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Comment by hocuspocus | Hacker News Reader

As someone who lived two years in Germany

a) That's a good joke. From faster to slower: NFC > PIN > signature > cash.

b) You should look into the real cost of dealing with cash. EC is stupidly cheap since it's basically the cost of a SEPA direct payment (we're talking 1-2 cents per transaction). Debit card payments can also be pretty cheap in Europe. All those annoying restaurants and small shops that take only cash do it to dodge taxes, not for any other reason.

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Sorry, but what is "EC" and "SEPA", and what do they have to do with the real cost of dealing with cash?

EC is Eurocheque, a German specific card system. In my experience in Germany, lots of places take EC but neither visa, mastercard or amex, so in effect, only Germans can pay with credit in a lot of places. This is true even in Frankfurt (arguably the financial capital of Europe). In the cafeteria of a place I frequently work, they also don't take cash, so foreigners can't eat.

SEPA is the single euro payment area. Here it refers to the cost of a wire transfer.

Now that we are talking about card payments (NFC, chip and pin, etc.): jump into a random Frankfurt taxi in 2017, and IF they are willing to take your card (pretty big if), this will be their method of choice:

http ://fernandodecordoba.es/wp-content/uploads/2012/04/bac1.jpg

They put your card in there, put a paper on top, and proceed to press and copy the embossing of all you card numbers into a carbon copy paper. Talk about swipe card insecurity... That is by far the slowest way, you spend 5 minutes easily.

I agree with the laundering / tax evasion cause only partly: I once wanted to pay upwards of 900€ in IKEA with mastercard. The cashier asked me to go to an ATM that was inside the IKEA building, take out cash from the card, and pay with that. With its scale, I don't think IKEA prefers cash to launder money or evade taxes...

> EC is Eurocheque, a German specific card system.

Eurocheque hasn't existed since 2003. The current system is Girocard (https://en.wikipedia.org/wiki/Girocard), it's just that the colloquial name is still "EC".

Germany doesn’t use the MasterCard or the VISA network, instead having an entire separate payment network, EC, which uses under the hood wire transfers via SEPA. This is the E in EMV (EC, MasterCard, VISA) which created most of modern payment infrastructure.

SEPA is the Single European Payments Area, standardizing how to process fast and cheap payments, all transfers are in Euro, from 2018 on also having a standardized API between banks, wire transfers are free or below 1 cent each, etc.

Thank you for explaining those, but I'm still not sure what they have to do with the "real cost of dealing with cash". EC and SEPA seem to be digital payment technologies, and therefore aren't dealing with cash.

I would think that the means that banks charge for dealing with cash inputs, either directly or indirectly, to cash heavy businesses.

> Germany doesn’t use the MasterCard or the VISA network

Well, it is used (almost all major stores and large grocery chains support both Visa and MasterCard), but Girocard is far more widespread.

Only since the EU limited the fees. Until 2016, neither ALDI nor LIDL nor REWE nor PENNY nor Edeka nor Coop supported it.

I know it's nitpicking but Rewe has accepted credit cards since 2007.

Some REWEs have, but not all. There's still some where I live that don't. (REWE eG is a cooperative, so it's all a bit more complicated)

Basically there is Rewe Dortmund (with stores across NRW) and Rewe anywhere else (including NRW). The latter requires credit card acceptance for all Rewe-branded stores. If a store does not have that, an email to Cologne usually changes it.

There's also Rewe and Coop (Sky, Plaza, etc) in Schleswig-Holstein, which have merged now, but offer different amounts of credit card acceptance.

And members of both have reservations against MasterCard and VISA, due to what happened with Rossmann a few years ago (Rossmann sold cuban cigars, as punishment MasterCard, VISA and PayPal seized Rossmanns funds and suspended all payments), but as EC was also bought by MasterCard and merged with the Maestro brand, currently there's no option but to continue on.

Personally, as member of both the REWE eG and coop eG, I'd support a move away from CC to any national or EU based payment system as soon as possible.

