Spain’s Second Largest Lender, BBVA, Escalates Its War on Cash in Mexico

Some banks will do just about anything to try to wean their customers off using physical money, including (in the case of BBVA) charging their customers for using cash too often. 

Just over a week ago, customers of BBVA Mexico, Mexico’s largest bank by customer base, reported on social media that the bank had begun charging them for using their debit cards to withdraw money from the bank’s ATMs. They said they had not been informed of the new charges, which can run as high as 50 pesos per month. Many of the customers were livid because the bank had previously pledged that handling debit cards and payroll accounts would not generate charges.

The bank responded, through distinct media channels, by explaining to customers that from now on they only be allowed four free ATM withdrawals per month with their debit cards. If a user goes over that limit and makes between five and eight withdrawals, they will have to pay a so-called “membership” fee of 25 pesos at the end of the month. If you make more than eight withdrawals a month, the fee goes up to 50 pesos.

Fifty pesos is roughly $2.40 in U.S. money, which may not seem like much. But it is still enough to sting, especially in a country like Mexico where roughly 30% of the population live in poverty, according to the latest data from the Economic Commission for Latin America and the Caribbean (CEPAL). That number is growing as economic conditions become more precarious and inflation drives the price of basic necessities ever higher.

Paying to Access Your Own Money

But it is the principle that matters most here: bank customers are being forced to pay a fee to access their own money. And the solution being promoted by the bank that will allow the customers to avoid paying that fee is to log onto BBVA’s banking app and preorder the cash before visiting an ATM. The app generates a code for the operation the customer requests. Then he or she goes to the ATM, inputs the code and out comes the cash.

BBVA calls this service “Mobile Cash” and it offers customers a means of withdrawing cash without needing to use their wallet; they just use your phone instead. The problem for the bank is that many of its customers in Mexico would seem to prefer to continue using their debit card. So the bank has decided to give them a bit of a nudge by charging them for doing things the old way.

Ultimately what BBVA is hoping to accomplish is to encourage those of its customers who still haven’t downloaded its banking app to do so — and to start using it. By the end of 2021, 15.1 million of BBVA Mexico’s 24 million customers had become digital users, 30% more than in 2020. But roughly nine million haven’t. They are continuing to bank the old fashioned way, using cash and cards rather than apps and blockchain (something else BBVA is heavily investing in).

Getting Rid of Cash (Or At Least Trying To)

Like many large lenders, BBVA would like nothing more than to get rid of cash. In 2019, the managing director and vice-president of BBVA Mexico, Eduardo Osuna, said one of the bank’s long-term goals was to eliminate cash altogether. “Seventy-four of [Mexico’s] population is informal and this is a huge opportunity to lend them money,” Osuna said during a meeting of chief execs in 2019. “We must combat the use of cash,” .

Fifty-three percent of Mexicans still don’t have a bank account, according to a survey by Mexico’s National Institute of Statistics and Geography (INEGI). Most of those that do tend to live in urban areas and are relatively well off. One of the reasons why so many people still don’t have a bank account is that the banking system is not inclusive enough, concluded the INEGI report. For example, bank fees tend to be much higher in Mexico than in Spain and the U.S. though banks have reduced the fees somewhat following government pressure.

But now BBVA is using fees as a stick to try to wean its customers off cash. At the same 2019 meeting of senior BBVA executives Hugo Nájera, general director of business development at BBVA, said that cash is not only inefficient but also facilitates tax evasion. “The best thing we can do,” he said, “is get rid of [it].”

These sentiments were echoed in December 2020 by BBVA’s chief economist, Carlos Serrano Herrera, who wrote an Op-ed in El Financiero calling on Mexico’s AMLO government to “wage war on cash”:

It facilitates tax evasion and corruption (we Mexicans have become accustomed to watching videos in which corrupt politicians accept bribes in cash). In this regard, World Bank studies show a high correlation between the extent of cash use in a country and the perceived levels of corruption… Because it is so difficult to trace, cash also facilitates organized criminal activities. Cash is also a fertile ground for informality, a very serious problem in our country as evidenced by the fact that 62% of companies and 56% of workers are informal, according to Inegi data.

