Man offering money

Cash Culture: Why Germany is resisting going digital

When I'm back in the UK, I can buy almost everything I need with a credit or debit card. It's easy enough to go a whole weekend without having to handle a single note or coin. Even in a bar or a coffee shop, it’s easy to survive without cash…

Not so in Germany.

Plastic is considered far from fantastic.

Instead, cash is the accepted standard when paying for pretty much anything. If you go for a night out in Germany with nothing but cards in your wallet, then be warned: You may be setting yourself up for a long walk to the nearest Geldautomat (ATM). But why is this? And what is it about the German mindset that makes them so reluctant to go digital when it comes to money?

 

German Credit Cards Aren’t Really Credit Cards

Before we begin, it’s worth clearing up some definitions. To those in the English-speaking world, a credit card is something you use all the time to pay for anything from small items like groceries, right through to major expenses like a new car or kitchen.

Germans view credit cards as something only to be used in emergencies, or when there’s no option other than to pay online. What’s more, German credit cards aren’t really even credit cards at all. Instead, they’re a kind  of glorified charge card that defers payment only until the end of the calendar month. The bank then just takes the money owed on a German credit card from your account via a direct debit for the full amount due.

With the exception of a small handful of options we’ve listed below, in 99% of cases you don’t get any choice other than to pay off the full balance of the card each month.

 

Late adopters

One reason for Germany reluctance when it comes to digital spending, could be that Germany has rather patchy internet coverage. Perhaps surprisingly for a country associated with tech industries, Germany has been a somewhat late adopter when it comes to internet infrastructure. Despite the government’s promises to invest in nationwide broadband, you’d still be lucky to find internet speeds above 50MB per second in much of rural Germany.

This may explain why digital purchasing still isn’t standard practice in rural Germany. But it doesn’t explain why, even in a well-connected tech hub like Berlin, you can struggle to find a restaurant willing to take anything but cash. Or why there are still nationwide chain retailers reluctant to adopt card payment as the norm.

 

A culture of Pragmatism

The German relationship with money – and especially debt- is in stark contrast with that of the English-speaking world. Germans are cautious and frugal with their wealth. In Germany, money is for saving. Spending or investing always plays second fiddle to conserving and planning ahead. As such, credit cards are treated with immediate distrust. Perhaps this wariness of digital spending is an extension of the German national character. Pragmatism and Logik are central concepts in German culture. Debt, ultimately, doesn’t seem to make as much sense to the risk-averse German mindset. “Why ever borrow when it’s simpler and safer to live within one’s means?”

Cash is also easier to keep track of. You’re less likely to overspend if you can see the individual notes flying out of your wallet. This desire for simplicity can be seen in other German shopping habits, too. Online shopping – especially for groceries – is relatively uncommon. Even the billion dollar company Aldi doesn’t offer online shopping. It seems that Germans are unwilling to add extra, abstract steps to the shopping process. Why go through a website, deal with an effective third-party, then wait who-knows-how-long for the item to arrive, when you can just go to a store and pick it up?

Another idiosyncrasy of online shopping in Germany is that you can pay using a direct debit-type of bank transfer known as Sofort Überweisung, as opposed to paying by debit or credit card. Again, German culture seems to favour the most direct approach possible. Especially if it means avoiding anything card-shaped!

 

Reluctance to Invest

This scepticism towards debt extends to investment, too. Germans are perhaps overly-cautious when it comes to investing in shares, even when it’s in their best interests to do so. According to the chief of a German institute representing the interests of publicly traded companies and investors (Deutsches Aktieninstitut, DAI): “Large parts of the population haven’t yet realized the negative impact of low interest rates on their savings.”

Indeed, low interest rates can mean that Germans see little – or even a negative – return on their savings after inflation. But still they’d rather have cash in the bank than in shares. Then again, the historical roots that motivate Germany’s frugality may go back even further…

Reparations after the first world war left the German economy in absolute freefall. Hyperinflation meant that by 1924, one US dollar was worth 4,210,500,000,000 German marks. People had to transport cash in wheel-barrows in order to buy groceries, and paper money had more value as fuel for keeping warm than it did as currency. The phrase “burning money” has never been taken so literally.

The national tendency to save for a rainy day is perhaps unsurprising, when rainy days have been so historically impactful.

 

Are things changing?

Yes, but slowly. Naturally, there’s a resistance to change, but global trends wait for no-one and Germany is slowly beginning to get with the times.

In 2018 a council known as the Digitalrat was founded to help bring Germany into the digital age. Most major supermarkets now accept card payments (although smaller kiosks within larger supermarkets, like bakeries, still inexplicably don’t!). Internet speeds are improving, even in historically under-served rural areas. As government services and other crucial aspects of German life go online, spending will inevitably follow.

Ultimately, change is inevitable.

But knowing the German mindset, that may still mean carrying around plenty of small change for some time yet.

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