No cash? No problem! – Exploring the differences in payment preferences between the UK and Germany

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Payment services are something that affect us all, even though we may not always think about it. Getting paid or paying someone else is a vital part of our economy because the flow of money enables wealth to be passed around the world. So payment service providers, such as credit card networks, virtual wallet services (such as PayPal) or the ATM-infrastructure providers play a vital part in our lives. Innovation in the payment services sector therefore opens up new possibilities. For example, we can now order meals and pay for them before they even arrive at our doors or book a taxi abroad without ever having to pick up bank notes or a debit/credit card.

Given these innovations, I, a German Accountancy & Finance student living in Glasgow, Scotland, would therefore like to explore the differences in payment preferences between Germany and the UK in this short blog post.

Through my own experience, at first sight it seems that British consumers are less hesitant to pay cashless, while their German counterparts tend to prefer cash. While my friends (age range 18-25 years) tend to prefer cash and card pretty much equally, I do observe that paying cashless is easier in the UK: canteens and even coffee shops offer card terminals there – something that would seem ridiculous in Germany. Indeed, a 2014 study by the Payments Council, an UK payment industry lobby group, indicates that 48% of consumers in the UK use cash for their transactions [1]. Meanwhile, in Germany, a 2014 study conducted by Germany’s central bank Deutsche Bundesbank shows that 53% of transactions in Germany were made in cash [2]. This poses the question why German consumers are less inclined to go cashless. A study by the European Central Bank (ECB) suggests that the preference for cash as a means to pay is due to the higher spending control that it gives to consumers [3]. Another explanation might be security. By not carrying around a debit/credit card, the most that consumers could lose is their cash withdrawal amount – and not their entire bank deposits. Personally, I seem to fit into the “typical German”-category by preferring to pay in cash. I find that it gives me more control over my expenditures because I can only spend as much money as I have in my wallet and I also perceive the payment process as more transparent.

Overall, however, it seems that consumer payment preferences in the two countries are broadly similar. Cash is the most popular in both, followed by debit card transactions. The only big differences in payment preferences seem to lie in the use of transfers (including standing orders, Faster Payments and direct credits) and credit cards (both are more popular in Germany) [4]. Consumers in the UK, on the other hand, tend to prefer direct debits over the two aforementioned payment types [5, 6].

In summary, it seems that the payment preferences between these two countries are more similar on a macroscale than one might have initially thought. The big differences occur on a microscale and the acceptance of cashless payments.


Hi, my name is Nicholas and I’m a German third year accountancy & finance student at the University of Glasgow in Scotland. I’m currently interning for Deutsche Payment as sales trainee, allowing me to get a first-hand experience in the payment solutions industry, as well as in the FinTech.

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Many thanks to Niall Ullah, Toni Milanova and Romi Madan for their valued contribution.

Sources:
[1] PYMNTS (2016), Global Cash Index™, accessed at: 15th of August 2016.
[2] Deutsche Bundesbank (2015), Zahlungsverhalten in Deutschland 2014: Dritte Studie über die Verwendung von Bargeld und unbaren Zahlungsinstrumenten, accessed at: 15th of August 2016.
[3] European Central Bank (2011), Using cash to monitor liquidity – implications for payments, currency demand and withdrawal behavior, accessed at: 15th of August 2016.
[4] Please note that Faster Payments is not available in Germany.
[5] See footnote 2.
[6] Payments UK (2016), UK Payment Markets – Summary, accessed at: 15th August 2016.