Mobile payments in Germany: No hype, but a trend!

Samsung_VisaBy Volker Koppe, Market Readiness Lead DACH & Nordics, Business Strategy & Innovation, Visa Europe

Things are beginning to move in the mobile payments market in Germany. This is demonstrated through mobile payment projects such as NFC City Berlin, driven by the standardization company GS1. Germany‘s largest mobile payment initiative was launched last year in the capital with the mobile network operators O2, Vodafone and Deutsche Telekom teaming up with major retail groups to upgrade POS terminals to support NFC payments.

This has led to a doubling of the number of participating retail outlets and POS terminals in Berlin, accepting contactless Visa cards and mobile payments, compared to 2014. At the end of September, GS1 organized the Mobile in Retail Conference 2015, giving a forum to more than 300 professionals, to discuss recent developments and the future of mobile payments. Visa Europe supported the congress as main sponsor and we were intrigued by some interesting new facts which were presented during the conference.

For example, with approximately 60,000 activated NFC terminals (out of a total of 800,000) the German market still lags far behind other European countries. It will become mandatory for every Visa accepting merchant in Europe to replace all of its terminals with NFC-ready terminals by 2020. But we might not have to wait that long. Recently, countrywide retail chains such as Karstadt, Aldi Nord, Media Markt and Saturn activated the acceptance of contactless payments across their store networks.

And we are confident that this will set the course for the entire German market. In addition, leading industry experts at the conference in Berlin estimated that around 500,000 terminals in German stores are actually NFC-enabled – they just have not been activated so far. So the cost-intensive hardware no longer remains the problem for a lot of merchants. What’s more, almost two thirds of POS terminals across Germany could become NFC-ready by a simple software update, more or less over night!

During the conference, GS1 and the German EHI Retail Institute presented the results of the expert study “Mobile in Retail” – and provided more reason to be optimistic. 56 % of the surveyed retailers expect that they will accept contactless payments nationwide by 2017. And 94 % of the experts across all surveyed industries (banking and finance, retail, MNOs, smartphone manufacturers and wallet providers) agreed upon mobile payment not being hype anymore, but a real trend establishing itself in the retail industry. According to the research results (in German), there is no doubt that NFC is set as the transmission standard for mobile payments. In addition, the German mobile operators are forecasting that by 2017, more than 50 % of all smartphones in the market will be NFC-ready.

Customers increasingly expect mobile payment solutions

Looking at the customer side, a representative Visa study has shown that German consumers will increasingly adopt mobile payment solutions in the next five years. While currently 6 percent indicate that they use a mobile device for paying on a daily basis, 4 out of 10 Germans expect to pay using a smartphone, tablet or laptop at least once a week by 2020. This refers to payments at the POS, as well as those to internet merchants or friends and family (P2P). Based on these figures, we estimate that by that time, German consumers will pay more than 6 billion Euros per month from mobile devices!

With the conditions for mobile payments established, the ball is now in the banks’ court

Mobile contactless payment services like Apple Pay, Android Pay or Samsung Pay were launched by leading global technology companies in the US, the UK and South Korea in recent months. In many European markets including Spain, Poland or Slovakia, cloud-based payment solutions were introduced by major member banks. Based on Google’s HCE technology, these are already used by hundreds of thousands of customers.

But what is the situation for consumers in Germany? So far, smartphone users are able to use solutions from mobile network operators such as Vodafone to pay with their smartphone. There are some pilot projects launched by banks, including an initiative of Postbank. There are no services available commercially yet from German member banks, with the exception of a solution offered by Volkswagen Bank, which operates with an NFC-enabled micro-SD card and an accessory for (older) iPhones.

The preconditions for mobile contactless payments in Germany are definitely being established in the retail industry and the chicken-and-egg-dilemma – “Why offer mobile payment solutions without acceptance at POS?” and vice versa – is disappearing. Therefore, the ball is now in the court of the German banks. With the Visa Cloud-Based Payments model they can act now, and enhance their existing mobile apps quite easily with an attractive payment functionality.

Due to the high number of installed apps on the smartphones of their customers, banks have a clear competitive advantage compared to most other service providers who still have to build their customer base. We should also keep in mind that payment is largely a question of trust! In Germany, many representative studies have shown that consumers trust their banks more than any other provider when it comes to payments.

By offering branded solutions, banks can evaluate user behavior and build expertise to formulate their long-term digital payment strategies. And maybe most importantly, a bank can position itself as an innovator in the market in the eye of their customers. By simply waiting for the large smartphone and operating system providers to enter the market, banks could miss the opportunity of keeping their customers in their own app and strengthening customer loyalty – and they could further risk losing touch with them, missing out on valuable cross- and up-selling opportunities.

For more insights, visit the Visa blog at

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Categories: Mobile Payments

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