Germans hang onto cash as rest of world goes electronic

Germany's attachment to cash is under attack, with European Union encouraging people to pay with cards and even mobile phones by making it safer and easier to do so.

Germans hang onto cash as rest of world goes electronic
Photo: DPA

But the German love of using notes and coins in situations where cards are used in many other countries will make it an uphill battle to promote electronic payment here.

The Bundesbank says an average German carries €118 around with them in cash, of which €6.70 is in coins – weighing more than 100 grams. And in 2008, around 82 percent of all transactions were carried out in cash – particularly those for smaller amounts.

Those in favour of electronic payment say it is safer and cheaper than paying in cash, according to Die Welt newspaper on Sunday.

Cash is even more expensive, says the European Commission, and is a useful tool for criminals. In Sweden authorities are expecting cash to be practically phased out over the next few years, and the number of robberies of shops to plummet as a result.

This is not to be expected in Germany, said Malte Krüger of Paysys Consultancy, which advises cash and credit card companies.

“A cashless future is not realistic in the foreseeable future,” he said.

“Many act as if paying by card is much cheaper than cash, but that is not true.” He said the European Commission estimates that cash payments cost between 30 and 55 cents each time, in infrastructure, but Krüger said the figure was more like 14 cents.

As for criminality, Krüger said, “One can say that it is a problem with cash, but one can also say that it’s a security problem in the country.” He said if all payments were to be switched to cards, criminality would simply shift to focus on that.

Die Welt also argues that it is a cultural matter – that Germans simply do not like the idea of their every payment being recorded and thus traceable. Swedes are seemingly far more relaxed about such matters – tax statements are even available online there.

Cash, “offers a space which is not under control – no-one asks where it has come from,” said Ingo Härlen, an economic psychologist.

It is also interesting to see people’s personal emotional relationship to cash when it comes to spending – or overspending. Härlen said the physical act of handing over money can be useful in keeping control of how much a person spends.

Globally, electronic payment methods are on the march, with consultants Arthur D. Little estimating that in 2012, around $250 billion will be paid with mobile phones over text messages.

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German watchdog steps up monitoring of popular N26 online bank

Germany's financial watchdog on Wednesday ordered online bank N26 to step up "internal controls and safeguards" to prevent money laundering and terrorist financing, and said it was appointing a special representative to monitor progress.

German watchdog steps up monitoring of popular N26 online bank
An N26 card. Photo: Wikimedia Commons

Bafin’s announcement marks an escalation of previous warnings to the popular Berlin start-up, which has come under fire in the past for not properly verifying the identities of new customers.

“Bafin ordered N26 Bank GmbH to rectify deficiencies both in IT monitoring and in customer due diligence,” the regulator said in a statement.

N26 “is required to ensure that it has the adequate personnel, technical and organisational resources to comply with its obligations under anti-money laundering law,” it said.

A “special commissioner” would oversee the company’s efforts, Bafin added. Founded in 2013 and known for its transparent debit cards, digital bank N26 is one of Germany’s most high-profile financial technology or “fintech” firms and now has seven million customers in 25 countries.

Its rapid growth has rested in part on fast-track identity procedures for new customers.

READ ALSO: What is the digital German bank N26 that’s about to hit a million users?

In 2019, German business weekly WirtschaftsWoche said it had managed to open accounts using forged IDs.

N26 on Wednesday pledged to “work closely” with Bafin and the special representative.

It said it had already significantly increased measures to prevent money laundering in recent years, “but we recognise that more must be done in this area”.

The coronavirus crisis had contributed to a spike in fraudulent online transactions worldwide, N26 added, “increasing the demands placed on banks in the fight against crime”.