Irrational Investments and Behavioural Finance

Cashless Italia

Italy for Nudges by promoting incentives for non-cash payments

This article aims to explain the underlying aspects of the “National Cashback”, a new program planned by the Italian Government. This article presents the ongoing program “Italia Cashless“, a name that has been present in the news over the last few weeks, analyzed under nudge theory, following the “libertarian paternalism” approach suggested by R. Thaler and C. Sunstein, and analyzes both the direct and indirect aspects that this program is carrying along with itself.

“Italia Cashless” is a program launched by the Italian Government to encourage the use of credit and debit cards, as well as payment app, to modernize the country and to promote the development of a system more digital, fast, simple, and transparent. The main aspect of such a campaign is primarily tracking more payments and fighting the incumbent problem of tax evasion in the country: the most recent estimates by the Government state it to be around 110 billion Euro, equal to the amount provided for public health spending, or even worse around 180 billion, according to other reliable sources. By limiting the use of cash for payment, or speaking about nudging, promoting the usage of trackable payment systems, the Government expects a decrease in such a disastrous amount of tax evasion. Another reason to encourage digital payments could also be – in a more restrictive and contingent analysis – to try to limit the usage of cash, which during a pandemic could be a driver of the virus itself. This has been observed with multiple nudges to pay digitally, rather than cash.

Let’s explain what this program consists of, and how it relates to nudging. The cashback program is a mechanism of incentives supposed to give 10% of any payments done by cards back to the spender. The plan is six-monthly, and it is required for any period to reach a minimum of 50 different transactions, no matter what the amount of each of them is (even to get just a coffee), to be eligible for the refund. There is also an upper limit of 150 Euro per semester as a cashback. In addition to the program, Super Cashback presents cashless spenders the opportunity to win a special prize of 1500 Euro per semester for the top-100k of the “most virtuous” digital payers.

Here we assist to a direct form of nudging people, a sort of libertarian paternalism approach adopted by the Italian Government, as defined by the Nobel Prize Richard H. Thaler. Even though it could seem, at first, a contradiction itself, the expression libertarian paternalism is the perfect summary of the “Nudge Theory”. Libertarian because the key point is, indeed, freedom of people to choose whatever is best for them to do, without any external obligation; paternalism, in the sense of the author, refers to the aim of positive influence from the public sector, which is supposed to improve welfare and well-being of any individual. Therefore, the complete expression “liberal paternalism” put together encourages a tenuous form of influence, since choices are not forbidden, blocked, or hindered in any way. The last call is, and will always be, in the power of individuals. Nudging is just a better way that government and organizations can exploit in terms of drawing a better “choice architecture“: people are free to choose whether to adhere to the program or not, the number of payments completed by cash or any other forms eligible for cashback. Not only is there total freedom regarding participation, but also positive reinforcement is given to help people “to choose better”, even “wisely” we could say. This complete set of rules, provisions, and reinforcement should lead to a general improvement in “payment behavior”, going against a well-defined cultural norm in Italy that is characterized by in hand cash payments combined with a reluctance to adopt more digital, or trackable form of payment.

The program as defined, started in January and it will be going on for the entire year, divided into the two six-month periods for accruing the right to get the cashback as abovementioned. There is also another provision, as if it were a trial period for December only, called “Extra Christmas Cashback”: for that month, it was established a sort of facilitation to the normal program, reducing the minimum number of transactions from 50 to 10, but at the same time still leaving unaltered the maximum amount achievable of 150 Euro of cashback in just a month. As for the latter, we are already able to look at the data that show positive results: with almost 6 million subscriptions, more than half got the minimum number of transactions to be eligible for the refund. Moreover, the funds that the Government provided for the program turned out to be enough, despite some worries that they could have been not enough; 222 million Euro are coming for 3.2 million participants that reached the minimum target, with an average of 69 Euro per person. As the Government stated: “The observed participation as yet has been above the expectations in terms of data.”[1]

Here comes, therefore, the other aspect, indirect, of nudging regarding this program. The economic situation is crucial due to the pandemic that has devastated the world this past year. In Italy, the situation is quite alarming since a lot of business owners were forced to close due to COVID restrictions; these businesses have suffered a huge contraction in their revenues, due to a general decrease in demand from the buyers’ side, because of this vicious circle. the Cashless Program arrives as a form of nudging aimed to increase the demand itself, given the minimum number of transactions to reach within the month to be eligible to the refund, people could tend to make some purchase that they would not have done without this program. At the same time this program is pursuing the target of transparency and fight against tax evasion, which is better handled in the cashless system because by encouraging people to use trackable systems to pay, ad behaviors, such as not issuing any receipt or invoice after payment, evading taxes is avoided.

As abovementioned, the “culture of cash” is widespread in Italy, sometimes refusing to accept electronic payments. We can define culture as a set of norms, valid behavioral models for all the people who belong to a specific system. These are rules supposed to assist people in decision-making by giving a defined frame and decreasing the level of uncertainty. In this context, the architecture of choice presented in the nudge theory is playing a key role. Cultures do not always remain crystal over time, and nudging is an effective way to make them change without setting a new set of laws or regulations but letting people choose to adhere to a new mindset and create their new frame. Therefore, policymakers can set a new frame, without any mandatory rules, but showing instead why it could be convenient to make some specific choices (which could be the choice to use electronic payments instead of cash). That is the first step to “create a new culture.”

While “Italia Cashless” will not be the way to solve every problem linked to tax evasion, as well as to the economic difficulties of small business due to this though year, but for sure with the important lesson which can be learned from the nudging approach, could create a little improvement for many people, creating the conditions for a win-win situation for both Italy and Italians.


  • Thaler, R.H. & Sunstein, C.R. (2008). Nudge: Improving Decisions About Health, Wealth and Happiness, Yale University Press.
  • Grandori, A. (2001). Organization and Economic Behavior. (Original Edition: L’organizzazione delle attività economiche. Il Mulino, Bologna, 1995). London, Routledge.


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