Mobile Pay Google Pay takes on Germany’s cash culture

US giant Google will test whether a country that doesn’t even like credit cards is ready for contactless payment via mobile phones.
New coin of the realm.

Germans famously like to pay with cash, using bills and coins for three-quarters of retail store transactions. Nonetheless, Google Pay was launched Tuesday in cooperation with four German banks, where it is in competition with other banks' mobile pay services and the market leader Payback Pay.

Like most other mobile pay systems in Germany, Google Pay only works on Android phones. Apple’s iPhone only has a 20 percent market share in Germany and despite speculation about Apple Pay's imminent arrival, it is nowhere to be seen.

Payback Pay is it very attractive to consumers because it combines the mobile pay with a bonus program. It also functions on iPhones and Android phones because it uses QR code (matrix barcode) technology to function.

How successful any mobile pay system will be in Germany, however, is up in the air. Even in the United States, where payment options are more flexible, there has been no rush to use mobile payments. “Mobile payment will only become established when a solution offers customers more than just an alternative payment method,” said consultant Maik Klotz. “Payment is always a means to an end.”

Online privacy pledge

The requirement to have a credit card is partially limiting Google Pay’s acceptance in Germany, as they are much less widespread than the Girocard debit card. Only one-third of German consumers have a credit card.

Growth is also limited by the fact that Google Pay is confined to its four partnered banks, Commerzbank, Comdirect, Wirecard and N26, three of which are online only. The company has said it wants to extend the service to all banks.

One partial solution to Google Pay's dilemma is provided via the cooperating payment service, Wirecard, which has an app called Boon that creates digital credit cards independent of where the customer has an account. Customers can use this card with Google Pay.

However, Deutsche Bank has its own mobile pay system, as do some Volksbanken credit unions. Credit unions plan to offer the option to all customers by the end of the summer and allows Girocards as well as credit cards to back the payments. The local savings banks will soon follow.

A number of retail chains are equipped to use Google Pay right away, including Aldi-Süd, Lidl, Hornbach, Kaufland, McDonald’s, Media Markt and Saturn. And 60 percent of cash registers are equipped with the Near Field Communication (NFC) technology needed for contactless mobile pay to function.

In a country where people are a bit touchy about online privacy, Google Pay has pledged to use any data from transactions only to ensure people are happy with the product. “Google gets the data only to check identity and to execute the transaction,” said Torsten Daenert, who heads up the cooperation for Commerzbank. “The company can’t use the information for any other purpose – neither for advertising purposes or to sell it.”

Elizabeth Atzler and Katharina Scheider cover financial services for Handelsblatt. Darrell Delamaide adapted this article into English for Handelsblatt Global. To contact the authors: [email protected] and [email protected]