According to the World Bank Global Findex Survey 2014, Argent ina has made substantial progress in terms of financial inclusion, with the percentage of the Argentine population aged 15 or above with a bank account increasing from 33.1% in 2011 to 50.2% in 2014. Although financial inclusion has improved, a significant proportion of the population in the country still does not have access to the formal banking system.
Cash is the most preferred payment instrument in Argentina, accounting for 82.1% of the total transaction volume in 2014. However, the share of cash-based transactions, in terms of transaction value, gradually decreased during the review period (2010-2014), from 47.1% in 2010 to 34.3% in 2014, due to the government’s sustained efforts to reduce dependence on cash. Even during the country’s financial crisis, the government promoted the use of payment cards by offering tax incentives and by strongly promoting the use of payroll cards.
Government efforts to drive demand for payment cards
The implementation of mandatory wage accounts regulation by the BCRA has encouraged cashless transactions. The regulation requires payroll funds to be directly credited into wage accounts. It was first introduced in 1997 and came into force in 2001; it is now strictly enforced in Argentina. The account is also used for the administration of government benefits such as retirement, pension and social welfare funds. As reported by the BCRA, there were 7.7 million wage accounts in Argentina as of March 2014. Increasing number of wage accounts has led to high use of payroll debit cards.
Argentina’s government implemented the Forced Bankarization policy in 2001 to encourage use of payment cards. Under this policy, consumers are reimbursed 3% of value added tax (VAT) on purchases made with a credit card, and 5% on those made with a debit card. This led to a significant increase in debit and credit card transactions during the review period.
Cash-based vouchers remain a preferred mode of payment – a hindrance for the cashless society
Payment companies are developing voucher-based payments to cater to the significant unbanked population, allowing consumers to make payments without the need for a bank account or payment card. Cash-based payments through vouchers such as Pagofacil and Rapipago remain the preferred mode of payment among consumers. Pagofacil users make a purchase, print a voucher and take it to a local payment location to make cash payment. Payments can be made at 4,000 Pagofacil locations across the country. Similarly, Rapipago vouchers are also accepted at 6,000 locations.
Although voucher-based payments provide a convenient shopping experience for consumers due to their wide acceptance, they are also a hindrance to the government’s vision to turn Argentina into a cashless society.
Restrictions on transactions abroad is anticipated to hinder transaction volume
In an attempt to control drops in foreign currency reserves, which fell by 29% in 2013 to $30.9bn (ARS168.7bn) – a seven-year low – in December 2013 the government of Argentina introduced restrictions on online shopping and use of payment cards abroad. Consumers may make tax-free online purchases up to $25 from foreign websites, with 50% tax charged on purchases above this amount. Products imported through foreign online retailers need to be collected from the customs office.
Argentina’s government increased tax on all credit and debit card purchases made abroad from 20% to 35% in December 2013, and also made it mandatory to report every purchase to the tax authority – Administración Federal de Ingresos Públicos (AFIP). These restrictions are expected to result in slow growth in card transaction values over the forecast period.