Germany Cards And Payments Market

Germany Cards And Payments Market

CURRENT SCENARIO

Today, Germany cards and payments market is rapidly growing. This progress can be attributed to the shift from cash to digital payments. With online wallets and prepaid cards gaining traction the pattern of transitioning away from cash transactions has quickened greatly. Considering this change despite being slow, it is expected that in the coming years, prepaid instruments are estimated to climb surpassing this category. Also, another reason is the European Union is reducing the upper limit of cash payments, local agencies are providing debit cards to people wanting asylum.

• According to Deutsche Bundesbank, card payments accounted for less than 1 per cent of total cash transactions, which in value terms just crossed 70 trillion euros in 2023.

The persistent expansion of e-commerce propels the acceptance of different digital payment methods. In addition, contactless payments are progressively becoming common and are backed by technological developments in infrastructure and the payment ecosystem. The comfort and protection of these techniques have positioned them as a favoured option for several customers.

MARKET DRIVERS

The rapid adoption of contactless payments is driving the Germany cards and payment market.

A newly published study by the Bundesbank reveals that cash today holds 51 per cent of total transactions in the nation. Mobile payment methods and contactless cards are being utilised more regularly. Cashless methods of payment are progressively recognised as more handy, quicker, and simpler than cash. These are features considered as main reasons behind choosing for or against a form of payment in the “hybrid payment world” and “hyperdigital payment world” and “hybrid payment world” conditions. In addition, the adoption of this payment type has gone up sharply, particularly in previous cash-dominant sectors like cafes and restaurants and the services industry. Based on these factors, the overall pattern of dropping cash application in the scenarios seems highly reasonable, which ultimately accelerates the market growth.

• As per the 2023 study by Deutsche Bundesbank, cashless means of payment are adopted in 81 per cent of overall transactions at physical payment venues, acceptance has surged by about 20 percentage points in comparison with 2021.

A comprehensive payment environment is another propellent for this market. The country talks loudly in praise of one of the most varied digital payment ecosystems in Europe, with different options customised to customer preferences. This is opposite to a few nations which have standardised on some prevailing payment techniques. Apart from cash being a significant method, others comprising direct debits and bank transfers, debit and credit cards, digital wallets, alternative payment methods, e-commerce payment preferences, integration of payment solutions, etc. also have a significant presence, making it a potential market.  Furthermore, the regulatory environment in the country assists a large variety of payment alternatives, maintaining that both unique and standard manners coexist in this market. This framework promotes competition among service providers and supports breakthroughs in new technologies.

MARKET RESTRAINTS

Preference for cash transactions is one of the major obstacles to the growth of the Germany cards and payments market.

• On payment behaviour, German people pay close to 60 per cent of their buys or acquisitions in cash, including both services and goods, as stated by the study by Germany’s central bank.

It is not the only nation opposing the worldwide trend towards cashless transactions. In Austria, due to its immense popularity, the chancellor has argued that cash should be considered as a constitutional right. Moreover, the belief that “only cash is true” gives a summary of the cultural sentiment around cash which restricts the adoption of different cards and payment methods. Further, confidentiality and secrecy is the another reason behind the strong inclination towards cash. Hence, it’s a major restraint for the market expansion.

MARKET OPPORTUNITIES 

Low penetration of credit cards provides potential opportunities for the expansion of the Germany cards and payments market.

Compared to other European nations, credit card usage is relatively low in Germany. However, the trend of gradual decline in cash transactions shows that slowly people are accepting these cards. This is expected to create key prospects for the market players. In addition, the market in the country is also witnessing the rise of contactless payments which exhibits that consumers want convenient and hassle-free payment methods if any new manner is introduced.

MARKET CHALLENGES

Limited adoption, complexity and usability problems in digital payments are major challenges derailing the growth trajectory of the Germany cards and payments market. Some customers perceive digital payment systems as difficult to operate, particularly the older ones and not-so-tech-savvy people. The necessity for several steps in authentication procedures, like using biometric data or entering passwords, can be viewed as uncomfortable in contrast to the ease of cash transactions, leading to slower growth of the market.

Even after the popularity of digital payment methods, not all dealers and shopkeepers accept them, especially local vendors and small companies favouring cash for several reasons. This restricted adoption can obstruct people willing to utilise their preferred way but realize it is not available. Therefore, these are some of the challenges hindering the market growth.

Germany Cards and Payments Market – Key Highlights:

The gaining prominence of alternative payment options in Germany like Vodafone Wallet, a digital wallet for customers to make in-store contactless payments and Deutsche Bank Mobile, launched by Deutsche Bank for its customers on Android devices using their card details to pay at the places where MasterCard PayPass is accepted.

The development of a pan-European instant credit transfer scheme by the European Payments Council in Single Euro Payments Area (SEPA) markets to enhance the use of electronic payments and provide instant transfers up to EUR 15,000 within 10 seconds at any point of time throughout the year. UniCredit also started its own real-time payment platform apart from SEPA Instant Credit Transfer (SCT Inst).

Growing adoption of digital-only banks like telecom provider Telefónica Deutschland and Fidor Bank partnered mobile-only bank, O2 banking app allowing P2P transfers and loans offering MasterCard debit card, N26, and Fidor Bank.

SEGMENTAL ANALYSIS

Germany Cards and Payments Market - By Cards

• Debit Cards,
• Credit Cards,
• Prepaid Cards

Debit cards are the most used segment of the Germany cards and payments market and are expected to witness further increases in their application during the forecast period.

• According to the Deutsche Bundesbank, in Germany, debit cards (basically the giro card) were ranked the second most commonly applied form of payment, representing about 23 per cent of the number of transactions and in terms of turnover, it holds 32 per cent share of overall expenditure.

The market share of this segment surged significantly during the COVID-19 pandemic, consumers progressively utilised this card to pay for smaller transaction amounts.

Germany Cards and Payments Market - By Payment Terminals

• POS
• ATM's

The POS (point of sale) segment holds the maximum share of the Germany cards and payments market and is projected to elevate its proportion throughout the estimation period. Among all the POS, girocard is the most favoured payment system among German people for buys in stores, and shops and is also extensively used for e-commerce payments.

• As per Alcineo, about 100 million cards were issued which executed around 7.5 billion payment transactions using 1,132,000 active terminals. Also, 84 per cent of transactions on girocard are contactless.

The market size of this expanded due to the advantages it provides to people and merchants by facilitating the application of both contactless and contact girocards for cash withdrawals and payment in shops.

Germany Cards and Payments Market - By Payment Instruments

• Credit Transfers,
• Direct Debit,
• Cheques
• Payment Cards

Direct debit is the most used category of the Germany cards and payments market and the segment is anticipated to drive forward during the forecast period. Moreover, the segment’s market growth was majorly fuelled by electronic direct debit (ELV).  Its quick payment processing, low costs, high acceptance rate in consumers, comfort in paying, and lower wait times at checkout contribute to the growth of the segment.

COUNTRY ANALYSIS

Germany cards and payments market is growing at a steady rate and is believed to see further progress during the forecast period. According to research on the country’s payment behaviour, customers are progressively becoming digital. This possibly provides a benefit to those dealers and traders who can fully accept the resulting payment trends.

Recent Market Developments

• In November 2024, it was reported that Germany will introduce a new payment card for people seeking asylum across the country. Today, they are only pay using vouchers or cash.