Germany stands as an outlier in the global payment ecosystem. While the most developed economies and even a lot of developing nations have embraced digital payments, our market tells a starkly different story.
As a German, I have grown increasingly frustrated with our country’s stubborn attachment to cash. While colleagues across Europe seamlessly tap their phones or cards for payments, I have lost count of how many times I have had to apologize to frustrated international friends or scramble to find an ATM before a purchase.
Recent data reveals the stark reality of our cash-dominated landscape: According to a 2023 study by the German National Bank, 51% percent of all point-of-sale transactions in Germany are still cash.
Digital Payments Struggle: Why Cash Remains Dominant in Germany
The reasons behind this phenomenon are complex and deeply rooted in our cultural, historical, and psychological traits. For many, paying with cash in Germany is more than a transaction; it is a deeply ingrained societal practice. I still know people going to the ATM at the beginning of the month and withdrawing all the funds they plan to spend that month. Whenever they leave the house, they prefer walking around with a large wallet full of bills and coins instead of just their card. The idea of paying a small or medium amount by card is not even something worth considering. Quite the opposite: I can see their distress when they use a vending machine that only accepts electronic payments.
Numbers confirm my perception: The average German carries 100 Euros of cash. Personally, I can only find 4 Euros and 1 cent in my wallet at the moment. Like a big portion of the younger generations, I do not seem to fit in…
Cultural Roots: How Germany’s Turbulent Past Shaped Its Financial Mindset
As a tech-savvy German, I’ve witnessed firsthand the complex dance between technological innovation and deep-seated cultural resistance. Our approach to digital payments is less about technological capability – still, Germans are known for their work culture and ability to innovate – and more about profound cultural skepticism. Research shows that the German obsession with cash is far from arbitrary. It is deeply embedded in a complex historical narrative of economic survival, trauma, and resilience.
The Haunting Memory of Hyperinflation
To understand why Germans are so conservative about money, we must first look back to the Weimar Republic of the 1920s. During this period, Germany experienced one of the most devastating instances of hyperinflation in modern economic history. Between 1921 and 1924, the German Mark became so worthless that people needed wheelbarrows full of cash to buy basic groceries.
- At the peak of hyperinflation in 1923, prices doubled approximately every 3.7 days.
- The dollar exchange rate skyrocketed by a factor of one trillion (!!!) from 4.20 German Marks before the war to 4.2 trillion German Marks in November 1923.
- Many middle-class families saw their entire life savings completely evaporate.
This traumatic economic experience left an indelible mark on the German collective psyche. The lesson learned was brutally simple: physical cash and tangible assets are more trustworthy than abstract financial instruments. I have been far from experiencing this period. However, studies suggest that fear and phobia can be inherited and passed on over generations.
Privacy: The Invisible Currency of Trust
At the heart of our cash preference lies an intense concern for privacy. In a country scarred by historical experiences of surveillance—from the Nazi regime to the East German Stasi—cash represents more than a payment method. It’s a form of personal freedom and anonymity. Digital transactions leave a traceable financial footprint that many Germans find deeply uncomfortable. Cash transactions provide a sense of control and invisibility that digital payments cannot match. It is the same suspicion towards digital solutions that also holds back digitalization in the German public administration.
High Savings Rate and Low Credit Card Penetration
Germans do not like debt – we are often considered debt averse since the German word for debt is Schulden (guilt in English) and, therefore, a genuinely negative trait. On the other hand, Germans like to save and have one of the lowest private household debt, according to the OECD. In fact, most Germans consciously try to live within their means. This also reduces the need for extra liquidity cash alternatives. Only about one-third of the population own a credit card in Germany. Most people use debit cards, but usage is still significantly lower here than in other European countries. In 2022, a German citizen paid, on average, 122 times by card. This is by far the last place in the EU compared to Lithuania, which is leading the rankings with more than 750 payments. Many Germans feel they can control their finances better when paying cash.
Cash as a Cultural Ritual
When I oversee older people in the shops, counting exact changes to 1 cent or observing small kids proudly collecting coins in their piggy banks, and the reverence with which many Germans handle physical currency, I realize cash is far more than a simple transactional tool. I feel that cash is a deeply embedded social ritual and a cultural language that speaks volumes about our collective identity. There are countless sayings about money and praising small amounts:
- “Wer den Pfennig nicht ehrt ist des Talers nicht wert,” meaning Who does not honor the penny is not worth the thaler: Precise counting of change is considered a virtue.
- “Man muss auch kleine Beträge achten,” meaning You also have to pay attention to small amounts: Exact payment is valued over convenience
- “Bargeld lacht,” meaning Cash smiles: Cash triggers positive emotions
Digital Payment and Credit Card Adoption: Germany’s Payment Future
Society is changing, and so is Germany’s relationship with digital payments. The payment landscape is shifting, driven by generational changes, technological innovations, and globalization. While in 2017, consumers paid 74% of all their purchases in cash, it was only 51% in 2023.
Digital payment trends: The growing popularity of e-commerce and digital wallets has led to a higher demand for card payments in Germany.
International travel: Germans are passionate about traveling internationally, ranking as the third largest outbound tourism market. Credit cards provide considerable advantages, including low-fee transactions in foreign currencies and extra travel benefits.
Younger generations: German Millennials and Gen Z have a different attitude toward financial risk and prioritize convenience. 99 percent of 16 to 29-year-olds in Germany have made at least one contactless payment with a card, smartphone, or smartwatch in the past twelve months.
International influence: The increasing number of expatriates and incoming tourists has made credit cards more visible and acknowledged in everyday life in Germany.
Conclusion: Reflections on a Distinctive Financial Cash Culture
One thing is clear: German relationship with money is far more than a simple transaction method. It is a complex narrative woven from historical experiences, psychological insights, and cultural values.
The country’s cash culture is not a simple resistance to change but a sophisticated approach to financial interaction that encompasses the following:
- Historical lessons from economic instability
- Deep-rooted privacy concerns
- A unique psychological relationship with money
- A nuanced approach to financial security
Cash may still be king, but the throne is not immovable. Technological advancement, ongoing globalization, and generational change increasingly impact Germany’s adoption of digital payments. This trend may be slower than elsewhere, but it is irreversible.
This article is part of our Ultimate Guide on Credit Cards in Germany. Check it out to learn more about the ins and outs of the German credit card market.
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