Payment behaviour in Germany An empirical study of the selection and utilisation of payment instruments in the Federal Republic of Germany Deutsche Bundesbank 2009 Deutsche Bundesbank Wilhelm-Epstein-Straße 14 60431 Frankfurt am Main (Germany) Postfach 10 06 02 60006 Frankfurt am Main (Germany) Tel +49 (0)69 95 66 – 1 Fax +49 (0)69 5 60 10 71 internet http://www.bundesbank.de Prepared by Andreas Hoffmann/Dr Heike Wörlen (coordination), Andrea Friedrich, Nadine Knaust, Dr Ulf von Kalckreuth, Dr Tobias Schmidt Completed on 30 June 2009 May only be re-printed if the source is stated. - II - Table of contents List of figures......................................................................................................................... V List of tables ......................................................................................................................... VI I. Definition of the problem, and design of the study .....................................................1 II. Comparative analysis of cash and cashless payment instruments...........................3 II.1. Explanation of the payment instruments investigated ...............................................3 II.2. Selection of payment instruments .............................................................................7 II.2.1. Reasons determining the acceptance of payment instruments by retailers and other service providers ........................................................................................8 II.2.2. Reasons determining the acquisition of payment instruments by customers ......9 II.2.2.1. Convenience and speed ................................................................................9 II.2.2.2. Acceptance ..................................................................................................12 II.2.2.3. Possibilities for use abroad..........................................................................15 II.2.2.4. Possibilities for use on the internet ..............................................................17 II.2.2.5. Protection against financial loss...................................................................19 II.2.2.6. Overview of expenditure ..............................................................................22 II.2.2.7. Costs............................................................................................................24 II.2.2.8. Anonymity ....................................................................................................28 II.2.2.9. Familiarity and experience...........................................................................30 II.2.2.10. Receiving benefits .......................................................................................32 II.2.2.11. Summary .....................................................................................................33 II.2.3. Customers’ situational selection at the point of sale..........................................37 III. Utilisation of cash and cashless payment instruments ............................................40 III.1. Ownership and utilisation of payment instruments ..................................................40 III.1.1. Cash stock in people’s wallets...........................................................................40 III.1.2. Ownership and utilisation of payment cards ......................................................42 III.2. Evaluation of payment behaviour according to the payments diary ........................46 - III - III.2.1. General benchmarks/overviews ........................................................................46 III.2.2. Evaluation of payment behaviour by socio-demographic characteristics and card ownership ...........................................................................................52 III.2.3. Evaluation of payment behaviour by place and purpose of payment ................61 III.2.3.1. Place and purpose of payment ....................................................................61 III.2.3.2. Utilisation of payment instruments according to place and purpose of payment ...................................................................................................62 III.2.4. Summary ...........................................................................................................66 IV. Choosing between payment instruments and their usage – a microeconometric behavioural analysis.....................................................................................................68 IV.1. Questions and introductory remarks........................................................................68 IV.2. Analysis framework .................................................................................................70 IV.3. The measurement of cash payment rates – dependent variables...........................71 IV.4. Variables to measure potential influencing factors on the cash payment rate.........71 IV.5. Results.....................................................................................................................74 IV.6. Conclusions .............................................................................................................77 V. Development and outlook of payment behaviour in Germany .................................79 Annex ....................................................................................................................................85 List of references .................................................................................................................98 - IV - List of figures Figure 1: Overview of cashless means of payment and payment instruments ........................4 Figure 2: Evaluation of the criteria “convenience and speed” ................................................12 Figure 3: Evaluation of the criterion “acceptance”..................................................................14 Figure 4: Evaluation of the criterion “Possibility of utilisation abroad” ....................................17 Figure 5: Evaluation of the criterion “possibility to use on the internet”..................................19 Figure 6: Evaluation of the criterion “protection against financial loss” ..................................22 Figure 7: Evaluation of the criterion “overview of expenditure” ..............................................24 Figure 8: Overview of the time of debiting of payment instruments .......................................25 Figure 9: Evaluation of the criterion “costs”............................................................................28 Figure 10: Evaluation of the criterion "anonymity"..................................................................30 Figure 11: Evaluation of the criterion “familiarity and experience” .........................................32 Figure 12: Evaluation of the criterion “receiving benefits” ......................................................33 Figure 13: Significance of the criteria of payment instruments from the users’ point of view.34 Figure 14: Fulfilment of the criteria by payment instruments from the users’ point of view....36 Figure 15: Criteria for the selection of a payment instrument at the POS ..............................39 Figure 16: Cash stock in people’s wallets ..............................................................................41 Figure 17: Ownership and use of payment cards...................................................................43 Figure 18: Credit card ownership and use by level of education............................................45 Figure 19: Average payment amount per payment instrument ..............................................48 Figure 20: Spread of the payments across the amount ranges .............................................49 Figure 21: Self-assessment of cash and card use per amount range....................................51 Figure 22: Use of payment instruments according to age group............................................53 Figure 23: Use of payment instruments according to gender.................................................54 Figure 24: Use of payment instruments according to level of education................................55 Figure 25: Use of payment instruments according to income groups ....................................57 Figure 26: Use of payment instruments according to origin (migration background and western/eastern federal states) ............................................................................58 Figure 27: Use of payment instruments according to employment status..............................60 Figure 28: Utilisation of payment instruments according to place and purpose of payment ..65 Figure 29: Value of all card payments as a share of gross domestic product (as a percentage)...........................................................................................................68 - V - List of tables Table 1: Structure of the cash stock in people’s wallets.........................................................42 Table 2: Share of payment instruments by turnover and number of transactions..................47 Table 3: Share of payment instruments in different amount ranges.......................................50 Table 4: Number and value of transactions by place and purpose of payment .....................62 - VI - I. Definition of the problem, and design of the study Cash continues to be consumers’ preferred payment method. Nonetheless, the turnover share of cash transactions