In 2023, about 62% of retail purchases in Germany took place through card transactions, compared to 37.5% in 2009. Payment by cash, on the other hand, is becoming increasingly rare: only 35.5% of sales were made using banknotes and coins in 2023. To stay competitive, businesses must offer modern ways to pay for customers.

In this article, we’ll look at card payments’ main advantages and disadvantages.

What’s in this article?

• What are the advantages of card payments for businesses?
  
• What are the disadvantages of card payments for businesses?
  

What are the advantages of card payments for businesses?

Card payments offer many benefits to the businesses that allow them. Here are the most important ones.

Increased sales

According to the EHI study “Payment Systems in Retail,” in 2023, for the first time, total revenue of almost €300 billion were generated in stationary retail in Germany with card payments. In comparison, around €172 billion in cash was spent at German registers.

Digital checkout methods can boost sales for shop owners because people are not restricted to on-hand banknotes. In the Bundesbank’s “Payment Behavior in Germany 2023” study, respondents indicated they have an average of €100 in cash. Card payments provide greater flexibility, often encouraging customers to spend more than they carry. They also facilitate spontaneous impulse purchases, unrestricted by available cash.

Efficient processing

Card payments make checkout more efficient by simplifying and speeding up transactions. This is especially true with contactless methods using NFC technology—shoppers can complete their purchase in seconds by simply tapping their card on the payment terminal. In contrast, using cash involves counting coins and notes, providing change, and checking the authenticity of banknotes, which consumes valuable time.

Reducing the number of manual checkout processes cuts wait times at the register. This is especially beneficial during peak hours when lines are long. Faster transactions allow more shoppers to be served in less time, minimizing frustration and increasing potential revenue.

Shops that go cashless also eliminate the need to replenish change or secure registers frequently. Instead, they can focus more on serving their customers and ensuring that operations run smoothly. Additionally, closing out at the end of the day is much easier without cash, as there is no need to count receipts manually.

Stripe Terminal can help you process transactions digitally and efficiently. With Terminal, you can offer your customers the ability to make cashless payments through card readers or mobile devices and post them directly to your accounting system.

For more information on how to go digital in retail, check out our related article.

Customer satisfaction

Electronic transactions can positively influence your customers’ satisfaction as well. Most buyers expect a range of checkout options. According to a study on payment behavior in the digital era by Mastercard and others, 19% of respondents refrain from buying something if they can’t pay by card. 40% of Generation Z respondents said they were annoyed by cash-only establishments. This means that merchants can boost customer satisfaction by enabling card payments.

A key factor here is the convenience and flexibility of cashless solutions. Shoppers do not have to carry cash or worry about having enough to make a purchase. Paying electronically also enhances peace of mind: people feel safer carrying less money, especially in busy city centers or when traveling.

Furthermore, customers gain from better spending tracking. Card payments are recorded digitally, making it easier to track purchases. This is especially beneficial for budget-conscious consumers who want to manage their finances.

Improved security

Card payments in retail offer efficiency and convenience and contribute significantly to security. One of the biggest upsides of electronic transactions is the reduction of physical currency in the register. The less cash in the till, the lower the risk of theft by external perpetrators and internal misconduct.

Another security issue is robbery protection. As card payments increase, there is less of a need to keep large amounts of cash or take it to the bank regularly. This benefits small and medium-sized retailers, as moving physical money often involves organizational effort and security risks.

Along with physical security risks, card activities also cut down on financial losses from register discrepancies. Manual cash transactions are prone to errors due to miscalculation, accidental or incorrect change, or register discrepancies. Digital payment systems accurately record each activity, curbing mistakes and making corrections easier.

Automated accounting

Electronic checkouts enable automated accounting processes. While cash purchases must be recorded manually, card payments can be entered into the books automatically and tracked seamlessly. This eliminates the need for time-consuming administrative tasks and reduces the risk of errors.

A precise and traceable sales overview is created since every card transaction is recorded and documented electronically. This not only simplifies daily cash accounting but also ensures transparent financial statements. Automatic documentation is especially valuable for tax purposes: retailers can more easily prove their income to the tax authorities and benefit from a reduced risk of error in the annual value-added tax (VAT) return.

What are the disadvantages of card payments for businesses?

Despite their benefits, card payments come with drawbacks that businesses in Germany need to be aware of.

Costs

Merchants must meet the technical requirements to offer card payments. There are several ways to do so, each with a different level of financial commitment. For example, card readers can be purchased or rented. With Stripe Terminal, on favorable terms, you can buy pre-certified readers, such as the S700, or mobile devices, such as the BBPOS WisePad 3. It is also possible to offer cashless methods without an additional device. With Tap to Pay, you can use your iPhone or Android device to accept payments and record them in your accounting system.

Every electronic charge—credit card or girocard—costs the payment service provider. This is the second major cost factor after readers. Typically, a fixed fee is charged per transaction or as a percentage of sales. This cost can be particularly impactful for smaller merchants with low margins.

Technical problems

Unlike cash, card payments can be interrupted by technical problems. These can be caused by several factors, including internet connection issues, faulty terminals, or service outages. If the point-of-sale (POS) system or reader is not working properly, transactions might not be processed or could be delayed. This increases customer wait times and disrupts store workflows.

In such cases, stores must quickly offer alternative payment methods or risk turning shoppers away. The latter can result in lost earnings and a poor customer experience. Moreover, system malfunctions often need to be repaired by external service providers, resulting in additional effort and cost. It pays for retailers to invest in regular maintenance and training to minimize technical outages.

Necessary know-how

The use of card readers requires not only the right equipment but the appropriate know-how on the part of the retailer as well. Modern POS terminals offer a variety of features that go far beyond simply scanning credit or girocards. Many can accept contactless payments, Google Pay, Apple Pay, or chip-and-PIN cards. People can pay using NFC, QR codes, or the traditional chip and PIN option.

Since each payment method requires specific steps and procedures, anyone operating the register must be trained accordingly. Smooth transaction handling is only possible if they are familiar with the processes. In the best-case scenario, all responsible employees can react quickly to system disruptions.