A new Deutsche Bundesbank study (The cost of paymentA transfer of funds which discharges an obligation on the part of a payer vis-à-vis a payee. More methods in the retail sector accessible in German only below) analyses both monetary costs – fees, charges, equipment and transport costs – and non-monetary costs – the time spent by retailers using payment instruments at the point of sale or for administrative expenses.
This report synthesizes findings from extensive research, including surveys of hundreds of German retailers, transaction time measurements, and international comparative studies. It provides a detailed, structured analysis of the cost efficiency of different payment methods in German retail, segmented by company size, industry, and transaction value.
Cash remains the most cost-efficient payment methodSee Payment instrument. More for small transaction amounts (up to €20). The average cost per cash transaction is €0.43, primarily due to minimal device costs and absence of transaction fees. Cash payments require simple infrastructure—mainly cash registers and secure storage—resulting in low monetary costs. However, cash handling involves time expenditures for counting, securing, and depositing cash, which can add to overall costs. Despite these time costs, cash is favoured by small retailers and in sectors like food and beverage due to its simplicity and low direct costs.
Girocard, the German domestic debit card scheme, emerges as the most cost-effective payment method for transactions exceeding €20. Its average cost as a percentage of turnover is just under 1%, reflecting low transaction fees and moderate device costs. Girocard transactions benefit from established infrastructure and lower interchange fees compared to international cards. The German retailer study found that Girocard’s unit costs have declined more sharply than cash over time, signaling increasing efficiency and adoption.
International debit cards (Visa/Mastercard) and credit cards are widely accepted but incur higher costs. Transaction fees for these cards range between 1.5% and 3.15% of the transaction value, including interchange fees (0.2–0.3%) and processing fees. These fees significantly increase the cost per transaction and cost-to-turnover ratio, making these cards less cost-efficient than cash or Girocard. Credit cards, in particular, are the most expensive due to higher interchange and processing fees. Despite their higher costs, these cards are preferred in larger retailers and sectors where consumer demand for card payments is strong.
Mobile payment methods, including digital wallets (Apple Pay, Google Pay) and contactless payments, are rapidly gaining acceptance in German retail, especially among younger consumers and in urban areas. These methods reduce transaction times by up to 70% compared to traditional card payments, lowering labor and operational costs. Device costs for mobile payments include investment in compatible POSAbbreviation for “point of sale”. See Point-of-Sale terminal. More terminals and software, but transaction fees are generally lower than traditional card payments. Mobile payments also reduce the risk of fraud and improve checkout efficiency, enhancing customer satisfaction. The adoption of mobile payments is highest in sectors like clothing, restaurants, and personal services, where speed and convenience are paramount.
Company size significantly affects payment method costs and acceptance rates due to economies of scale and differing operational capacities.
Payment method costs and efficiency vary notably across retail sectors due to differences in transaction frequency, average transaction value, and service nature.
Cash remains the most cost-effective option for small transactions and small retailers, but its dominance is eroding as digital payments gain traction. Girocard debit cards offer the best cost efficiency for larger transactions, benefiting from Germany’s well-established domestic payment infrastructure. International debit and credit cards, while widely accepted, impose higher costs that can erode retailers’ margins, especially for smaller businesses.
The rapid growth of mobile payments reflects consumer demand for faster, more secure, and convenient transactions. Retailers adopting mobile payments can reduce transaction times and labor costs, improving operational efficiency and customer satisfaction. However, the initial investment in compatible hardware and software integration remains a barrier for smaller retailers.
Company size plays a pivotal role in payment method choice and cost efficiency. Larger retailers leverage economies of scale to adopt digital payments efficiently, while smaller retailers often remain reliant on cash to minimize costs. Policymakers and financial institutions must consider these dynamics when designing interventions to support digital payment adoption and ensure equitable access to efficient payment infrastructure.
The German retail sector’s payment landscape is evolving rapidly, with cash remaining the most cost-effective method for small transactions and small retailers, while Girocard and mobile payments lead in efficiency for larger transactions and businesses. The choice of payment method is influenced by company size, industry, and transaction value, with larger companies benefiting from economies of scale in digital payment adoption. Mobile payments are transforming the retail experience by reducing transaction times and costs, particularly in urban and younger consumer segments.
Stakeholders must balance the benefits of digital payment adoption—such as improved efficiency and customer experience—with the challenges of higher transaction fees and infrastructure costs, especially for smaller retailers. Policymakers should support the development of inclusive payment infrastructures and incentivize the adoption of cost-effective digital payment solutions to ensure the German retail sector remains competitive and responsive to consumer demands.