multiple of five given the denominational mix in Turkey. 16.4% of transactions were at the exact price of 20 TL, which was the mode of distribution.

For transaction sizes greater than 35 TL, cash payments were less frequent in the transaction amounts where consumers received a coin change. The share of transactions at the non-convenient prices was 18.5% of all transactions. Thus, when a consumer faced a non-convenient price, using an alternative payment was more likely to avoid cash transaction costs.

It is clear that in Turkey receiving coins is not popular. Research in Canada has found the same result (Shy 2020 2).

An efficient currency denominational structure along with convenient pricing increases the use of cash and allows efficient payments. If payment can be in banknotes only, this also allows faster transactions. The paper points out that if for the merchant speed is important or if they are selling items where people like to pay in cash, then they should price accordingly.

What drives payment behaviour?

Factors that did not influence the use of cash were gender, marital status or the day of the week.

Age and being a paid employee increased the likelihood of paying in cash, as did having greater cash balances at the start of the day. This increased the probability of using cash for all transaction amounts. The likelihood of cash usage decreased in line with education and income level. It also reduced as the value of the transaction rose.

Final word

CBRT intends to repeat its Payments Method Survey. This survey took place in the context of the pandemic. Now Turkey faces a high level of inflation. As a result, firm conclusions may take time to become clear and it will be interesting to see the changes that result.

1 - The Determinants of Consumer Cash Usage in Turkey. Saygin Çevik, Dilan Teber.

2 - Chen, H., Huynh, K. P., Shy, O. (2019). Cash versus card: Payment discontinuities and burden of holding coins. Journal of Banking and Finance, 99, 192-201.