The prestigious Brussels-based media outlet Politico.eu has dedicated an extensive article to Prime Minister Edi Rama and his efforts to transform the Albanian economy into a cashless society by 2030. In her analysis, journalist Alice Taylor, who has lived in Albania for years, describes the reality where cash remains king, while citizens often avoid the banking system due to a lack of trust, inherited from the post-communist period and the pyramid schemes of the 90s.
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Albania's Prime Minister Promotes the Dream of the First Cashless Society
In a place where ""cash on hand is king", Prime Minister Edi Rama's ambition to eliminate its use by 2030 would completely subvert society.
For years, Albanians have preferred to keep their money under their mattress, next to their AK-47s (kalash), as the national joke goes, rather than in banks. But if Rama wants, Albania will become the world's first cashless economy.
A big part of the reason for this is that many transactions currently take place over the counter. Eliminating cash "it is an absolute advantage for countries with high informality and destabilizing amounts of illicit money in the financial system", said Selami Xhepa, professor of economic sciences at the University of Tirana.
The problem is that the banking system and society may not be ready to take this step.
Most Albanians prefer to manage their savings outside the banking system, hiding banknotes in inconspicuous places and insisting on cash payments whenever possible.
Even in tourist guides for Albania, the expression "money is king” often appears as a tip for visitors. Although most chain stores or larger restaurants accept cards, cafes, beauty salons, boutiques, telecommunications companies, and grocery stores do not.
At a clothing store in downtown Tirana, when POLITICO tried to pay with a digital card, the cashier seemed confused and asked, “cash in hand? "
It was a similar story in the taxi and on the bus, when the fatorino repeated loudly, "40 lek".
The left-wing government wants to free Albania from what the European Commission's 2024 country report described as a "...large informal economy” which hinders business and competition (not to mention reducing tax revenues).
Estimates place the gray economy – the part of the economy not included in official statistics – at between 29 and 50 percent of gross domestic product.
Spiro Brumbulli, secretary general of the Albanian Banks Association, told POLITICO that the government and institutions will draft a plan to pave the way for a cashless transition, with further steps including a limit on purchases made with physical currency, integration with the EU’s SEPA payments system by October, and the launch of SEPA instant payments soon after.
Post-communist trauma
Ideas to move towards a less and less cash-based society are being pursued by many developed countries, such as Sweden, Estonia and Ireland. Albania is a different matter, however, and public skepticism is understandable.
After the fall of communism in the early 1990s, banks and financial institutions, along with “investment company,” began to appear promising unbelievable interest rates of up to 19 percent on deposits.
Some firms quickly expanded to more than 25, and at the height of this mindset, one in six Albanians had invested money, in many cases their entire life savings, in pyramid schemes. Early investors received generous rewards, but they became smaller and rarer as the system collapsed under its own weight.
In January 1997, the first firms began to collapse, prompting Albanians to try to withdraw their funds en masse, creating a vicious cycle of further collapse. By March, the country was in chaos, and rebellion had begun. Soldiers and police deserted their posts, and crowds of angry and impoverished Albanians accused the government of failing to stop the fraud and even profiting from it.
About 2 people were killed in clashes between citizens and authorities, and by armed gangs with more than a million weapons stolen from state warehouses. In total, about $1.2 billion was lost, equivalent to half of the Gross Domestic Product at the time.
This period caused waves of migration, delayed the country for many years in its development, and destroyed citizens' trust in banking institutions and the state.
Expensive banks
Over the past almost three decades, banks have failed to rebuild trust.
Part of the problem, says Professor Xhepa, is that banks offer few benefits and are expensive to use. This discourages people from opening accounts and using bank cards and digital transfers.
Most "have charged discriminatory interest rates"," he says. "High for loans and very low for savings." He adds: “International payments also have high fees, discouraging transfers from immigrants.”
Digital payments within Albanian banks have high transaction fees (the cost to send 500 euros was up to 50 euros for this POLITICO reporter), while fees for other forms of transactions are equally expensive.
The bank exchange rate between the lek and the euro is also known for its low competitiveness.
Even in business, many companies complain about fees of up to 3.5 percent per transaction for card processing.
Brumbulli from the banking association says that some businesses even charge customers additional fees for paying by card.
This helps businesses avoid taxes, as cash payments are often not recorded in the cash register.
The Governor of the Bank of Albania, Gent Sejko, declined to comment.
While the ambition to move towards a cashless society by 2030 is bold, success still depends on the introduction of low-cost and easily accessible digital payments infrastructure, potentially including a central bank digital currency or a national instant payments platform.
Although the Bank of Albania has studied such currencies and stablecoin, a type of cryptocurrency, as possible tools, there is no official plan yet. Without a clear plan for these mechanisms, Rama's plan risks remaining a mere aspiration.
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