In the light of the public discussion on the features of an efficient payment system and considering the enormous economic importance of the payment system, the present study intends a sound estimate of the cost of cash, debit cards and credit cards in Germany in 2004. The estimate is based on the costs of four sectors: households, retailers, the banking sector and the Central Bank. The study focuses on “resource costs” , i.e. excluding such items as facilitation of crime or data theft.
The estimates show that both payment methods, cash and card payment, cause considerable resource costs. In Germany, they amount to about EUR 10 billion or almost 0.5% of the gross domestic product. Cash accounts for more than EUR 8 billion, equal to 0.38% of the gross domestic product or EUR 100 per capita. Costs for debit and credit card payments amount to EUR 800 resp. EUR 900 million, corresponding to 0.04 % of the gross domestic product and EUR 10 resp. EUR 11 per capita. If costs are related to the number of transactions, cash turns out to be the payment instrument with the lowest average cost (EUR 0.22) per transaction. Costs for debit cards amount to EUR 0.44 per transaction, for credit cards to EUR 2.35 per transaction. If costs are expressed as percentage of the payment value, the picture changes: Due to the low average value of cash payments, the pertinent costs climb to 1.11%, whereas the costs for debit card payments remain low with only 0.72%. The credit card is the most expensive payment instrument in this case as well with a percentage of 2.66%.
Costs of cash and cashless payment instruments in Germany (2006)