The Decline of Cash Continues: Card Payments Overtake Cash in Germany10th May 2019
A study from German-based merchant group, EHI Retail Institute, has found that card payments accounted for 48.6% of total retail sales in 2018, compared to 48.3% from cash payments. This marks the first time that card payments have outranked cash payments for retailers.
The results (Figure 1) paint a well-known, well-reported picture of declining cash volumes across Europe, which is particularly interesting given Germany’s affinity for notes and coin.
Those familiar with the German payments landscape will be aware that cash remains a vital component and is the payment method of choice for over three-quarters (76.4%) of transactions made by consumers.
Figures 2 and 3 show total consumer payments in Germany, not just retail sales, and highlight the continuing importance of cash to the German economy as a whole.
That is not to say that studies like the one from EHI are incorrect or not useful: on the contrary, these sector-specific studies allow merchants to make informed decisions based on their particular situation, rather than on high-level figures.
Additionally, the study emphasises the fact that the decline of cash is not occurring at the same rate in every industry: those with low average transaction values are likely to still see significant cash volumes due to consumers preferring to pay by cash for low amounts.
The retailers surveyed by EHI echoed this sentiment, agreeing that “cash will still dominate low-value payments in five years’ time”.
While cash spending continues to remain robust, volumes are undeniably declining. Due to the largely fixed costs associated with handling and processing cash, merchants’ costs per transaction are increasing and will continue to do so in the coming years. Therefore, merchants in Germany must review their cash arrangements now before the cost differential to other payment methods becomes too high and begins seriously impacting profits: particularly for retailers with single digit profit margins.