Cash costs each German €150 each year: Research


Using cash instead of debit and credit cards costs Germans around €150 per person each year, according to an academic study from Steinbeis University in Berlin on the ‘Cost of Cash’.

The research by professor Jens Kleine of the Research Center for Financial Services at Steinbeis, is the first time the costs associated with cash in Germany – usually considered to have a strong cash culture – have been studied.

The findings come in advance of proposed changes to the Payments Services Directive, which are expected from the European Commission next month, and which will launch a debate on the relative costs to Europe of cards and cash.

Professor Kleine and his team, who received sponsorship from card owner MasterCard, found that the total private cost of cash in Germany is €12.5 billion per year – and that this cost is largely picked up by the banking and retail sectors which then pass part of the costs onto individual consumers.

Cash costs arise from handling money

Cash costs arise from production costs, transportation costs, insurance costs, cash handling, security and losses of interest, according to the academics.

With €6.7 billion, the largest burden is carried by merchants, followed by banks with €4.5 billion and consumers with €1.3 billion.

Card payments were found to reduce the cost of transactions to all parties as many of the costs associated with cash are not applicable.

The study explores a number of ways countries can reduce cash payments including implementation of limits for cash transaction amounts that exceed a specific level and banning or limiting cash payments for cigarettes and other cash-based vending machines.

“In order to reduce the cost of the payment system, individuals need to understand the real costs of the different payment methods,” said professor Kleine. 

Calls for Commission to show its own analysis

In an interview with EURACTIV, the president of MasterCard Europe, Javier Perez said that if the Commission’s proposals include new rules that shift the price of card payments onto consumers, then this would have the effect of encouraging people to use cash.

"From an economic point of view that would be a disaster, because you are replacing a cheaper way of making payments with a more expensive one. On top of that cash encourages tax evasion, the black economy and illegal activity,” Perez said.

The MasterCard chairman said that the Commission should publish its own cost of cash analyses with the updated Payment Services Directive.

They said they would do a study on the cost of cash three and a half years ago. It has never been produced,” he said.

The Payment Services Directive (PSD) was adopted by the EU Council of Ministers in March 2007, but an explosion in e-commerce through the internet and the ownership and use of smartphones has taken place since then.

In response to the challenge posed by technology to traditional payments methods, the Commission published a green paper called: ‘Towards an integrated European market for card, internet and mobile payments,’ as a precursor to further rules changes.

>> Read our LinksDossier: Payment Services Directive: The new payments landscape

  • July 2013: Commission to publish proposal for updated Payment Services Directive and regulation on interchange fees

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