Piggy Bank Nation: Why Cash Still Matters in Germany

Daniel Korth, writer of the blog “Finanzrocker” about the relationship of Germans with cash.

When I was living in New Zealand for a few months ten years ago, I paid for everything – even one-dollar chocolate bars – with my debit card. My habits haven’t really changed much since then: wherever I can, I still pay with card. My girlfriend, on the other hand, always preferred to stick with cash: she was wary of digital payment methods and even refused to do online banking. And given the funny looks I get here from other Germans whenever I opt to pay some paltry amount with a card, I seem to be alone in my preference. The stats back this up: according to data from the Deutsche Bundesbank, 74 percent of all purchases in Germany in 2017 were made in cash.

Cashless payment: long the norm in other countries

The situation is quite different in Sweden, where 95 percent of retail revenue and 80 percent of all transactions are cashless. Many shops don’t even take cash anymore – and by 2030, Sweden is planning to do away with it altogether.

Meanwhile in China, the nation seems to have skipped right over the whole credit card era and jumped straight into using digital payment platforms like Alipay and WeChat. These cashless payment methods are now used almost exclusively. Nearly everywhere in China, even at roadside snack bars, customers are paying with their smartphones – unthinkable here in Germany.

Cashless payment is also far more common among our neighbours in Denmark and the Netherlands than it is here. These glaring differences ultimately beg the question: why is Germany still so stuck on “good old” cash?

Safety first

The origins of this predilection – which has to do with the fear of losing control – are deeply rooted in the German psyche. After all, there’s a reason the term “German Angst” was invented. This specifically German strain of anxiety rears its head in regard to not only cash, but also to self-employment and investing in the stock market. For Germans, everything is fraught with uncertainty and risk, and this also holds true when it comes to maintaining control over one’s own data. To pay digitally – that is, to let everyone see what you’ve bought – is to give up that control.

Ironically enough, it should be noted, Germans, who are apparently so protective of their privacy, seem perfectly happy to share the details of their spending habits with bonus card providers like Payback, a program through which 29 million active points-collecting customers allow their purchasing data to be mined in exchange for discounts on premium products. But that’s a separate issue…

Cash is king

The fact is that in this country, money in the bank does not have the same value as money in the hand. As a store of value, cash is still king. That it is tangible and visible should also not be discounted, as Bundesbank Executive Board Member Carl-Ludwig Thiele argues in his highly readable exhibition catalogue essay.

Holding on to cash means you always have something in reserve, that you’re always prepared for unexpected situations – especially in Germany, where infrastructure for non-cash payment methods isn’t always available. And let’s not forget that paying with cash helps us keep our spending habits in check: what’s not in the wallet cannot be spent.

Of the billions of euros held by private individuals in Germany in mid-2017, over a billion took the form of either demand deposits in current or instant access savings accounts, or cash. These assets have more than doubled since the 2008 financial crisis, with its associated era of economic uncertainty. A significant amount is still being stashed under mattresses or stuffed into piggy banks. A sizeable portion of Germans feel safer when they can access their money at any time. (Many also believe that this renders their wealth crisis-proof; in reality, inflation eats away at the value of cash year after year without anything to offset the loss).

Speaking of security, Germans also love gold: we can hold it in our hands, bury it in our gardens, or even brick it up into the walls of our houses, keeping it safe from politicians, impending EU crises, and the volatility of the stock market.

To some extent, this mindset was also shaped by life after World War II and in a divided Germany, which is what gave way to “German Angst” in the first place. It has been passed down from parent to child, from generation to generation, and today, even young people prefer paying with cash rather than by card or contactless.

Times are changing

Nevertheless, a gradual transformation is underway. The generation that lived through the difficult post-war period and helped shape this cash-hoarding behaviour is slowly dying out. And though younger generations are still being influenced by the “German Angst” of their parents and grandparents, they are also growing up surrounded by advanced technology, with more confidence in new developments and a greater willingness to try new things. If they’re convinced of the advantages of digital payment options, they will also warm to making more use of them. Over time, this will reduce prejudices against cashless payment – and as a result, it will become more widespread. 

The first signs of change when it comes to the German attitude toward risk are already visible. As of this year, the number of German stockholders has risen to 10.1 million, and one in six Germans holds an investment in a listed company. Both of these figures are close to those of 2007 – that is, before the financial crisis hit.

So what was keeping my cash-loving girlfriend from making the switch? Mainly, she was afraid of doing something wrong or becoming the victim of data theft. Only after she recognized the advantages of digital payment options – and realized that her initial fears were unfounded – did she begin making use of them. These days, she also pays for one-euro chocolate bars with a card. In fact, she goes cashless even more than I do. Times are changing.

Daniel Korth

Daniel Korth has been writing about finance, investment, and wealth creation on his award-winning blog “Finanzrocker” since 2015. His “Finanzrocker” podcast draws in over 90,000 listeners every month. Together with “Finanzwesir” Albert Warnecke, Korth also hosts “Der Finanzwesir rockt”, a podcast that attempts to make financial education socially acceptable in German households.