German consumers are much more open to innovative payment methods than is generally assumed. The German love of cash is simply a myth according to a study by Dr Tomas Falk, holder of the ConCardis Endowed Chair for Consumer Behaviour at the European Business School.
The long dominance of cash seems to be crumbling. “Cash only” is a thing of the past as modern cashless payment methods surge into the market and offer consumers new alternatives. Contactless payment is already normal practice for some merchants. At least since “Google Wallet” was announced, everyone has been talking about mobile payment services. Both payment innovations have the potential to break the dominance of cash. This is the result of a current study "The myth that Germans love cash – an empirical study on the acceptance of innovative payment technologies".
User friendliness the utmost priority
German consumers generally have a positive view of modern payment methods. “Those questioned found both contactless and mobile payment practical and attractive. Around 68 percent of the study participants were in favour of contactless payment, and around 64 for mobile payment,” said Falk. To use contactless payment, customers “tap & go” by holding their card up to a card reading device. Mobile payment means completing a transaction with the help of a smartphone. To ensure that consumers actually use the new payment methods, providers must, most importantly, provide a high degree of user friendliness. First and foremost, the payment process should be easy to understand and control. Costs and risks, generally thought to be people's main reservations against alternative payment methods, were of surprisingly little concern to consumers. Furthermore, neither aspect would significantly discourage consumers from using these technologies in future. Overall, it is clear that German consumers are generally willing to try out innovative payment methods. The precondition for actually using the new payment procedures, however, is the provision of a comprehensive infrastructure of payment terminals and acceptance points.
Innovators are ambassadors
Innovators represent a consumer segment with a particularly high intention of using the latest payment methods. For contactless payment, this group comprises 35 percent of those surveyed. They use their debit cards extensively and are very future-oriented. For mobile payment, the innovator group comprises 23 percent of survey participants. They tend to be younger and to make above-average use of mobile services. Both groups tend to have a strong affinity to new media. In practical terms these results provide key information in terms of how to successfully introduce the two payment methods onto the market. “Innovators function as ambassadors for new payment methods. They prepare the ground for modern payment, not only by being the first to jump aboard, but also by enlightening their peers and convincing them to follow,” explained Falk.
Larger transactions possible with contactless payment
Overall, contactless payment has considerably more potential than previously thought in terms of transaction size. Those surveyed said they would use contactless payment for all transactions up to EUR 50 – not, as previously thought, only for low-value transactions of less than EUR 20. “It is notable that consumers are willing to use contactless cards for larger payments too. This payment method thus has far higher revenue potential for merchants than previously assumed,” said Manfred Krüger, CEO of ConCardis.
Contactless payment paving the way for mobile payment?
The focus of media interest is currently on mobile payment. However, the study shows that consumers are currently more willing to try contactless payment. Consumers are used to paying by card, so the advantages of card-based contactless payment, such as speed and convenience, are immediately obvious. Moreover, contactless payment can already be used in “islands of innovation” such as some petrol stations. It is likely that there will be a seamless transition, with contactless payment acting as a bridge and preparing the ground for mobile payment. Another reason for this could be that mobile payment appears more interesting than contactless payment. This reflects the wider range of possible uses for smartphones as intelligent wallets. As well as simply being used to make payments, for example, smartphones can also serve as a customer loyalty card or as a way to redeem coupons.
About the study/empirical methods
The study series used a two-stage approach; based on the 4-party model, consumers (cardholders), merchants (card acceptors), banks (card issuers) and acquirers took part in 30-minute telephone interviews on the subject of cashless payment. A quantitative online survey was designed to expand on the results of this qualitative survey and took place in March 2011. A total of 1,753 consumers participated in the online survey. Of these, 1004 answered questions on contactless payment and 749 on mobile payment. The average time taken to answer the survey was eleven minutes for the questions on contactless payment and twelve minutes for the questions on mobile payment. Statistical tests were used to ensure that the sample was representative. Evaluation of the results was completed in late August.
