11 June 2019
Why Germany is Ready for a Payments Revolution
The following white paper explores why Germany is ready for the payments revolution that has already swept countries such as the UK, Sweden, Norway and others globally. Despite the growth in online and face-to-face electronic payments, cash is still the dominant retail payment method for consumers in Germany today: 80% of the purchase transactions made by German consumers were made in cash in 2017.
However, there is change happening in Germany driven by a number of factors including new payment technologies and changing sentiment towards new payment innovations. Germany is at a tipping point, and this paper explores why banks and the financial sector should be innovating now to capitalise on the opportunities, including:
- A changing more demanding consumer – a look at how millennials especially are driving demand for new more innovative ways to pay underpinned by convenience and security. This digitally-savvy, choosy consumer has grown up on a diet of brands designed to make their lives easier such as Uber, Airbnb etc and now want financial services to do the same.
- Regulation changing the market – regulation such as PSD2 are forcing the sector to be more innovative while also encouraging new fintech companies and challenger banks to enter the market. Existing banks have to rethink how to connect with customers and engender brand loyalty while delivering value-add services beyond what they are providing now.
- The “Digital Giants” are all experimenting with new ways to pay and could dominate the market quickly due to their existing and loyal customer base
- Fintech innovation – with access to data provided through APIs, FinTech’s are bursting with new ideas and are not weighed down by legacy systems and operations. They can afford to take risks and design customer experiences around mobile devices rather than account-based models. While concerning for the banks, the banks have the edge when it comes to trust and credibility – something that they need to take advantage of now or lose their place in the market.
- The sector’s need for new revenue sources – adopting a payment-led strategy can provide customers with a new array of services and benefits such as loyalty schemes or the ability to manage their finances. In Germany the nation will require handholding as they move from a cash environment to a world without cash. But the banks are advantageously positioned and have the opportunity to increase engagement, attract new customers through new innovative products and strengthen the role of the current account as the consumer banking anchor product.