Mobile Payment slowly gains momentum

It is a truism that continue to be confirmed in studies: German consumers love paying with cash. Based on recent assessments by the EHI Retail Institute, nearly 80 percent of transactions in German retail is still handled with cash.

According to EHI statements, however, card-based sales at the POS have increased eightfold over the past twenty years. Are Germans really behind the times when it comes to using innovative payment methods? Even though the industry sector likes to use this argument when asked why mobile payments have not become accepted across Germany, current data refutes the assumption that the reason for this lies solely with the customers.

On behalf of GS1 Germany, the Saarland College of Technology and Commerce (German: Hochschule für Technik und Wirtschaft des Saarlandes), htw Saar, has recently surveyed the status quo in technological developments as well their acceptance by retailers and customers. Its conclusion: approximately 70 percent of surveyed consumers would already use mobile payment options in brick-and-mortar retail today. Even if the “traditional“ payment options – payment with cash, debit or credit card – are still more popular compared with mobile payment in Germany, these numbers speak for themselves.

The current study of the htw Saar also shows one reason for the low market share of mobile payment solutions: customers do not trust the payment providers. At least half of the respondents would also use mobile payment options for high-priced products (purchases over 100 Euros) – but only if the retailer acts as the payment provider. Eighty-nine percent of surveyed customers mention brick-and-mortar retail as the most trustworthy payment provider while pure mobile payment providers rank in last place out of eight.

That’s why retailers themselves need to become proactive and meet this customer request with their own app for example. Most customers consider this the safest payment alternative. Usually, customers need to register one time to use the mobile payment option via an app so that the purchase amount can then be charged via secure direct online debit to the account verified at registration.

By now, many retailers are also convinced about the mobile payment growth potential. In April, the “NFC City Berlin“ initiative was started in Berlin, where six leading retailers (Galeria Kaufhof, Real, Kaiser’s, Obi, Rewe and Penny) joined forces with mobile network operators Deutsche Telekom, Telefónica Deutschland and Vodafone to win over customers for mobile payment methods using NFC. More than 2,000 point-of-sale terminals in 500 stores and supermarkets of the partners have already been upgraded to accept mobile payments, which doubled the number of NFC acceptance points in Berlin.

The participating companies see themselves as trendsetters for the entire country. “Digital products and services enrich and simplify the everyday life of customers. Mobile payment is quickly expanded thanks to the collaboration of strong commercial partners and all mobile network operators in Germany,“ says Alfons Lösing, Managing Director Wholesale and Partnering for Telefónica Deutschland. Retailers also feel confident about the sustainability of the mobile payment alternatives. “Retail in Germany has a high level of innovative capacity. We are a partner of this Initiative to offer our customers a modern alternative with mobile payment solutions. However, we also want to contribute in establishing this secure, modern and convenient form of payment,“ emphasizes Jens Siebenhaar, CEO of Rewe Systems.

NFC already appears to prevail as the technical standard for mobile payments – not only ”NFC City Berlin“ but also the majority of current projects clearly prefers the near field communication technology compared to alternatives such as QR code or Bluetooth low energy (BLE) solutions.

In June of this year, the ALDI Nord Group is another major retailer that jumped on the mobile payment bandwagon – and it did so completely: customers are now able to make contactless payments nationwide in all of ALDI’s 2,400 stores. ALDI Nord also relies on an NFC solution. The fact that ALDI Nord, deemed a more conservative discount supermarket chain, relies on the new solutions could definitely have a positive signaling effect for many other retailers who are still unsure about investing in mobile payment solutions.

Retail and consumers want mobile payment

Mobile payments will also prevail in Germany – and sooner rather than later. Of course, it’s true that German consumers love to use cash to pay at a store. The more Smartphones become accepted in all age groups, the larger the percentage of users who want to use their devices for mobile payments will be. “The increasing popularity of credit cards, as well as the open-mindedness of young people in particular toward mobile payment solutions, shows that there is a clear trend toward cashless payment,“ BITKOM Vice President Ulrich Dietz is certain.

However, there are two important points to consider. German consumers are very sensitive about the safety of their personal information. This applies particularly to account and transaction data. And when it comes to data protection, they trust the retailer more than a payment provider. Retailers themselves, therefore, need to provide secure payment options and must not completely rely on the third party service providers.

The second point is quite simply the lack of hardware infrastructure. According to BITKOM, there are currently only approximately 60,000 acceptance points for contactless payments using NFC in Germany, which only equates to about eight percent of all POS terminals. However, the number of NFC-enabled terminals is going to strongly increase over the next two years according to the Retail Federation.

“When the POS terminals have been retrofitted nationwide, payments with Smartphones can experience a breakthrough within a very short amount of time,“ says Dietz. “What’s more, consumers need to be better educated about the possibilities and many advantages of contactless payment solutions.“