Albania’s leader pushes dream of first cashless society

TIRANA, Albania — In a country where cash is king, Prime Minister Edi Rama’s ambition to make Albania go without by 2030 would turn society on its head.

For years, Albanians have preferred to keep their cash under the mattress — next to their AK-47, as the national joke goes — rather than in banks. But if Rama gets his wish, Albania would become the world’s first cashless economy.

Much of the reason for this is that at the moment so many transactions happen under the counter. The elimination of cash “is an absolute priority for countries with high informality and destabilizing amounts of illegal money in the financial system,” said Selami Xhepa, professor of economic science at the University of Tirana.

The trouble is, the banking system and society may not be ready to take the leap.

The majority of Albanians prefer to manage their savings outside of the banking system, stashing banknotes away out of sight and insisting on physical cash payments whenever possible.

Even in tourist guides for Albania, the phrase “cash is king” often crops up as advice to visitors. Although most chain stores or larger restaurants accept cards, cafés, beauty salons, boutiques, telecom companies and grocery stores don’t.

In a clothes store in central Tirana, when POLITICO tried to pay with a digital card, the teller looked confused and asked, “cash?” 

It was a similar story in a taxi and on the bus ― the conductor scoffed and repeated louder, “40 lek.”

The center-left government wants to free Albania from what the European Commission’s 2024 country report described as a “large informal economy” that impedes business and competition (not to mention diminishing tax revenues). 

Estimates put the gray economy — the portion of the economy not accounted for in official statistics — at between 29 percent and 50 percent of gross domestic product.

Spiro Brumbulli, secretary general of the Albanian Banking Association, told POLITICO that the government and institutions would establish a plan to pave the way to go cash-free, with next steps including a ceiling for purchases made with physical currency, integrating with the EU’s SEPA payment system by October, and rolling out SEPA instant payments soon after.

Overcoming Albanian bank trauma

One of the problems is that Albanians simply don’t like banks. A recent survey from the Albanian Association of Banks found that just 34 percent of the population trusted them. The World Bank reported that less than 50 percent of Albanians have a bank account.

Going cashless is a policy being considered by many developed countries, such as Sweden, Estonia and Ireland. | Sascha Steinbach/EPA

The Bank of Albania says that 78 percent “have access” to a bank account, less than the European average of 96 percent.

Not everyone is convinced the plan makes sense. Genc Pollo, co-founder of the opposition Democratic Party and a former deputy prime minister, told POLITICO that trying to close the economy’s gray areas  by banning cash was “like killing chickens using artillery.” He called the idea an “attack on the personal freedom of legitimate banknote holders.”

While he agreed Albanian banks can be “clumsy and expensive,” smarter regulation and more competition from online money platforms and crypto would be a better route than a cash ban. He had little hope that a cashless society would reduce money laundering. 

Erald Kapri, a newly elected member of parliament for the center-right Opportunity Party, told POLITICO, he suspected politics was at play.  “It’s just one of those ideas of Rama to get attention and distract from the country’s real issues, such as corruption or the high cost of living,” he said.

Post-communist trauma

Going cashless is a policy being considered by many developed countries, such as Sweden, Estonia and Ireland. Albania is a different matter however and public skepticism is understandable. 

After communism fell at the start of the 1990s, banks and financial institutions, along with “investment companies,” started popping up and promising implausibly high interest rates of up to 19 percent on deposits.

A few firms quickly ballooned into more than 25, and at the peak of the craze, one in six Albanians had sunk money — in many cases, their entire life savings — into the pyramid-style schemes. Early investors received generous payouts, but these grew smaller and less frequent as the system buckled under its own weight.

By January 1997, the first firms began to collapse, prompting Albanians to attempt 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, broke Albanians accused the government of failing to stop the scams and even profiting from them.

Some 2,000 people were killed in clashes between citizens and the authorities, and by gangs armed with more than a million weapons looted from state armories. Overall, about $1.2 billion was lost — equivalent to half of the GDP at the time.

This period triggered waves of migration, set the country back years in terms of its development, and shattered citizens’ trust in banking institutions and the state.

Expensive banks

Over the almost three decades since, banks have missed the mark when it comes to rebuilding trust.

Part of the problem, Xhepa, the professor, said, is that banks offer little in the way of benefits and are expensive to use. That discourages people  from opening accounts and using bank cards and digital transfers. 

Although the Bank of Albania has studied such currencies and stablecoins ― a type of cryptocurrency ― as potential tools, no official roadmap exists. | Robert Ghement/EPA

Most “have maintained discriminatory interest rates,” he said. “High for lending and very low for savings.” He added: “International payments have also carried high fees, discouraging transfers from emigrants.”

Domestic digital payments between Albanian banks incur high transaction charges (the cost of sending €500 was as much as €50 for this POLITICO reporter), while rates for other forms of transactions can be equally cost-prohibitive.

Bank exchange rates between the lek and the euro are also notoriously uncompetitive.

On the shopfloor, too, businesses object to having to pay up to 3.5 percent per transaction for card processing.

Brumbulli, of the banking association, said that some businesses even charge customers extra for paying with a card.

Doing so helps businesses avoid taxes, as cash payments are often not rung up through the register. 

The governor of the Bank of Albania, Gent Sejko, declined to comment.

While the ambition to go cashless by 2030 is bold, success still hinges on the introduction of low-cost, easy-to-access digital payment infrastructure — potentially including a central bank digital currency or national instant payment platform.

Although the Bank of Albania has studied such currencies and stablecoins ― a type of cryptocurrency ― as potential tools, no official roadmap exists. Without a laid-out plan for such mechanisms, Rama’s plan risks remaining aspirational.