Non-extractable in Leftovers
In the opening quarter of 2025, folks emptied their ATMs significantly less frequently than in the past 14 freakin' years. Card transactions also plummeted to a two-year low. Yet, it ain't just Russia dealing with this trend – people worldwide are cutting back on plastic due to the rise of snazzy alternative payment methods. That's according to a few bigwigs in the financial world who've shared some juicy insights on the topic.
You got Bank of Russia data that shows the first quarter of 2025 had the lowest number of bank card cash withdrawals in 14 years – 394 million, only topped by the depressing first quarter of 2009 with 392.5 million. The total cash withdrawn also hit a record low – 7.6 trillion rubles, a number not seen since the first quarter of 2023 (6.9 trillion rubles). Meanwhile, card transactions for goods and services took a nosedive, slipping to 13.2 trillion rubles in the reporting quarter, which is 2.5 trillion less than the last quarter of 2024 and 185 billion lower than the same period in the previous year.
So why the sudden droop in card transactions and cash withdrawals? Money experts are throwing around some interesting theories.
Yuri Belikov, the Managing Director of Expert RA rating agency, thinks ultra-high market interest rates, which basically egg people on to save their dough in classic deposit products, and a hefty reduction in consumer credit issuance, partially cashed out, could be why folks are feeling pinched. The Central Bank reports that average maximum interest rates for the entire first quarter of 2025 remained well above 20% per annum, a number unseen since July 2009. Cash loans in the first quarter of 2025 were 2.2 times lower than in the same quarter of 2024. Belikov added that the heavy debt load on citizens due to escalated retail lending over the past four years diverts a large chunk of their income towards servicing loans.
Konstantin Borodulin, the Managing Director of the Financial Institutions Rating Service at NRA, points out that "increasing the limit on transfers through the SBP to their own accounts in various banks contributed to the reduction in cash dealing in major purchases and deals."
Now, this trend towards a decrease in card-based transactions isn't just a Russian thing – experts worldwide are noting a decline in net card transactions with people shifting towards alternative payment methods. All over the world, more transactions are moving to tokenized wallets (Apple Pay, Google Pay, etc.) in the US and Western countries; WeChat and AliPay are dominating China; and a payment service similar to the SBP, UPI, has already floored cash and card payments in India. Maxim Mitusov, an independent expert, laid out the trends in his list.
Meanwhile, Alexei Voylokov, a professor of digital finance at the Presidential Academy of the Russian Academy of National Economy and Public Administration, believes that the simultaneous increase in retail turnover and decrease in bank instrument payments can only be explained by an increase in cash payments. He suspects that folks might be getting more of their salaries in envelopes after Russia introduced a progressive tax scale on January 1, 2025.
As for what the future has in store, experts don't predict a sudden surge in cash withdrawals. Roman Prokhorov, the head of the "Financial Innovations" association, reckons the second and further quarters could see a drop due to the fight against “dropper” fraud. However, Yuri Belikov expects the downward trend to eventually level out and gradually make way to average levels. He believes this shift will be driven by a cycle of declining market rates and the return of retail credit.
- The decline in card transactions and cash withdrawals could be attributed to high market interest rates and reduced consumer credit issuance, leading people to save more, as suggested by Yuri Belikov, the Managing Director of Expert RA rating agency.
- As people worldwide transition to alternative payment methods, such as tokenized wallets, WeChat and AliPay, and UPI, there has been a noticeable drop in net card transactions, a trend observed by financial experts globally, including Maxim Mitusov, an independent expert.
