Why Are Germans Focused on Cash Payments

The world of payments is rapidly shifting to the digital realm; however, some consumers persist in using cash, or payments with the same finality as cash.

Industry insiders expect cash will be near-obsolete in a few short years, but one European country seems to be headed in the opposite direction for now. Germans use cash more frequently than other countries. Research from the Federal Reserve found the these consumers use cash in 82 percent of their financial transactions. Debit cards make up 13 percent, while credit cards account for only 2 percent. Germans also tend to keep more cash in their wallets - $123 on average. This number is around twice that seen in other countries the Reserve studied. Americans carry $74 on average, while citizens in the Netherlands hold $51.

Germans don't just like to make payments with cash; they demand the freedom to do so. A proposal to limit cash payments was met with severe backlash from consumers and political insiders alike. Earlier this year, the country introduced laws to ban cash payments greater than €5,000, The Guardian reported. The ban was an attempt to stem money laundering and prevent cash from being used to finance terrorism. These limits are common in other countries of the European Union, but various German political groups from both the left and the right condemned the idea.

"It would be fatal if citizens got the impression that cash is being gradually taken away from them," Jens Weidmann, head of Germany's central bank, said to German newspaper The Bild, according to The Guardian.

Even the newspaper itself was against the idea. It published an open letter in February 2016 which the publication encouraged readers to sign and send to the country's finance minister.

The German obsession with cash grew so prevalent that citizens are even beginning to store their money at home. According to The Wall Street Journal, more Germans are taking money out of banks and keeping it in their own home vaults. The demand is so high that sales of personal safes for one manufacturer increased by 25 percent during the first half of 2016. Many such companies are at their limit in terms of production.

Why do Germans prefer cash?

In a world where electronic payments provide so much convenience, why are Germans so adamant about sticking with cash? One reason, PYMNTS.com noted, was security. German consumers believe cash is a safer payment method than other options.

To help combat these fears, businesses hoping to reach German consumers should partner with a payment processing company that is compliant with the Payment Card Industry Data Security Standards. In addition, the partner they choose should be able to accept a wide variety of payment options. Online retailers can generally only accept electronic forms of payment, but providing multiple ways for consumers to pay lets Germans choose a method that best suits their needs.

The Wall Street Journal pointed to another reason Germans are averse to electronic payments: inflation. With negative interest rates from the European Central Bank, German bank account holders could be charged for making deposits. Additionally, as Quartz mentioned, a history of hyperinflation made Germans wary of storing their money in banks.

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