Germans warming to non-cash payments

FRANKFURT • Cash no longer makes up most of the money spent in Germany, a Bundesbank study has shown, denting a historical supremacy over other means of payments rooted in the country's longing for privacy and freedom.

The Bundesbank has been a staunch advocate of cash in the face of a global shift to electronic forms of payments such as debit cards and an international debate about the idea of digital-only money issued by central banks.

But a survey of about 2,000 people by the German central bank showed that cards were gradually gaining ground in the country, even if cash remained the favourite form of payment.

"Cash remains the most popular, but card payments are increasing," Bundesbank board member Carl-Ludwig Thiele said as he presented the survey yesterday.

Cash accounted for 47.6 per cent of German transactions by volume last year, down from 53.2 per cent three years earlier and below the halfway mark for the first time since polling started in 2008.

Cards grabbed a 39.4 per cent market share last year compared with 33.4 per cent in 2014, mirroring a global trend that has long taken hold in many other countries, including Sweden and Britain.

Internet payments also grew but still accounted for a modest 3.7 per cent of total volume.

Germans and Austrians are the biggest users of cash among countries in the euro zone's richer "core", according to a recent study by the European Central Bank (ECB).

This preference has been associated with worries about privacy and a deeply ingrained diffidence towards the state, which some trace to the era of the Nazis and of communist East Germany.

The Bundesbank survey found that most Germans thought that cash was useful to teach children about the use of money and to ensure a better control of one's personal finances.

The vast majority also believed the abolition of notes and coins would cause problems to parts of the population, such as the elderly, while only just over a third saw it as a way to fight tax evasion and money laundering.

A German government plan to push for an upper limit of €5,000 (S$8,160) to cash payments met fierce resistance two years ago.

Speaking after Mr Thiele, ECB board member Yves Mersch weighed in by saying that low caps threatened the euro's status as the euro zone's legal tender, which promotes freedom and equality.

The idea of a digital currency giving holders a direct claim on the central bank is under study by Sweden's Riksbank and has been touted by some academics as a way to extend the reach of monetary policy when interest rates on deposits are below zero.


A version of this article appeared in the print edition of The Straits Times on February 15, 2018, with the headline 'Germans warming to non-cash payments'. Print Edition | Subscribe