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The introduction of cashless wage payments and the spread of branch banking in post-war Germany

Published online by Cambridge University Press:  11 September 2017

Malte Krueger
Malte Krueger*
Affiliation:
University of Applied Sciences Aschaffenburg
*
M. Krueger, Faculty of Business and Law, University of Applied Sciences Aschaffenburg, Würzburger Straße 45, 63743 Aschaffenburg, Germany; email: malte.krueger@h-ab.de.
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Abstract

The period from the 1950s to the late 1970s saw an almost uniform decline of cash-to-GDP ratios in industrial countries. A closer look at the German payment system suggests that the factor causing such a change was a shift towards cashless wage payments. In this period, in Germany, the branch network of banks expanded significantly and at the end of the period almost all economically active individuals had a current account. This change was triggered by rising wages and income. Rising wages increased the burden of weekly wage payments in cash, and rising income made the average earner more attractive for banks. Moreover, regulation and deregulation, by triggering both price and non-price competition, may also have played a role. Technological change was not an independent driver. In the 1950s, the number of giro accounts per German adult was comparable to the current situation in many developing countries. Yet, I argue that the German post-war experience does not provide a blueprint for most of these countries.

Keywords

retail paymentsdemand for cashinnovationretail banking

JEL classification

E41: Demand for Money L89: Other O31: Innovation and Invention: Processes and Incentives G29: Other
Type
Articles
Information
Financial History Review , Volume 24 , Issue 2 , August 2017 , pp. 185 - 207
Copyright
Copyright © European Association for Banking and Financial History e.V. 2017 

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Footnotes

The author is grateful to two anonymous referees for their helpful comments and suggestions. The usual disclaimer applies.

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