[Dave Birch] The German payments market is huge, and growing, but very different to the UK market or the US market. This has been a problem for many people who are hoping to develop innovative services for the European mass market: schemes that might succeed in the US won’t succeed in Europe’s largest economy. Conversely, innovative services developed for that German market find it hard to expand abroad, as noted by a senior person at the European Central Bank (ECB).

I would like to mention a web merchant in Germany that offers either prepayment, cash on delivery or payment by Sofortüberweisung (an overlay service). Such slim choice and lack of competition is clearly an obstacle to the growth of e-commerce in Europe,

[From ECB: A new voice on a familiar topic – SEPA from the perspective of ECB Executive Board Member Peter Praet]

Consumers (and, it has to be said, banks) in Germany are notoriously conservative when it comes to messing about with payments. Payments cards account for only about a third of consumer spending at retail POS. It’s a debit market, so almost three-quarters of those payments are made on debit cards (and about a third of those are made using ELV, which doesn’t exist outside Germany). I saw a survey about this today, which had some interesting messages: it’s not that consumers and retailers aren’t interested in e-payments, but they are worried about security and find them too complicated.

Around 86% of Germans consider that security concerns are the biggest hurdle to the use of e-payment systems, according to a survey by German internet economy federation BVDW. Customers raise concerns about security and find e-payment transactions complicated (38%). Retailers complained of the lack of technology necessary for e-payment (53%) and also find that transactions are too complicated (41%). Very few respondents said they lacked interest.

[From Germans consider e-payment important but unsafe – survey – Telecompaper]

What could help to overcome these fears? In the German market, unlike the UK or US markets, help may be at hand from a particular source: the national ID card. Deutsche Bank said that

The new ID will help to significantly boost the general environment for electronic commerce in Germany. For one thing, the new ID enables new types of online business relations and more efficient processes. These include, for example, opening an account via the internet or reporting insurance claims online. Some people who have harboured concerns up to now about internet security could presumably be convinced of the merits of online transactions via the use of an eID function.

[From Talking point]

Plenty of German consumers seem to be prepared to use their new eID card online (via a USB smart card interface).

The survey found that Germany’s internet users would use the new ID mainly for government services (44%), online banking (38%) and online shopping (33%).

[From Talking point]

While the German card and online payment markets might be conservative, the German market for m-payments seems to be developing quickly, again in different and interesting directions from the US and UK. In the survey mentioned above, almost three quarters of respondents thought that m-payments would be “important” in the next two years. So it seems that the traditionally conservative German consumers seem ready to experiment with new mobile payments services.

The study found that Germans who are already using m-payment services or want to use such services see purchasing public transport tickets as most interesting m-payment application with 54 percent, followed by parking ticket payments with 50 percent.

[From German mobile payment skeptics decrease to 45% – study – Telecompaper]

The German mobile operators have clearly taken note and have decided to get together to accelerate the transition. Not by creating a partnership with banks (as in, for example, France or the Netherlands) but by ignoring them.

Three major German mobile operators plan to launch a trial of their own payment brand using contactless stickers in three cities before the end of the year,

[From German Telcos Plan to Launch Payment Trial with Stickers | NFC Times New – Near Field Communication and all contactless technology.]

It has to be said that operators elsewhere (e.g., Kenya, Japan, Korea) have already discovered that given certain local circumstances, it may make more sense for them to get on develop new m-payment systems rather than work with the banks to offer the existing payment systems over mobile channels.

It made headlines in Europe, but this week’s announcement that three major telecommunication companies in Germany have joined forces to bypass supporting banks in handling Mpass mobile-payment transactions is a concept not likely to quickly take hold in other countries, one industry observer says.

[From Germany Mobile-Payments Alliance Would Bypass Banks – PaymentsSource Article]

This is a pretty ambitious initiative by the German telcos and I can’t see it begin replicated by Isis or the UK mobile operators joint venture in the m-commerce apace.

The German telcos indicated they would distribute new point-of-sale equipment to shop owners when it is time to convert Mpass to NFC capabilities,

[From Germany Mobile-Payments Alliance Would Bypass Banks – PaymentsSource Article]

I noted another interested development in the German market. As I’ve often joked in presentations, it make no sense for an operator to spend money on expensive lawyers to obtain a licence for banking services when banks are so cheap! In Japan, DoCoMo simply bought a controlling stake in Sumitomo Mitsui when they wanted to offer banking services (specifically the provision of credit). Now they’ve done the same thing in Germany.

In 2009 NTT Docomo acquired German mobile content distribution firm net mobile, which already provides some finance-related services, including operator-billing systems, such as premium SMS payments. The Japanese firm has now committed EUR28.4 million to the German unit, most of which will be used to acquire a controlling stake in Bankverein Werther, a private German bank with strong electronic commerce and payment services.

[From Finextra: Japanese telco NTT Docomo takes stake in German bank]

Fascinating. So while the German market will undoubtedly remain conservative in the e-payment space, with some possible innovation around the online use of the eID card, it seems that it will be far from conservative in the m-payment space.

These are personal opinions and should not be misunderstood as representing the opinions of 
Consult Hyperion or any of its clients or suppliers

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