Cash is “coined freedom” for Germans

A German EUROThis citation by Fjodor Michailowitsch Dostojewski is very much in line with Germans resilience to move towards electronic payments.

I was already wandering why electronic payments were always such a hassle in Germany. Small retail transactions are almost never (only in 20% of cases) paid via electronic means. The old lady in front of you will be counting her cents to EUR 4,26 and when reaching EUR 4,24 she will realize that she will have to pay with a EUR50 bill which the cashier cannot change. ARGH!

The Frankfurter Allgemeine Zeitung (FAZ) sacrificed two articles on June 1 regarding the Topic (“Warum haengen wir so am Bargeld” and “Deutsche wollen ihr Bargeld behalten“)

Reasons to reduce cash transactions are there many and Germans are aware of them: money laundering, drug traffiquing, etc could be easily stopped if people would use less cash. Nothing seems convincing enough. According to a Visa study, Germany holds the largest black economy in Germany (UER350bn) . If electronic payments would increase by 15%, the black economy could be reduced by 6-9 %. Peter Bofinger, a German economic professor has experienced a very emotional outcry (a real “shitstorm” to translate his words) of the German public after his comments or suggestions about banning cash.

In Addition, cash is expensive. A 2013 study by a Berlin University declared that the cost of the German cash economy reaches EUR 150 per citizen per year. Money transport vehicles move around 1.3 Million Kilometers every year.

In Europe there are already a few countries were cash circulation has been brought down: The Nordics are spearheading this movement where e.g., in Denmark cash stations, restaurants, and small shops will not accept cash payments anymore starting next year.

Evidently, there is a development, also in Germany towards card payments, however, it is a lot slower than elsewhere. In Germany 80% of retail transactions are still in cash (in numbers), compared to 56% in France, 52% in the Netherlands, and less than 50% in the US. The “war on cash” the US, is showing some fruit. Being supported by the financial sector which evidently earns more (or has less cost) with electronic payments. There are issuing banks increasingly combining forces against cash primarily since they hope to be able to impose negative interest rates on customers. This being fairly difficult for private individuals who today just withdraw their funds something which would not be possible anymore if we are living in a cashless society.

According to the opinion research institute, YouGov, and an article in DIE ZEIT,

  • 75% of Germans do still want to continue having the cash option in shops.
  • 74% would be against the option for small shops to not anymore accept cash as in Denmark.  However, 21% of the Germans would favor such a law.
  • 75% of the German population considers cash to be more secure than electronic money.
  • 53% of supermarket payments are done in cash. However, the higher the price, the more electronic payments are happening.
  • 51% (only!) consider cash as less hygienic than POS devices, escalator handholds, and books from the library.

But what are the reasons for the German public to be so opposed to moving to electronic payments?

One is definitely the slow establishment of the acquiring network. In Germany setting up shops with POS (point of sale) devices was very slow. There were only few places where clients could use their cards. Supermarkets with their low margin business were afraid of high fees.

Others cite the “German Angst” to spend more than you have. With cash, it is easier to manage and keep an overview of your finances. With credit cards, this concern might be true, however, with debit cards you can never spend more than you have.

For now, the card transactions are not quicker in supermarkets yet. Since people are not used to electronic payments, remembering their PIN, etc. it sometimes takes longer to get out the card and plug in the PIN than counting the EUR 4,26.

A very big concern for many Germans is privacy. They want to have the freedom to spend their money for what they want, in the amount they want, without anybody knowing about it or being able to trace it. With the introduction of google street view this already came up as a very sensitive issue in Germany. If you have a cleaning lady who is not registered, you will need cash to pay her. Even the thought that your partner could know for what, how much and where you spend your money, is an uncomfortable thought for many Germans. A secondary implication of this freedom to spend cash anonymously, is the fact that cash can be hoarded without anybody knowing. Around 20 to 30% of cash flowing in Germany is currently being held within country.

Overall, the “German” is a rather skeptical and pessimist fellow. With all new technology introduced, he or she will always start thinking about the disadvantages and risks. However, carrying around less cash should even convince the most hardliner German, so this argument might also not completely explain the anxiety of electronic payments.

Even the German central bank is against a reduction of cash in the German economy primarily due to the anxiety that negative interest rates could be pushed onto private individuals.

I think you will have to take all this Information with a grain of salt. We are far way EVERYWHERE to reach a 100% cashless Society. The questions which have been asked in These studies seemed to have been: ” Do you agree that cash should be abolished?” Considering existing infrastructure, I woudl also answer “no” to this. But it should be reduced and yes, I am willing to pay via Card or phone, but not necessarily exclusively.

FUN FACTS:  The most widely used bill in Germany is the EUR 50 bill of which there are 7.1bn. Then you have the EUR 20 and EUR 10 bills. The least frequent is the EUR 200 bill of which only 200 Million are in circulation. Regarding coints, the EUR 0,01 tops it all with 28.9 bn pieces in circulation. The least used, but the most important is the EUR 2 coin with a total Volume of EUR 10.4 Billion

Am weitesten verbreitet ist der 50-Euro-Schein, es gibt 7,1 Milliarden Stück davon. Es folgen die 20-Euro- und die 10-Euro-Note. Am seltensten ist der 200-Euro-Schein mit nur 200 Millionen Stück. Bei den Münzen liegt die 1-Cent-Münze vorn (28,9 Milliarden Stück). Am seltensten, dem Wert nach aber am wichtigsten ist die 2-Euro-Münze (Gesamtvolumen: 10,4 Milliarden Euro).

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