Little by little, Germans move away from cash

Tourists and business travellers visiting Germany are often surprised when they reach to pay for their beer, metro tickets or even a large restaurant bill that their credit cards are not welcome. Habits, however, are slowly changing as younger consumers leapfrog from cash to convenient electronic forms of payment.

Little by little, Germans move away from cash
Photo: DPA

A deeply ingrained mistrust of credit has long kept cash king in Germany, where the average citizen carries 103 euros ($113) in their pocket. 

“Cards have long been the most costly means of payment for merchants while cash transactions cost them almost nothing,” Ulrich Binneboessel of the HDE retail sector federation told AFP, explaining the reluctance to accept credit cards.

More than half of the amount spent in Germany on private purchases, 53 percent, is paid in cash, according to a study by the Bundesbank central bank — one of the highest rates for an advanced economy.

In terms of the number of transactions, the figure hovers at 79 percent despite the fact that nearly all Germans have debit cards, which are much more widely accepted by vendors.

A third of those polled said they only paid in cash, far more than in other Western countries, with the rate particularly high among pensioners.

One among them, who asked to be identified only as Reinhard, always carries money and knows exactly how much he has on him at any point in time.

“In a shop, I think it's a waste of time to pay any other way but with cash,” he said.

Reinhard, who lives in the western state of Hesse, said he is afraid he will be charged too much and discover it only when he receives the bill in the mail, and is wary of hackers and identity thieves who prey on cardholders.

Historical trauma

Security and privacy are high priorities among Germans, who tend to be more conservative consumers with a strong aversion to debt. The vestigial trauma from 1920s-era hyperinflation which helped usher in the Nazi era still colours the national thinking.

“Consumers in Germany have little desire to experiment,” said Carl-Ludwig Thiele, a Bundesbank board member.

But “changes in how people pay are coming, step-by-step”.

In a revolutionary move by German standards, discount retailers Lidl and Aldi started accepting Visa and MasterCard this month, after electronics chains Media Markt and Saturn took the same decision in late May.

And from the autumn, Media Markt and Saturn customers will be able to check themselves out at the till by scanning their cards or mobile phones.

“It is no longer relevant to talk today of Germany as a country of cash payers. Perhaps the Germans just need a little longer than others to be convinced of the benefits of the new payment systems,” said Horst Rueter of research institute EHI in the western city of Cologne.

Buyers who came of age in the Internet era are rapidly embracing a world without cash, with 20 percent of German 14 to 29 year olds already paying using their smartphones, according to a survey by the high-tech industry federation Bitkom.

“With the technical possibilities now available, coins and notes are an anachronism,” Peter Bofinger, one of five Wise Men experts advising the German government on economic policy, told Der Spiegel news magazine.

Beyond the benefits to consumers, he said, less cash would improve efficiency and make it easier to combat money laundering and other financial crimes.

Kind of freedom

However, reassurance about the safety of payment methods and a ceiling on costs are crucial because “the willingness of consumers to pay for payment services is extremely low,” said Thiele.

The European Union this month passed a regulation capping fees on payments made with debit and credit cards, which should also spur their use.

“The trend towards less cash will continue, although this will be a continuous and slow process,” Rueter said.

Cash will only cover less than half the payments in the “medium term”, the Bundesbank said.

For its defenders, cash offers a kind of freedom. Three in four Germans said they would object to merchants refusing cash in the future, according to a survey by polling group YouGov.

“Each country has its own way of paying,” Rueter said, based on “a mixture of cultural specificity, specific needs and common sense” which can evolve with time.

Germany, for example, stopped using cheques about 15 years ago, calling them obsolete.

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Where in Germany do people have the highest disposable income?

An economic study has shown huge regional differences in income throughout Germany. So which parts of the country have the most to spend each month, and which are feeling the squeeze?

Where in Germany do people have the highest disposable income?

A study by the Economic and Social Sciences Institute (WSI) of the Hans-Böckler foundation reveals stark regional differences in disposable income in Germany. In some cases, households had as much as double the spending money of those in other parts of the country. 

Here’s where people have the most – and least – disposable income each month.

What is disposable income?

The WSI calculated disposable income as the sum of income from wealth and employment, minus social contributions, income taxes, property taxes and other direct benefits or taxes.

What’s left is the income which private households can either spend on consumer goods or save.

The study, which was based on the most recent available national accounts data for 2019, looked at the disposable income of all of the 401 counties, districts and cities across Germany.

Which regions have the highest and lowest disposable incomes?

The study found that the regions with the highest disposable incomes were in the southern states.

Heilbronn in Baden-Württemberg had the highest disposable income of all 401 German counties and independent cities – with an average per capita disposable income of €42,275. The district of Starnberg in Bayern followed in second place with €38,509.

READ ALSO: REVEALED: How much do employees really earn across Germany’s states?

By comparison, per capita incomes in the cities of Gelsenkirchen and Duisburg in North Rhine-Westphalia were less than half as high, at €17,015 and €17,741 respectively. These regions had the lowest disposable income in the country. 

The study also found that, more than thirty years since German reunification, the eastern regions continue to lag behind those in the west in terms of wages.

According to the WSI, the Potsdam-Mittelmark district is the only district in the former east where the disposable per capita income of €24,127 exceeds the national average of €23,706.

Do regional price differences balance things out?

The study also showed that regionally different price levels contribute to a certain levelling out of disposable incomes, as regions with high incomes also tend to have higher rents and other living costs.

“People then have more money in their wallets, but they cannot afford more to the same extent,” WSI scientist Toralf Pusch explained.

READ ALSO: EXPLAINED: When will Germany raise the minimum wage?

Therefore, incomes in the eastern states, adjusted for purchasing power, are generally somewhat higher than the per capita amounts would suggest.

That could explain why, even after price adjustment, the cities of Gelsenkirchen and Duisburg in western Germany continue to be at the very bottom of the list.

Saxon-Anhalt’s Halle an der Saale, on the other hand, which has an average disposable income of only €18,527, benefits from the lower prices in the east.