The recent shift toward greater use of cash in Russia has drawn attention from analysts, banks and regulators. Multiple sources tracking payments report higher shares of physical-currency transactions in retail and services, even as the central bank’s official metrics show continued growth in cashless payments. Understanding why citizens and small businesses are stocking up on banknotes requires comparing independent data, tax policy changes and the operational challenges created by intermittent mobile internet.
Numbers from fiscal-data processors and major banking analytics diverge, but they tell a similar story: certain sectors are returning to cash transactions in larger proportions than before. At the same time, the monetary base has recorded growth in the amount of cash in circulation, and banks note spikes in ATM and branch withdrawals during outages. The following sections break down the evidence, the drivers and the broader economic consequences of this trend.
What the data show
Independent industry trackers have recorded an uptick in the share of payments made in cash. Firms that aggregate point-of-sale information report that cash payments rose several percentage points year on year in categories such as grocery retail, hospitality and auto parts. Meanwhile, bank-led analytics observed a similar increase in cash use across the economy. By contrast, the central bank’s public datasets indicate that the share of cashless payments in retail turnover reached record levels, and that the number and value of cash-withdrawal transactions fell.
Reconciling the differences
Experts say the discrepancy comes from what each source can see. The central bank measures activity inside the formal banking system, whereas fiscal-data operators capture transactions at delivering terminals and tills. If payments migrate outside accounts — for example, as unrecorded cash sales — then regulators’ bank-account-based indicators may miss part of that movement. This divergence suggests that some cash circulating in the economy may be serving categories that evade centralized monitoring.
Why people and businesses are choosing cash
Three practical forces are pushing households and firms toward keeping more banknotes. First, the introduction of a higher base value-added tax increased the cost of accepting cards for merchants because card processing became subject to VAT. For low-margin retailers and services, the extra percentage points on fees meaningfully reduce profitability, making cash acceptance comparatively cheaper. Second, weakened or sporadic mobile internet service has created short-term worries about the reliability of card transactions and digital wallets, so many people maintain an on-hand reserve of cash for daily purchases. Third, proposed tighter reporting rules for private account transfers have prompted some users to consider avoiding traceable electronic transfers.
Tax changes and thresholds
Authorities have raised the standard VAT rate and are lowering revenue thresholds that determine tax obligations for small businesses using simplified regimes. These policy moves broaden the number of enterprises exposed to VAT and other reporting requirements. When compliance costs rise, the calculus for some small-scale sellers and landlords shifts toward unrecorded cash deals as a way to preserve margins and reduce visible income.
Risks and implications for the economy
A persistent move into cash-based transactions would carry consequences. Public finances could lose revenue as commerce slips out of formal tax collection, employees in the informal sector may miss out on social protections that depend on declared income, and compliant companies face unfair competition from those operating off the books. Observers warn that a stronger informal sector undermines longer-term efforts to formalize the economy and weakens the transparency of financial flows.
That said, several analysts caution against exaggerating the trend’s scale. Surveys and projections compiled by market watchers suggest the share of cash payments may remain in the high twenties to low thirties percentage range through the near term. The ultimate trajectory will depend on how businesses and consumers respond to higher tax burdens, whether regulators enact and enforce stricter monitoring of private transfers, and if technical problems like frequent mobile internet outages persist.
What to watch next
Policy choices and infrastructure reliability will be decisive. If authorities push stronger reporting or change tax incentives, some transactions could flow back into the formal system. Conversely, continued connectivity problems and higher compliance costs may entrench reliance on cash. For now, the mix of independent payment data, central-bank indicators and observed ATM behavior offers the clearest picture of where the economy may be headed.
