Raynor de Best
Research expert covering finance, insurance & real-estate, internet & e-commerce
Get in touch with us nowDigital payments refer to any form of cashless payment, or payments conducted without banknotes or coins, in an online or offline environment. Such payments can include mobile payments - digital payments performed with a mobile device - but also relatively new trends like buy now, pay later (BNPL), cryptocurrency, or instant (real-time) payments. Out of all these digital options, which developments are noteworthy to know about for Germany?
Third-party providers from abroad, instead of domestic banks
German online payments lean heavily towards digital wallets and buy now, pay later. PayPal's usage for online transactions in Germany was the highest in Europe and even higher than in its native U.S. Another notable online payment method is SEPA, which reveals itself by looking at the number of direct debit transactions in the country. Direct debits are automated transactions between merchants and banks that stem from third-party payment providers at a regular timeframe. The SEPA system - or the Single Euro Payments Area, an effort from the EU to facilitate cross-border bank transfers between its member states. As Germany has a complicated financial infrastructure, by virtue of the highest number of banks within a single country in Europe, such third-party services are relatively popular.When will cash no longer be king in Germany?
Germany's share of cash was noticeably higher than other European countries for several years. Some believe debit cards will eventually become Germany's most popular transaction method in physical stores. The country's debit card penetration is predicted to increase by only 0.24 percentage points between 2022 and 2028, which makes it unclear when that change would happen. Instant payments could be another option to help digitalize payments in Germany. In 2021, such real-time payments in Germany made up roughly three percent of all payment traffic as payment providers were still learning to work with the pan-European SCT Inst initiative. German banks joined this initiative alongside banks from Belgium, France, the Netherlands, and Spain in 2017, but the scheme did not yet have an API overlay by 2022, limiting its options somewhat.
