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Cash against the current: A qualitative case study on cash persistence in Germany

Peurell, Isak LU and Nyström, James-Filip LU (2026) EKHK18 20261
Department of Economic History
Abstract
Cash persists at a large scale in Germany despite having the necessary conditions to displace cash as has been observed in other high-income countries. This thesis examines why cash persists at the levels it has by applying network effects theory to the German payment market through a qualitative single case study. Two hypotheses are derived from the theory and are then tested through secondary data using pattern matching. Hypothesis one analyses the role of Germany's fragmented banking sector and its role in producing weak sponsorship incentives for digital payment adoption. Hypothesis two analyses German consumer preferences for cash's irreplaceable attributes and its implications on cash persistence. Evidence is found to be broadly... (More)
Cash persists at a large scale in Germany despite having the necessary conditions to displace cash as has been observed in other high-income countries. This thesis examines why cash persists at the levels it has by applying network effects theory to the German payment market through a qualitative single case study. Two hypotheses are derived from the theory and are then tested through secondary data using pattern matching. Hypothesis one analyses the role of Germany's fragmented banking sector and its role in producing weak sponsorship incentives for digital payment adoption. Hypothesis two analyses German consumer preferences for cash's irreplaceable attributes and its implications on cash persistence. Evidence is found to be broadly consistent with both hypotheses. Germany's fragmented banking sector has failed to resolve the coordination problem of attracting enough merchants and consumers necessary for digital alternatives to displace cash. German consumers are found to display anomalously strong preferences for cash's unique attributes and that these preferences are demonstrated in economic behaviour which exceeds rational cost calculation. The two mechanisms reinforce one another, producing a situation where the conditions necessary for displacing cash with digital alternatives is prolonged by both weak incentives from banks and German preference for cash’s attributes. (Less)
Please use this url to cite or link to this publication:
author
Peurell, Isak LU and Nyström, James-Filip LU
supervisor
organization
course
EKHK18 20261
year
type
M2 - Bachelor Degree
subject
keywords
Cash, digital payments, payment behavior, network effects, bank centralization
language
English
id
9241727
date added to LUP
2026-09-07 13:53:39
date last changed
2026-09-07 13:53:39
@misc{9241727,
  abstract     = {{Cash persists at a large scale in Germany despite having the necessary conditions to displace cash as has been observed in other high-income countries. This thesis examines why cash persists at the levels it has by applying network effects theory to the German payment market through a qualitative single case study. Two hypotheses are derived from the theory and are then tested through secondary data using pattern matching. Hypothesis one analyses the role of Germany's fragmented banking sector and its role in producing weak sponsorship incentives for digital payment adoption. Hypothesis two analyses German consumer preferences for cash's irreplaceable attributes and its implications on cash persistence. Evidence is found to be broadly consistent with both hypotheses. Germany's fragmented banking sector has failed to resolve the coordination problem of attracting enough merchants and consumers necessary for digital alternatives to displace cash. German consumers are found to display anomalously strong preferences for cash's unique attributes and that these preferences are demonstrated in economic behaviour which exceeds rational cost calculation. The two mechanisms reinforce one another, producing a situation where the conditions necessary for displacing cash with digital alternatives is prolonged by both weak incentives from banks and German preference for cash’s attributes.}},
  author       = {{Peurell, Isak and Nyström, James-Filip}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Cash against the current: A qualitative case study on cash persistence in Germany}},
  year         = {{2026}},
}