The Use of Cash in Germany: Status and Outlook

Abstract

Due to the rising reluctance towards cash because of its inferred connection to criminal activity, a thorough examination of why cash is still the preferred payment option in Germany becomes mandatory. As a result of financial and political uncertainty, cash is still highly demanded as a means of payment, as well as a store of value, although it only plays a minor role regarding transactions involving larger payment amounts. However, external effects, such as the cohort effect, still need to be reviewed. It is not clear whether the younger generations will use cash as frequently as the older generations. A substantial argument for abolishing cash seems to be its high costs, but there is no evidence that other payment options are significantly less expensive. Moreover, the high circulation of higher banknotes in other countries creates doubts that an issuance stop of the 500 (sic) banknote will lead to a significant decline in illegal activities. In addition, cashless payment options are also used for tax evasion or the financing of terrorism. Cash allows for data protection and operates as a back-up solution if cashless systems fail. Lastly, it is of huge importance to analyse the advantages of cash as performed in this chapter before making imprudent assumptions about the declining influence of cash.