It is always interesting to hear senior bank executives complain about how cash is facilitating tax avoidance and evasion, especially when the bank they work for is among 36 large European lenders accused by the Paris-based EU tax observatory of using tax havens extensively to reduce their tax bill. BBVA also faces tax evasion and money laundering allegations in Argentina.

Leading the Charge in the War on Cash

In September 2019, BBVA became the first bank in Spain (and according to a Forbes article published at the time, in the world) to stop offering cash services at some of its branches. Since then many of its rivals have followed its lead. When BBVA announced the change to its services, it invited customers to use its network of more than 6,000 ATMs instead. But in the last two years it has gradually whittled down their number to 4,871.

To justify its decision to withdraw over-the-counter cash services at some of its branches, the bank said it was simply upgrading its services to respond to the changing needs of its customers, since around 50% of them were mainly using the bank’s digital services. The other 50% of its customers — many of them elderly and/or poor who do not have smart phones or if they do, do not know how to use BBVA’s banking app — do not seem to matter.

This is one of the darkest aspects of the financial industry’s ongoing war on cash. It is being waged under the banner of “financial inclusion,” despite the fact that a cashless economy would be anything but inclusive. Those who stand to benefit most from a cashless economy are younger generations in the more closeted classes, who are largely computer literate and already use digital payment methods for most, if not all, of their transactions. Life will become somewhat easier for them.

By contrast, those more dependent on cash — the poor and the elderly — will suddenly find life a lot harder. This is already happening in Spain, where the elderly, for whom cash is still the preferred use of payment, have to travel further and further afield to continue getting hold of cash. The older you get, the harder it is to travel, especially if you can no longer drive a car.

But there has been some pushback in recent months. A new pro-cash initiative called Plataforma Denaria is gathering public support for freedom of payment choice and underscoring the benefits of banknotes and coins to the nation’s economy and society. In its mission statement, the Denaria Platform argues that cash is a universal, free payment method and a symbol of individual rights and freedom that serves as a pillar of financial inclusion.

“Since data is the new oil, cash is a symbol of freedom,” says Javier Rupérez, the president of Plataforma Denaria. “We believe that cash is a public good that must be protected. It is the safest, most democratic, accessible, and equal method of payment and must be protected by European regulators.”

The Denaria Platform joins other global movements in promoting awareness for cash, such as Germany’s Bargeld zählt!, an initiative launched by small and medium-sized business associations, and America’s Consumer Choice in Payment Coalition.

Cash Still King in Mexico

In Mexico most people still use cash for most of their purchases, though the pandemic has given way to a paradoxical situation. As happened with other currencies, including the US dollar and the euro, the amount of Mexican pesos in circulation increased sharply in 2020, rising from 7% of GDP to 9%. At the same time, the use of cash fell. As the Bank of Mexico notes in a recent paper, one obvious reason for the latter was the initial fear, first promulgated by the World Health Organization and gleefully magnified by the media, that coins and bills could be a source of contagion. At the same time, as often happens during periods of acute economic uncertainty, people hoarded cash.

[P]eople considered cash to be a safer means of dealing with uncertainty. In this sense, households had to reduce their spending as their incomes fell due to the closure of business activity and the implementation of social distancing measures. In particular, low-income households not only cut their spending but also increased their liquid assets, the most liquid of which was cash.

Additionally, reduced economic activity means people need less cash. The most significant indicator of the use of cash, as a means of payment, is withdrawals at ATMs, which, since records began, had never decreased. During 2020, they did so by more than 13%. Although payment with bank cards also fell, it did so to a lesser extent and has been recovering much faster, due to the reopening of businesses.

This suggests that the pandemic has had a much more lasting effect on cash than other means of payment. Another indicator of reduced use of cash as a means of payment is the recent Banco de México telephone survey, with a different methodology from that of face-to-face interviews in previous years, from which it can be concluded that the use of cash as a means of payment fell for the first time from 93% of the target population in 2019 to 86% in 2020.

The fact that 86% of Mexican people were still using cash after the lockdowns and other restrictions of 2020 goes to show just how important cash still is as a means of payment in Mexico, especially among low-income households. As such, BBVA has a long way to go if it wants to eliminate cash from Mexico altogether.