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A new survey from Deutsche Bundesbank has found that cash remains German consumers’ preferred payment method, signalling potential challenges for the digital euro.
Last month, Germany’s central bank published a new study of payment costs from the consumer’s perspective, comparing both debit and credit cards against cash.
Based on a survey of more than 2,000 people, the Bundesbank found that cash is the preferred payment method for the highest proportion (47 percent) of Germans.
Debit is the preferred payment method for 43 percent of respondents, followed by mobile payments at 5 percent and credit at 4 percent.
For the purposes of the study, mobile payments were defined as any payment made using a smartphone or smartwatch.
As noted by Burkhard Balz, a member of the executive board at the Bundesbank, the results were surprisingly favourable to cash, given that the survey was conducted in 2023, after the COVID-19 pandemic.
“The payment habits of Germans changed significantly over the course of the pandemic, away from cash and towards digital payment methods,” he said.
“However, the study makes clear that cash can keep up with various digital payment methods in terms of costs.”
The study was the third and final instalment in a Bundesbank series on the costs and benefits of cash versus electronic payments.
Its aim was to consider the cost of each payment method from the consumer’s perspective, using the widest possible metrics.
These include direct costs such as account management fees and cash withdrawal fees, and hidden costs such as losses to fraud and theft, and time spent dealing with each payment method.
For the first time, the authors also attempted to quantify the perceived cost of personal data disclosure when making payments, with results that reveal widespread concerns over data privacy among German consumers.
What makes cash king?
The study found that cash is the cheapest payment method per transaction, with debit not far behind.
Taking into account all metrics — fees, impact of loss, theft and fraud, time expenditure and data disclosure — the study found that cash costs €0.38 per transaction versus €0.74 for debit and €1.34 for credit.
However, when total value transacted is taken into account, debit is cheaper than cash.
The study found that debit payments cost 1.49 percent of the total value transacted, while cash costs 1.74 percent and credit costs 2.38 percent.
Germans wary over data privacy
The report found that Germans feel safer when using cash, both from a loss, theft and fraud perspective and from a data privacy perspective.
This is despite the fact that the respondents had actually lost more money when using cash than when using payment cards.
According to the survey, the average financial loss due to theft and loss of cash was €6 per year, while the average loss due to card fraud was €2.70 per year.
Nonetheless, many respondents felt safer with cash, knowing that the potential damage was limited to the amount of cash they were carrying.
In contrast, when asked what would be the greatest annoyance if their card was defrauded, almost half of respondents said the financial loss, but almost a third said the fear of data misuse.
Moreover, around a quarter said that time spent checking transactions, reporting the fraud and seeking compensation would be the greatest annoyance.
Germans happy to pay for privacy
The final section of the survey attempted to quantify the cost of disclosing personal data when making cashless payments.
Respondents were asked how much they would be willing to pay if they could have all the payment data that was collected during a card transaction deleted immediately.
Around two-fifths (42 percent) of respondents said they would be willing to pay €0.50 for immediate deletion, 28 percent would pay €1 and 12 percent would pay €3.
The survey also asked whether respondents would be willing to sacrifice the anonymity of cash if they received a discount for paying electronically.
More than a quarter of respondents said they would not give up paying in cash even if they received a discount of €3.
However, card users were equally loyal to their cards, with around half of respondents saying that they would still pay by card even if they lost out on a €0.50 discount for using cash.
If the Eurosystem is to launch a digital euro, the study highlights the importance of ensuring that as little personal data as possible is disclosed when using it.
In Balz’s view, this could actually turn out to be a selling point of the digital euro — it will have an advantage if it is designed to collect less data than existing electronic payment systems, and if this can be communicated effectively to consumers.
“This underlines how sensible it is to create a data-saving alternative to existing digital payment methods with the digital euro,” he said.
