BY MICHAEL HASSE
As Europe’s largest economy and with a high cash ratio of around 50% by international standards, Germany is a very attractive market for foreign payment service providers in particular. This has been demonstrated mainly by the M&A activities in the industry in recent years and months, which have been and continue to be dominated by players from outside Germany. Due to the importance of the girocard as the German debit payment method, the immediate question for any foreign company thinking about entering the German market is whether it is necessary to accept girocard and how it can this be ensured.
According to the EHI study for 2019, card-based payment methods are clearly dominated in stationary retail area by the girocard with a share of around 70% or 211 billion euros. The international schemes such as Mastercard, VISA, American Express, Diners/Discover, JCB and UP only account for a share of around 15% (45 billion euros) with their credit and debit products, and a further 15% of the volume is processed as secured or unsecured direct debit.
The girocard is the debit card of the Deutsche Kreditwirtschaft (DK). Currently, there are about 100 million cards in circulation, most of which are equipped with contactless functionality or can be integrated into wallets. As the owner of the girocard system, the DK establishes the regulations and monitors whether they are followed. The acceptance of the girocard at the point-of-sale (POS) is linked to the certification of a terminal by an approved girocard network operator. As of December 2020, there are 20 such network operators (see Deutsche Kreditwirtschaft (die-dk.de)), that come from the traditional payment sector as well as from the retail, petroleum and transport industries. The acceptance of the girocard is limited to Germany and its border regions.
To enable cardholders to use their girocard abroad, however, the vast majority of girocards issued are equipped with a CoBrand (e.g. maestro or VPay) for a debit product of the international schemes. Thus, from a purely technical point of view, girocard acceptance is not mandatory, since the CoBrand can be used for authorization and settlement. However, a card acceptance contract by a retailer with all required checks regarding money laundering, customer identification and risk profile is necessary. Payment service providers can also use terminals that do not have girocard approval but “only” comply with EMV and PCI regulations.
A significant difference between the girocard and the Schemes’ debit products lies in the acceptance fees for the merchant. While the fees for the girocard are between 0.15% – 0.25% of sales, depending on the merchant, they are easily more than double for the debit products of the international schemes. For a merchant with 100.000€ in girocard sales, this is easily a cost difference of 250 euros and thus a very important decision criterion for him/her.
So, while girocard acceptance is not absolutely necessary for entering the German market from a technical point of view, from a commercial point of view it may be subject to critical scrutiny or even absolutely necessary, depending on the target industry and the customer segments. In industries with a very high proportion of credit card payments, such as hotels, restaurants, high-end retail and tourist hot spots, acceptance of a girocard is certainly less critical than in food retailing, for example. Various mPOS providers use the CoBrands of a girocard for their business model in order to be able to make an interesting and marketable offer to retailers with low sales volumes or seasonal business in particular.
Therefore, whether the girocard acceptance is necessary or not can’t be answered easily but depends on the individual situation and strategy of the payment service providers.
Options for creating “real” girocard acceptance can be both the establishment of a certified network operation or a commercial network operator (KNB). In the KNB model, the payment service provider outsources the certified network operation and, if required, other parts of the value chain to an approved network operator but retains the customer contract and relationship itself.
SHC supports companies entering the German payment market, the implementation of a certified girocard network operation or a KNB.