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Visa Europe’s new report reveal electronic payments help to counter the shadow economy


18 Oct 2011


Euro & Finance

Today Visa Europe announced the launch of their report, “The Shadow Economy in Europe” at a lunchtime event which they hosted together with the European Credit Research Institute (ECRI) in cooperation with the Centre for European Policy Studies (CEPS). The event brought together representatives of the payments services industry experts, policymakers and academics who discussed possible best practices in which innovative systems including electronic payments can be used to address the shadow economy in Europe.

The shadow economy in Europe is estimated to be €2.2 trillion in 2011, this is 5% higher than the €2.1 trillion in 2010 and a rebound to the pre-crisis size in 2007.  Europe’s shadow economy is significant and has severe consequences for Europe’s economy including lost tax revenues, reduced protection for workers, lower productivity and, ultimately slower rates of growth. In the midst of the current economic climate, the extent of the shadow economy has been highlighted with more and more people inclined to operate outside the normal, legal framework. With the size of the shadow economy expected to increase in 2011 and governments under increasing pressure as slow growth and high unemployment impact their fiscal budgets, combative measures are being considered to effectively address the problem.

Announcing the launch of today’s report, Davide Steffanini, General Manager for Italy, Visa Europe revealed the extent to which the use of electronic payments can encourage cash displacement and help reduce the shadow economy. “By facilitating the use of electronic payments and reducing the extent to which cash is used for every-day transactions, participation in the shadow economy can become more difficult”. Presenting the study’s findings, Professor Schneider, co-author of the report reinforced these calls which indicate that “an increase in electronic payments by 10 percent, can lead to a decline in the size of the shadow economy by up to 5 percent.”

While most countries focus on curtailing undeclared work and creating credible laws and penalties, indirect measures are considered some of the most powerful measures to reduce the shadow economy’s size. “In any economy, governments are primarily the largest initiators and recipients of payments. As such, governments can serve as role models in promoting the use of electronic payments,” said Davide Steffanini.

In a number of government led efforts, Italy has defined sanctions and enforced rigorous controls to foster the use of electronic payments to help combat the shadow economy”, said Davide Steffanini, “including the Finanziaria 2010, a regulation which has made electronic payments mandatory for transactions of more than €5,000, but a lot more could be done to further reduce the extensive use/misuse of cash in Italy.”

Effective measures are emerging across Europe to help tackle the shadow economy. From the Czech Republic’s model of reduced VAT rates for maintenance and repairs in private households, to the “mini-jobs” reform introduced in Germany to simplify red tape and taxes to encourage lower-wage workers to join the official economy, Europe seems to be waking up to the ways that electronic payments can combat the shadow economy.

In concluding proceedings at today’s event, Davide Steffanini stated that “by facilitating the use of electronic payments across industries and continuing to develop ways to improve payment systems’ technology to ensure easy access to efficient, reliable and secure methods of electronic payments, banks, payment systems and governments can ensure that reducing the shadow economy is an achievable task.”

Note to editors:

About Visa Europe

In Europe, there are 430 million Visa debit, credit and commercial cards. In the 12 months ending March 2011 those cards were used to make purchases and cash withdrawals to the value of €1.6 trillion. 12.5% of consumer spending at point of sale in Europe is with a Visa card, and more than 70% of that is on Visa debit cards.  

Visa Europe is owned and operated by more than 4,000 European member banks and was incorporated in July 2004. In October 2007, Visa Europe became independent of the new global Visa Inc., with an exclusive, irrevocable and perpetual licence in Europe. As a dedicated European payment system it is able to respond quickly to the specific market needs of European banks and their customers - cardholders and retailers - and to meet the European Commission’s objective to create a true internal market for payments.

Visa enjoys unsurpassed acceptance around the world. In addition, Visa/PLUS is one of the world’s largest global ATM networks, offering cash access in local currency in over 200 countries.

For more information, visit

About the study

The shadow economy is estimated to be about €2.1 trillion in Europe and it is widely acknowledged to represent a major revenue threat for the global economy. Since the economic crisis has highlighted the scale of the shadow economy, policy makers have been considering measures from closing legislative loopholes to fiscal amnesty to recuperate lost revenues. As the shadow economy is difficult to detect and consequently to control, and as many countries have already implemented comprehensive strategies to help tackle the problem, it has become clear that more innovative mitigation strategies to combat shadow economy are needed. Electronic payment systems provide one means of making participation in the shadow economy more difficult, as these systems provide proof of transactions. Within this context Fried­rich Schneider, Ph.D., professor of economics and chairperson of the Department of Economics at Johannes Kepler University in Linz, Austria, and A.T. Kearney con­ducted a study to explore the structure of the shadow economy in Europe and identify measures to reduce it. The European Credit Research Institute and CEPS held an event in cooperation with Visa Europe in order to discuss the challenges of combating the European shadow economy, and how electronic payments could be used to help reduce and eliminate it.

To view the report please visit: 


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