Why Germany maintains its passion for cash

A member of the ECB executive board has defended cash at a speech in Germany.

Even though cash is now just one of a number of options consumers have for making payments in-store, it still remains the first choice for many people – and this is especially true in certain countries. While some parts of the world are looking to move to non-cash payments, there are others where these new alternatives have yet to make an impact – and one country where cash is still very much king is Germany.

The country has long been known for its preference for cash, and a recent study by the European Central Bank emphasizes its position as one of Europe’s leading users of cash. It noted that 80 percent of transactions by volume in the country use cash – significantly higher than most other nations in western and northern Europe. By value, 55 percent of transactions are conducted using cash, compared with 28 percent in France and 27 percent in the Netherlands.

The ECB’s study also found Germans keep more cash on them than any other Eurozone country, with the average citizen carrying €103 in their wallets. This compares with just €29 in Portugal and €32 in France, who were the Eurozone’s lowest carriers of cash.

Why Germans keep cash handy

But why is this? Quartz notes there are several cultural and historical reasons why Germans still tend to favor cash payments more than their counterparts elsewhere in western Europe, such as the nation’s history of currency collapses.

Privacy concerns are another particular issue in Germany – the country has some of the toughest laws in the world when it comes to issues such as data protection, and people are typically averse to sharing their information with either the government or private businesses.

This may also be viewed as a legacy of the nation’s past, such as the surveillance programs of the Stasi in East Germany – and it is reflected in people’s attitudes to payments. Cash is anonymous and leaves no trail, which makes it an attractive option for many in the country.

Meanwhile, consumers in the nation have been brought up to save and are also less willing to build up debt than those in other developed nations, which may explain the lower use of credit cards. Even when making purchases online, credit cards are only used for 18 percent of transactions, compared with 41 percent for PayPal and 23 percent for bank transfers.

Cash can play a key role in this, with Quartz noting that in 2014, two-thirds of Germans agreed that paying with cash helped them to take better control over their finances.

A more cash-friendly environment

Germans’ preference for cash is helped by a supportive environment that encourages the use of this payment method over non-cash alternatives. A 2016 study by Deutsche Bundesbank, for instance, noted: “Traders’ acceptance of cashless payment instruments such as debit or credit cards at the point of sale is quite low in Germany compared with other countries.” This was, in part, due to higher transaction costs associated with credit card payments, but while EU regulations brought that down, the use of credit cards remains low.  

Furthermore, research by the Cologne Institute of Economic Research cited by Quartz found that the ratio in Germany was one cash machine to 13 cash-free payment terminals in shops and stores. For comparison, the figure was one to 91 in Sweden and one to 311 in Luxembourg.

Unsurprisingly, Germans are heavy users of ATMs as a result of this. The ECB found that consumers in the country withdraw an average of €109 at each visit, second only to Luxembourg, where the figure was €129. By comparison, consumers in neighboring France only withdraw an average of €29 per transaction.

Therefore, it’s clear that while some other nations may be keen to push forward with non-cash initiatives, cash will still have a key role to play in Germany for many years to come.

Written by Konstantin Koenigs

Konstantin Koenings

Dr. Konstantin Koenigs is Vice President Field Solutions Management for NCR’s Line of Business Financial Industry. Based in Germany, he ensures the success of NCR’s Financial Industry solutions in targeted markets.