"Cash is minted freedom" Interview with the Stuttgarter Zeitung
15.09.2018 | Johannes Beermann
Interview with Johannes Beermann conducted by Michael Setzer.
Translation: Deutsche Bundesbank
Hello Mr Beermann. Do digital payments encourage people to live beyond their means?
Studies show that the inhibition threshold is somewhat lower when paying by credit card rather than by cash. Everyone knows that feeling, for example, when you have to "break" a fifty, as it were. You buy something for five euros and get 45 euros back as change, which ultimately means that "breaking" a twenty is the next inevitable step. I certainly think that paying by cash makes you more aware of how much you are spending.
Would a model like the one in Sweden, where cash is being driven out of day-to-day life, also be conceivable in Germany?
The situation in Germany is different. Here, there are no plans to do away with cash. Nor is that the case in Sweden, incidentally. The Governor of the Swedish central bank has spoken out against abolishing cash. In June of this year, an initiative was even launched in Swedish parliament with the aim of making it mandatory for the largest Swedish banks to provide cash services. Germany is much more densely populated. Cash does not have to be transported over such long distances as it does in a country like Sweden, which has a different topography and infrastructure.
In Sweden, I can, however, also pay for smaller items, such as a packet of chewing gum, by card.
In Germany it is the exact opposite, I think. Kiosk owners or, say, people running small craft shops do not always have the necessary infrastructure to be able to accept cashless payments. We have other circumstances in Germany which cannot be directly compared with the systems in place in other countries. Retailers in Sweden think along the lines of: "
Before I go and transport cash hundreds of kilometres to the nearest bank, it makes more sense to just accept cashless payments." In Germany, on the other hand, the distance to the nearest commercial bank or Bundesbank branch is much shorter.
More and more bank branches are closing here in Germany, too, especially in rural areas.
The branches of the commercial banks are not the sole decisive factor here. Cash is, after all, also supplied via the approximately 60,000 ATMs in Germany, as well as via the retail trade within the framework of the “cash back” service and via the 35 Bundesbank branches, where cash is regularly checked and counterfeit or damaged notes are taken out of circulation. Three out of every four purchases in Germany are made in cash. We carry out a regular survey to assess consumers’ payment habits. In our most recent survey, almost 90 percent of respondents were in favour of keeping cash. The issue of privacy protection also plays a role for many consumers. When you pay by cash, you do not disclose any information about where you bought something or how much or how many you bought.
Does cash mean freedom?
Absolutely! Cash is minted or printed freedom. It is the reward, the recognition for your hard work. I remember how things used to be back in my grandfather's day when his pay packet was handed over to him at the end of the week. He worked for the German railway and took home his pay in person every Friday. Much to my grandmother's dismay, he did not always bring the pay packet home unopened. And even then, he could at least try to think up a story about what he had done with the money. Try doing that in today’s digital age!
Why do we always talk in terms of "one or the other" rather than "both"?
I think this is a typically German discussion. I believe that consumers should decide how they would like to pay. Sometimes you pay by credit transfer, sometimes by card, and in future you will probably increasingly make payments using apps or your smartphone. And often, cash just happens to be the most practical means of paying. I have a pretty relaxed attitude towards this topic: consumers should decide for themselves.
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