Could Super App Users Spell the End of Germany’s Cash-Heavy Retail Economy?

PayPal, Germany, super app, cash

It has frequently been observed that German consumers are an anomaly among their northern European neighbors due to their comparably high preference for cash.

For example, a 2020 European Central Bank (ECB) report found that physical euros accounted for 51% of the value of transactions at the point of sale, compared to just 22% in the Netherlands and 24% in Luxembourg.

These findings were corroborated by a recent PYMNTS study, “Benchmarking the World’s Digital Transformation,” which found that Germans’ preference for cash was higher than any of the eleven other countries under study, with cash or cheque used in 37.9% of all reported transactions.

Read the report: Benchmarking the World’s Digital Transformation

But that report also found that Germans were strong users of digital wallets, which were used in 20% of in-store transactions. What’s more, Germany is the only country among the 11 markets analyzed where PayPal emerged as the preferred digital wallet for in-store payments, accounting for 14.7% of all in-store digital wallet payments.

German consumers are also big on super apps, another PYMNTS report recently revealed.

Published in collaboration with PayPal, “The Super App Shift: How Consumers Want To Save, Shop And Spend In The Connected Economy” report found that consumers in Australia, Germany, the U.K. and the U.S. are generally open to the idea of an app that combines payments with a more extensive range of virtual products and services.

Read more: The Super App Shift: How Consumers Want to Shop and Spend

The study also found that 20% of the German consumers surveyed reported being “very” or “extremely” interested in a super app. When extrapolated up to the population at large, this represents 14 million Germans with an estimated annual spend of $612 billion.

Considering the two reports together, it appears that Germany represents a huge potential market for PayPal to pursue its super app ambitions. In fact, according to the Super App Shift report, 16% of Germans list PayPal as their most trusted super app provider, second only to banks.

Germany Sets Stage for PayPal Super App

In discussions of super apps, China’s WeChat and Grab in Southeast Asia are often depicted as archetypes of the modern super app, operating largely as self-contained systems.

The former started as a messaging app and has grown into a full-service social media channel with integrated shopping and payment functions, while the latter began as a taxi-booking app before expanding its offerings to food delivery services and the GrabPay digital payment solution.

See also: UK Consumers Trust PayPal More Than Banks to Provide Super App, Study Finds

Where Germany and the U.S. differ from Southeast Asian markets is that social media, ride-hailing and food delivery are already highly competitive markets with leading players commanding a certain degree of customer loyalty.

But as a payment solution, PayPal already holds a sizable share of both markets, especially in eCommerce. And in the German market, the stage is set for PayPal to attain super app status not by adding new services, but by further streamlining existing integrations.

For example, according to data from Statista, the top three digital ride-hailing and ride-sharing services BlaBlaCar, ADAC Carpool Club and Uber, which altogether account for nearly 90% of the German market, all integrate PayPal as a payment method.

It’s a similar picture for food delivery in Germany. Despite a broad playing field where international heavyweights and local services currently exist side-by-side catering to different niches, what they almost all have in common is integrating PayPal as a payment option.

It’s All About Convenience

As noted in the Super App Shift report, “A core advantage of a super app is its elegance: such a solution takes what once was a tangled thread pile of apps, websites and channels and spools it into a single, centralized experience.”

In many senses, PayPal already provides an elegant experience for German users, but rather than the PayPal app operating as a distinct hub for accessing diverse services, it is a payments web that consumers are tapped into, connecting a number of different apps and providing users with streamlined one-click payments.

In an increasingly digital world, the types of purchases for which eWallet payments offer greater convenience than cash are only going to grow, and PayPal is well positioned to displace cash-based transactions as digital payments gain traction.

The Super App Shift found that globally, more than 90% of consumers primarily motivated by convenience would integrate a super app into any given area of their lives. With this statistic in mind, Germany’s cash economy presents a huge growth opportunity for a super app.

If PayPal becomes Germany’s preferred super app, its ascendance will be the mirror image of how WeChat and Grab emerged as integrated multi-feature mobile apps in their respective locales — albeit with a twist. Whereas the Asian super apps started with services and added payments later, PayPal started with payments and is increasingly incorporating other services into its solution.

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