A shift in payments is occurring right now in Germany, which may result in the obsolescence of cash and cards for a majority of the country. In order to understand why this is happening, we first need to understand the German payment landscape.
First, there’s no Apple Pay in Germany and NFC capabilities are still very rare. The Germans have been craving a mobile payment method.
Second, for many years, 50% of Germans carried around a plastic PAYBACK card—essentially a universal loyalty card. It provides customers with an average rebate of 1% in the form of points that they can redeem for various offers on the PAYBACK website.
The next logical step for a company like PAYBACK, with such a dominating market share—today, PAYBACK has over 29 million active customers in Germany alone—was to develop an app; in 2010, it launched the PAYBACK app, allowing users to activate coupons and collect extra points at partnering retailers. In 2016, PAYBACK took the app a step further and, with the help of InterCard and Paymorrow (both powered by Verifone), it provided pay-by-app functionality via a QR code presented to the merchant at checkout. The newly relaunched PAYBACK PAY app gave more value to consumers by combining points collection, coupons, and mobile payment for the first time.
There was just one small problem. In Germany, the direct debit system does not guarantee payment, and with this gradual shift away from cash, merchants would have been forced to take on more and more risk—if it turned out the customer couldn’t pay, the merchant would have to eat the cost.
Enter Paymorrow, recently acquired by Verifone. What we were able to bring to the table was the ability to guarantee payment to the merchant. The process works like this:
- A customer sets up a PAYBACK PAY account, which links to their bank account.
- The customer then goes to a participating merchant and uses the PAYBACK PAY app to purchase items.
- Paymorrow supplies the payment to the merchant and takes on the risk of the customer not being able to pay.
This shift in payment behavior and processing couldn’t have come at a better time, as Alipay launched in Germany earlier this year.
Suddenly, a country that was behind the times for payment innovation has leapt into the not-too-distant future. Should this system grow, the German people may have no use for cards or cash at all. How this will affect German wallet manufacturing, only time will tell.
