Hi Max, thank you for this post. I am thinking about this topic since many years and I would like to add a different view.
First of all I believe in the statement "convenience kills trust". This means for me, we would have seen a much higher adoption of electronic forms of payments if banks/financial service providers would have offered a better, more convenient way of paying. This also means, that from my point of view, theory #1 is weak. I know it is commonly used as an explanation but more as an excuse by banks to not deliver convenient solutions to consumers.
Banks didn't offer the right solutions (to consumers and merchants). PayPal, Apple Pay, and other US solutions had to come to Germany to provide the right solutions to consumers in Germany and... what a surprise consumer love it and use it massively.
So why didn't banks offer the right solutions to Germany? About 10 years ago, Germany had 10.000 contactless terminals, Netherlands none. 2 years later Germany had 30.000 and Netherlands hundred thousands. How come? A different market structure. Germany has a very fragmented banking market with > 1.000 banks, the Netherlands about 3 dominant players. Those 3 players, both issuer and acquirer, jointly started changing the market by issuing contactless cards and contactless terminals. This is how you drive and change an infrastructure.
In Germany, issuing is in the hands of thousands of banks and banks are (except cooperative banks and nowadays Deutsche Bank AG) no acquirers (anymore). This difference in the market structure is for me one of the most important factors why Germany in lagging behind when it comes to the use of electronic payments.
Look forward to further exchange on this - then hopefully in a personal meeting.
Hi Christian. You make a really important point. I definitely think there’s an underlying banking structure element to this story and it contributes to the overall picture, as you outline, but it still doesn’t fully explain why the percentage of cash transactions in German retail is still so much higher than almost any other developed country ie why consumer adoption lags so significantly. This I believe is cultural and better explained by the other theories I put forward. Let’s see if the new coalition governments requirement for merchants to offer a digital payment method shifts the needle. (My hunch is that many merchants will seek exemptions/ drag their feet).
Hi Max, thank you for this post. I am thinking about this topic since many years and I would like to add a different view.
First of all I believe in the statement "convenience kills trust". This means for me, we would have seen a much higher adoption of electronic forms of payments if banks/financial service providers would have offered a better, more convenient way of paying. This also means, that from my point of view, theory #1 is weak. I know it is commonly used as an explanation but more as an excuse by banks to not deliver convenient solutions to consumers.
Banks didn't offer the right solutions (to consumers and merchants). PayPal, Apple Pay, and other US solutions had to come to Germany to provide the right solutions to consumers in Germany and... what a surprise consumer love it and use it massively.
So why didn't banks offer the right solutions to Germany? About 10 years ago, Germany had 10.000 contactless terminals, Netherlands none. 2 years later Germany had 30.000 and Netherlands hundred thousands. How come? A different market structure. Germany has a very fragmented banking market with > 1.000 banks, the Netherlands about 3 dominant players. Those 3 players, both issuer and acquirer, jointly started changing the market by issuing contactless cards and contactless terminals. This is how you drive and change an infrastructure.
In Germany, issuing is in the hands of thousands of banks and banks are (except cooperative banks and nowadays Deutsche Bank AG) no acquirers (anymore). This difference in the market structure is for me one of the most important factors why Germany in lagging behind when it comes to the use of electronic payments.
Look forward to further exchange on this - then hopefully in a personal meeting.
Christian
As said, I also believe it is a combination of differs factors. Not a
single one can explain it in full.
Hi Christian. You make a really important point. I definitely think there’s an underlying banking structure element to this story and it contributes to the overall picture, as you outline, but it still doesn’t fully explain why the percentage of cash transactions in German retail is still so much higher than almost any other developed country ie why consumer adoption lags so significantly. This I believe is cultural and better explained by the other theories I put forward. Let’s see if the new coalition governments requirement for merchants to offer a digital payment method shifts the needle. (My hunch is that many merchants will seek exemptions/ drag their feet).