Why Do Germans Prefer To Pay Cash?


For anyone who lives in or has visited Germany, one of the main annoyances is that so many establishments do not accept credit cards. Germany is almost unique amongst industrialised nations in that Germans stubbornly prefer to pay cash.

Whilst it is remarkably easy to make online payments to another organisation or individual using bank transfers, and online banking is widely used here, for actual face-to-face transactions the norm is not to accept credit cards. There are even some very big names such as Penny and Deutsche Post, shame on them, who do not allow card payments to customers. Ikea…..yes….you heard it right, the same Ikea who revolutionised the way we buy furniture, has only recently announced that they will start accepting credit cards in Germany.

53% of turnover in German retail is in cash, compared to 23% in the United States.Click To Tweet

Why do Germans prefer to pay cash? There are, as you would imagine, numerous reasons but I will focus on the 4 main ones:


Germans are generally more frugal


Germans like to save

Schaffen, schaffen, Häusle bauen as the old German song goes…meaning work, work, then build a house!

It’s a bit of a cliche but there is definitely some truth to this. The hyperinflation experienced in 1923 during the Weimar Republic is ingrained in the nation’s psyche. Whilst it is wrong to generalise about a whole nation, domestic consumption is statistically less important to the German economy than it is in the U.K. or the U.S.. In a recent survey of why Germans prefer to pay cash, published in the national newspaper Die Welt, the main reason given by 65% of respondents was that it gives them better control and visibility of their finances.

it is easier to keep control of their finances when they pay for as much as possible with cash. I can certainly resonate with that. Since living here, that's the main reason why I like to pay for small discretionary expenditure such as meals, drinks, taxis and the like in cash. I keep track of what I am spending and it can easily stack up without you knowing if it all goes on the credit card. So a perfectly valid, if somewhat old-fashioned reason why Germans prefer to pay cash.


The banking system is slow to adopt technology


German banks…15 years behind their European counterparts

This is a biggie. If the banks are not pushing these products, then the end customer will be slow to adopt them. Merchant charges remain high for card payments compared to Germany’s European neighbours. Somewhat of a chicken-and-egg situation, in that as long as charges remain high, less businesses, especially small retailers, will move to accept cards.

The antiquated Girocard system, which essentially works like electronic cash, is a behemoth which dominates the German banking system. Visa (Electron) and Mastercard (Maestro) are eating into their market with contactless payments technology. Girocard is thus on its way to becoming a Nokia.

As Visa and Mastercard gain market share with contactless payments using the NFC technology, one assumes that they will reduce their card processing fees. Why? Because of scale and because credit cards are higher margin products for them.


The Customer is not King


king amongst pawns

Germany, where the customer is seen as an inconvenience rather than as King

The mindset in service industries is simply different here. The focus on service here is based on competence and rigidly following set company processes. The mindset of thinking outside of the box to give the customer what he wants tends to be the exception rather than the norm. You will experience this, along with the friendliness factor often being forgotten or ignored.

Businesses which are modern and outward-looking tend to really stand out here as the innovators and the trend-setters. Wineries are a fantastic example of this. The ones which are being taken over by the younger generation, who, as part of their studies, have often spent some time abroad, are injecting a huge breath of fresh air into a very conservative industry.


E-Commerce is less popular here…


Which means if there is less competition online for traditional brick-and-mortar small businesses, then there is less of a push to force change upon them. Whilst online shopping has certainly seen huge growth in Germany, the percentage of online transactions is lower than in most comparable European markets. The U.K. is the largest online shopping market in Europe, despite having a lower GDP per capita and 18 million fewer inhabitants than Germany.

I found a very interesting comment to a German-language blog post on this topic, which kind of sums it up perfectly. For readers who understand German, here is the link to the original post and comments. I have paraphrased this in my translation to make it read lucidly.


In Germany we have 2 worlds….goes on to list a bunch of businesses in large, highly competitive markets and low-margin industries. The other world is businesses such as furniture stores, who want to earn money through their own financing schemes, and small businesses such as dry cleaning, gastronomy and taxis, where there is no online competition and tax-avoidance is common as a result of most payments being in cash. In these industries little has changed over the past 20 years.


Whilst it’s true that credit card commissions could be a significant turn-off to low-margin businesses (depending on what type of payment system a business uses, this can be as high as 3% of a transaction), the whole point of GiroCard or its eventual successor, contactless debit cards, is that charges are low because it functions like “electronic cash”. So for small businesses, especially those who encourage cash payment to hide turnover, I kind of get why, even though I still maintain that by giving your customer the choice, you will ultimately increase your revenue. Unless you don’t want / need any extra customers of course, which could be the case for popular businesses in the gastronomy sector.


Will things change over time?


Technology, the forces of globalisation and a younger generation who routinely spend a semester studying abroad and experience a different world, will eventually force change.Click To Tweet

It is happening already. Lidl and Aldi finally caved in during 2015 and started accepting credit cards, which underlines the point that like most changes in Germany, it will almost certainly be evolutionary rather than revolutionary. So most likely, Germans will continue to prefer to pay cash for some time to come, before technology disrupts this relic completely.



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