Telephone Banking The Battle for the Mobile Wallet

A brave new world of mobile bank transactions is finally coming to Germany. The question is, who will earn the lion’s share, German banks or Apple?
Quelle: Bloomberg
Contactless payment heading to Germany.

Deutsche Bank will this week begin letting customers pay with their MasterCard using an App and their Android smartphones, amid reports that Apple Pay is about to enter the market.

If it does, it will engage in a power struggle with German banks for the greatest asset of the banks – contact to their customers.

So far, Deutsche Bank’s mobile app only works with Google’s operating system Android and the first step of its mobile payment service will only reach the 300,000 bank customers with a MasterCard, Handelsblatt has learned.

Apple has not yet confirmed it will enter the German market but there are plenty of signs that it is preparing to do just that. In February, Apple released guidelines for Apple Pay in the German language on the internet.

The introduction of Apple Pay poses a problem for German banks, because the business of paying with mobile devices is something they would rather handle themselves, and Apple represents a technical hurdle to these plans.

Mobile operating systems use a NFC, which stands for near field communication and is the standard for wireless transmission of data over short distances, from smartphone to the POS terminal.

Google offers free access to the Android NFC interface but Apple reserves it for its own payment systems.

In other worlds, unless they cooperate with Apple Pay, German banks cannot offer iPhone users the ability to pay through their mobiles.

After a consortium of banks in Australia attempted to get Apple to drop its NFC access restrictions and lost, it is unlikely that German financial institutions will have better luck trying here. Voluntarily opening up this NFC interface on Apple devices simply does not benefit the company.

“Apple acts according to the motto ‘engulf or die’ and wants to keep customers within its own ecosystem.” said Maik Klotz, a consultant on payment systems.

When customers use their bank’s app to pay for something, they look at their checking account balance, and read what is being offered by the bank via the app. Oliver Hommel, Accenture

Apple also demands a major part of the fees that are charged for paying with your mobile device. But in Germany, the allowed fees for this are pretty small and usually go to the banks, since they are the ones who issue credit and debit cards consigned to Apple Pay.

“Apple Pay is looking for a strong partner in Germany. The catch is, that Apple also wants to earn from this – a kind of fee from the transactions. German credit institutions, however, are used to receiving this fee when they allow payment,” said Horst Rüter, of the EHI Retail Institute.

German consumers are still far more wedded to paying cash than other Europeans, who have been quicker to embrace contactless payments.

Nonetheless, German banks are working on their own solution for payment via smartphone in the hope that it will lead to better engagement with their customers.

“When customers use their bank’s app to pay for something, they look at their checking account balance, and read what is being offered by the bank via the app,” said Oliver Hommel, expert for bank transactions at the consulting company Accenture.

This strengthens ties to the customers and also reduces cash costs. Mobile payment is also seen as the technology of the future and German banks do not want to be overtaken again by third parties.

German savings banks and credit unions are also trying to crack the mobile payments market. Joachim Schmaltz, digital board member of the German Savings Bank Association recently said that German savings banks are aiming to have customer credit cards on their smartphones by the fourth quarter of this year. Debit cards will follow in 2018.

Apple Pay is not the only player on the market. China’s Alipay – offered by Ant Financial – is more popular in some cities than paying with cash and is currently available in Germany as well. Its focus so far has been on Chinese tourists here, but this could well change.


Elisabeth Atzler has been a banking correspondent of Handelsblatt since 2012. Katharina Schneider covers the newest fintech innovations, private investment, consumer rights and tax changes. To contact the authors: [email protected] and [email protected]