STRATEGIC PARTNERS
February 10, 2002
FRANKFURT -- Credit-card companies are hoping Germans' well-known aversion to credit cards may be weakening following the introduction of the euro.
Germans' use of plastic rose dramatically in the first week of January during the introduction of the euro, as consumers and merchants used cards to avoid rummaging for both marks and euros in their pockets at cash registers.
Card companies, which have been trying to get Germans to use credit for years, hope the jump marks the beginning of a change in card culture for Europe's biggest economy.
Visa says it saw a 21 percent increase in the number of transactions compared to the same week the year before, while Europay, holder of the Eurocard Mastercard brand, reported an increase of approximately 10 percent.
Germans are quite familiar with payment cards, with 1,055 pieces of plastic per 1,000 people, third highest in the 15-member European Union behind the Netherlands and Britain. But they're mostly debit cards, and mostly used only for tapping cash from ATMs.
Reasons have included German laws restricting come-ons like frequent-flier miles for card use and barriers to direct marketing of cards and to sharing credit-history information.
Visa, for example, has about nine million delayed-payment cards, or about 40 percent of the market, circulating in Germany, which has 82 million people. That compares to its 21 million cards in France, with 59 million people.
Visa's contrast is even sharper in card use: 126 billion euros in France and only 14 billion euros in Germany for the year ending in Sept. 2001. Germans often don't have a single credit card, and many major retailers won't take them.
Germany last year dropped restrictions on bonus programs, but obstacles still remain.
For instance, anti-money-laundering laws require credit-card applicants to appear in person to verify their identity, said Patrick Diemer, Frankfurt-based general manager of Visa International in Germany.
The post office will perform the check when the card is delivered -- but for 16 euros. "In this context, that's quite a lot of money,' said Diemer.
Another hurdle: privacy laws that limit sharing of data on whether someone is a good credit risk. The result is that banks market cards mostly to their own depositors. "Credit bureau information is much less in depth in Germany than it is in the States, and they have much less information on people they don't already know,' said Diemer.
Overdraft provisions on savings accounts also give people a form of credit without a card.
Diemer is nonetheless optimistic that consumer debt and credit will catch on. `"We assume, and we hope, that point-of-sale use will increase,' he said.
