People bet on cash during the crisis

Cash is considered a safe haven for many people, even though it pays no interest. This can also be seen in the Corona crisis.

Frankfurt / Main (dpa) - According to a study, people in Germany fled to cash at the beginning of the corona crisis. The crisis seems to be leading people to put even more cash under their pillows, explained the ING Germany direct bank.

The circulation of notes and coins in the euro area rose by almost 100 billion euros or 8 percent in March, according to an analysis by the consulting firm Barkow Consulting on behalf of the bank.

Great demand for notes and coins

Compared to the development in the previous months of January and February, a "corona special effect" of around 30 billion euros was reported. Private households in Germany accounted for about 20 percent or EUR 6 billion of this.

At the beginning of the crisis, the Deutsche Bundesbank also initially noticed an increase in demand for notes and coins. Afterwards, however, the volumes decreased significantly again.

According to the analysis, people in Germany sat on a total of 253 billion euros in cash at the end of 2019. That was 32 billion or 15 percent more than in the previous year. On average, this corresponds to more than 3000 euros in cash for every German citizen.

According to the data, the boom in notes and coins began with the low interest rate phase in the euro area. Accordingly, cash holdings in Germany have more than doubled since the end of 2013, although inflation has caused an average loss of value of around one to two percent in recent years.

Uncertain financial markets and low interest rates

The past 20 years have been characterized by different bubbles and crises on the financial markets. Added to this is the low interest rate phase of the recent past. "It is therefore no wonder that the Germans are apparently somewhat unsettled and prefer to put part of their money under their pillows," explains Thomas Dwornitzak, Head of Saving & Investing at ING Germany. From the customer's point of view, cash remains the role of a "safe haven", but at the same time it is increasingly losing its role as a means of payment.

According to the German Savings Banks and Giro Association, Sparkasse customers paid for their purchases in March more often than ever in a month using the Girocard. According to this, around 206 million transactions were carried out with the plastic card - 11.4 percent more than in February. The proportion of contactless payments with Girocard without entering a PIN rose to a record 52.2 percent in March. In the same month last year, only about every fourth Girocard payment was contactless (27.5 percent).

According to the German banking industry at the end of March, a total of more than half of all Girocard payments were made contactlessly. In December this share was still 35 percent.

Greater limit for contactless payments

When making contactless payments, buyers do not have to insert their plastic cards into a reader and enter a PIN at the terminal, but only have to hold the card to the terminal. The German credit industry (DK) recently doubled the limit for payment with the Girocard without entering a PIN in retail from 25 to 50 euros per use. The new limit is to apply nationwide by autumn. Owners of a smartphone or a smartwatch can completely avoid physical contact with the payment terminal.

In the face of the corona virus pandemic, many stores are encouraging customers to pay in this way to avoid potential transmission. Credit card providers such as Mastercard also recently raised the limit for contactless payment.

According to the latest surveys by the Bundesbank, most people in Germany pay for their purchases as usual. Only 25 percent of around 1,000 respondents changed their payment behavior.

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