Tradition vs innovation: driving electronic payments in Germany?
In a time where the use of contactless payments rising globally, Germany still remains a predominantly cash-based society. A recent survey by Bundesbank, Gemany’s central bank, revealed that most Germans prefer using cash for small to medium sized transactions. What is more, many convenience stores and restaurants nationwide will only accept cash. It is payment security and transaction costs that are the top priorities for consumers and retailers respectively, while the convenience of a quick tap of a card or a mobile phone is not essential.
However, research suggests that a shift towards cashless payments is starting to take place. With internet and mobile penetration increasing, the German e-commerce sector is growing, which, in turn, is encouraging the use of cards as well as alternative payment methods.
Despite this shift in consumer behaviour, the adoption of contactless payments remains low – though it is slowly gaining traction in more densely populated urban areas and among young people, who are actively looking for convenient alternatives to cash. However, as not all financial institutions issue contactless cards and with merchant acceptance needing improvement, their use is extremely limited – taking being used for just over 1% of all payments made in Germany in 2017, according to the Bundesbank.
Contactless payments is not simply about cards though, and in 2017, the biggest bank in the country, Deutsche Bank announced that its customers would be able to pay for purchases with their smartphones, via their mobile banking app - the first German bank to introduce the technology. This, along with the introduction of Apple Pay last year, could be the much needed driver for contactless adoption across the country.
With consumers in Germany valuing security and privacy over convenience – and believing that cash is both the most secure and private payment method - it is now up to forward-thinking financial institutions to educate their customers about the safety and convenience of tap-and-go and mobile payments in a bid to increase electronic payment adoption across the country.