I know that there are some reservations but the rule the cooperative (including SH) decided as binding still stands. You are of course free to lobby internally for change.

Rewe has a fairly complicated legal structure, I'm not sure which you are a member of. There is no single "Rewe eG" which you can just buy into, especially not if you don't happen to own supermarkets.

EC was not bought by MasterCard, the brand was always owned by them (though there have been various mergers). The system behind those cards was not merged with Maestro (which is a different system) but merely rebranded as Girocard, an independent scheme by the German banks. It works without any reliance on MasterCard.

> Rewe has a fairly complicated legal structure, I'm not sure which you are a member of. There is no single "Rewe eG" which you can just buy into, especially not if you don't happen to own supermarkets.

I'm personally not sure either. Originally my entire family was just a member of the coop eG, but when they started to merge with REWE eG in the past months the coop eG offered an option to invest additional money into the REWE eG (at better than usual terms). So we did.

https://www.shz.de/regionales/schleswig-holstein/tschuess-sk...

So now we have some stores that have just been rebranded REWE, some still branded Sky, operating with the same mix of REWE and Sky products, and some accepting CCs, some not.

> The system behind those cards was not merged with Maestro (which is a different system) but merely rebranded as Girocard

In marketing, EC stopped being the main brand, though, and MasterCard provides their EC cards under the "Maestro" brand within of Germany, although they are not operating over the Maestro network, or in any way compatible with it. Take any recent EC card, it'll work only via the EC system, say Girocard Electronic Cash on the back, and Maestro on the front, but doesn't actually have any relation to the Maestro system. That's what I was referring to with the rebranding.

As someone who lived 40+ years in Germany ...

I also suspect tax avoidance rather than transaction costs

Transaction costs for cash is probably higher than for credit cards.

For cash you have to count and recount that cash at the end of the shift, and then the bank counts are recounts it again. This is a significant amount of labor. By contrast with a card once the initial transaction is done everything is put into the computer electronically and no human has to look at it again.

Also cash is subject to theft. In some locations this risk is a significant part of the transaction costs - not just the cash, risk of death in the robbery. Electronic payments are subject to loss, but generally there is a trail to chase when it happens, and the possibility of death is much less.

Not really.

Until 2016, the costs were 30€/mo+0.125% for EC, 160€/mo+4% for VISA and MasterCard, 160€/mo+7.5% for AMEX in Germany.

Most German merchants run on margins below 1-2%. Good luck paying 7.5% transaction fee on a margin of 1%.

This is why EC was far more widely accepted, although even that was too expensive for small places, such as farmers selling stuff on the market.

Nobody to my knowledge has every measures the costs of cash, it is just something they accept. With credit cards it is easy to measure because you get a number, but with cash it is not, you have to calculate too many different parameters and figure out what applies where.

I'm pretty sure every single German supermarket chain measures that, it's just a requirement to operate at those margins. The Edeka cooperative published in 2012 that their all-in cash handling cost is 0.14%. The 2013 Steinbeis Cost of Cash study[0] estimated a much higher number of 2.7% for merchants. The truth is probably somewhere in between.

Such studies have also been used to arrive at the EU interchange cap.

[0]: http://www.steinbeis-research.de/images/pdf-documents/CFP_Co...

The cash is counted by machines at banks, which I'm pretty sure almost never make an error doing so, and I'm sure it's less often than human counting error.

Margins in many businesses are razor thin in Germany. Which is the reason Walmart and others stopped doing business in Germany. For many businesses 1-2% transaction cost is the difference between success and failure.

But yes tax avoidance is a huge problem in restaurants in Germany.

How do they pay their employees if margins are razor thin? They'd have to operate on a huge scale to have enough profit to cover expenses and especially payroll. I would love to see a comparison of the balance sheets between some German and U.S. small businesses. Small businesses don't have the huge scale to live on a razor thin margin, so that's why I'm curious.

Also surveillance avoidance. Cash is awesome for leaving fewer traces.

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