Upcoming EU Cash Payment Restrictions Could Challenge Businesses and Consumers by 2027

• Cash payment restrictions were supposed to be introduced in 2023 as part of the Polish Order policy package. However, after facing social criticism, they were abandoned.
• In April this year, the European Parliament passed a law preventing cash payments for transactions over 10,000 euros. The ban will take effect in 2027 and this time it might be irrevocable.
• Additionally, there are plans to mandate the verification of individual transactions over 3,000 euros. This could prolong shopping times and increase operating costs for commercial companies.

Currently, the cash payment limit for transactions between companies in Poland is set at 15,000 PLN. As part of the Polish Order, these limits were supposed to be reduced to 8,000 PLN, alongside a limit for consumers. However, due to public protests, the amendment was withdrawn. Now, these restrictions are returning and may be irreversible.

It was in April this year that the European Parliament adopted a package of regulations, part of which is a complete ban on settling transactions of more than 10,000 euros in cash. Naturally, this is more than the ban currently in force in Poland, but additionally, supervision and control over cash transactions above 3,000 euros are to be introduced. This obligation still needs to be approved by the Council. This is the start of the process of implementing these regulations.

Until now, the cash transaction limits in Poland applied only to economic activity. Now, they also apply to private transactions. Will this make life more difficult for businesses and consumers?

How important is cash?

According to the European Central Bank, from 2019 to 2022, cash transactions fell from 72% to 59%. Based on the NBP report about cash turnover in Poland in 2022 (there is no similar report for 2023), half of the respondents (50.9%) pointed out that they carry out transactions more frequently without cash than with cash. At the same time, about 50% of the respondents mentioned that it’s essential or very important to always be able to pay with physical money when shopping, even if they don’t use cash daily. According to a Fiserv study from January this year, in the case of supermarkets, as many as 74% of Poles pay non-cash. This year’s research by the Pan Paragon application shows that a card transaction annotation was found on approximately 70% of the analyzed receipts. Cash was only visible on 30% of the purchase records.

Will the new laws make it harder for businesses?

For most medium and large companies, the new prohibitions change nothing, as those companies have been conducting most transactions non-cash for a long time. However, some consumers and smaller companies may view this prohibition as prioritizing the interests of banks or an attack on privacy. Hairdressers, masseurs, renovation experts, electricians, plumbers are the professionals who often operate with physical money, as their clients pay them in this way. According to Fiserv research, Poles pay non-cash the least often for tutoring or additional classes (4%), as well as at shoe and tailor shops (6%).

“Concerns about these professionals having difficulties due to cash payment restrictions and verification of large payments may seem exaggerated as it rarely happens that a hairdresser or masseur charges an amount for a one-off service that would be subjected to verification according to new regulations. On the other hand, even though representatives of these professions should prepare for the introduction of the National e-Invoice System, from our experience, they are reluctant to do so. says Kamil Fac, Vice President of Faktura.pl

The ban may be costly for commercial firms

One of the goals of introducing non-cash trading was to speed up and facilitate transactions. Now, it turns out that payment restriction regulations might substantially extend the purchase process of a device worth more than 3,000 euros. Large stores may be forced to hire additional personnel to verify these payments, or the next customer will have to wait until the store employee verifies the previous transaction. This may mean additional personnel costs, related to the purchase of software or additional security for connections with the institution overseeing the transaction verification.

–“Entrepreneurs have been given 3 years before the new regulations come into force to adapt to them. Tools that facilitate verification will appear, and even now, electronic transactions for much larger amounts are approved in seconds. It’s worth mentioning that we’ve been through a pandemic when many solutions related to accepting and booking non-cash payments were introduced on a large scale and very actively,” notes Kamil Fac from faktura.pl

The construction industry will keep a close watch on payment deadlines

Problems in adopting the new regulations may emerge in the construction industry. For larger purchases, some construction stores may refuse to accept cash to avoid incurring additional costs associated with verifying these payments.

Many smaller renovation or construction teams are reluctant to accept funds via transfer. According to new regulations, since compensation will not take place immediately after work is done in cash, there may be a temptation to delay the transfer for a week, or two, or even longer.

-“Delayed invoices are already a problem for the renovation and construction industry. When a small construction company performs some work, for example, modernizing for another small company, the payer would prefer to make the transfer with a delay. That’s why construction entrepreneurs are frequent clients of factors who speed up payments with a long term. However, the industry will have to prepare for changes not to extend waiting time for money even more,” says Jerzy Dąbrowski, a board member of Finea, a microfactoring company.

Some entrepreneurs are protesting against the complete transition to electronic money. However, realistically from a practical point of view, limiting cash payments with the current advancement of automatic accounting solutions should not complicate the life of SMEs. Certainly, it will only make it more difficult to hide income from tax authorities, but that is the goal of both EU regulations regarding payments and the introduction of KSEF.