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Anything, Anytime, Anywhere – All About Mobile Payment

by Natascha Zeljko

Now we can finally leave our wallets at home. Mobile payment is pushing through. A cash check with Matthias Hach, CMO at comdirect

When was the last time you paid digitally – and what was it for?

Several times a day since Apple Pay came into existence. I can’t imagine life without it and almost never have cash on me anymore. Actually only do when I go to the bakery around the corner.

Germans have never been fans of credit cards, and Germany also lags behind Scandinavia in mobile payment (in Sweden, 95% of transactions are cashless). What is the reason for this skepticism?

Germany is (still) a country of cash payers. This has a lot to do with the fact that the Germans – and I’m now making a blanket statement – are afraid of being too transparent. Because it can be traced back to me as a consumer, where and what I bought with card. On the other hand, many Germans have bonus cards such as Payback or order from Amazon, which make their shopping habits even more transparent. When it comes to card payments, the information on the transaction lies solely with the bank – which comprehensively protects it.

But slowly and surely the relationship between card and cash payment is also shifting in Germany. In 2018, for the first time, brick and mortar retailers had more transactions with card than in cash. Many consumers would like to be able to pay with a card. Retailers are responding to this wish and more and more cash registers are equipped for card payments. This is now even possible for bakers, at least for selected chains. In addition to consumer demand, this also has to do with the fact that the fees for card payments for retailers have been reduced. The retailer therefore only has to pay very little of his turnover. 

“Germany is (still) a country of cash payers. This has a lot to do with the fact that the Germans are afraid of being too transparent.”

On the other hand, the launch of Google Pay and Apple Pay was a huge success in Germany; how can this be explained?

We actually see two camps: the technology sceptics and the technology enthusiasts. That can’t be determined by age, although the younger ones tend to be more technology-savvy than the older ones. On the other hand, it is noticeable that more men than women use mobile pay. 

We were able to detect a strong demand for Apple Pay in particular in advance. On the first day after the launch in Germany, comdirect had already registered a five-digit number of devices for this purpose, and we are now in the six-digit range.

This is something that inspires everyone who has ever paid mobile: it’s incredibly fast and easy. No search for your wallet, no signature, just unlock the smartphone, hold it at the terminal, that’s it. Of the comdirect customers who have registered for Google Pay and Apple Pay, more than half use it regularly.

Apropos Google and Apple: there is also the thesis that these platform giants were needed in Germany to conquer the cash bastion Germany. How do you see that?

I am clearly against an isolated solution. That leads to the fact that I still need an offer for abroad, it doesn’t work with all partners/devices and so on. With Google Pay and Apple Pay we cover all common operating systems. You can only gain acceptance if the solution can be used by as many people as possible in the end.

Are there also differences within Germany? For example, I have the impression that Munich is not yet as far advanced as Hamburg and Berlin?

That’s a good question, but I don’t have the experience to answer it. From my everyday life in Hamburg and Berlin, I can say that the retail trade has largely switched to contactless payment. We also see this with our customers: Contactless payment is most common in supermarkets, drugstores, petrol stations and (fast) restaurants.

An interesting study by Oliver Wyman on the subject of “contactless payment” has just been published. The thesis: cash will disappear faster than expected. The proportion of contactless payments has risen from 15% in 2017 to 47%. What surprised you most about the results?

We can confirm that, according to the survey by Oliver Wyman, contactless payment has increased significantly. At comdirect, 80% of payments with Visa cards are already made contactless in stationary domestic trade. Apple Pay and Google Pay have contributed to this because the Visa card is deposited with these payment methods.

I was surprised by the very high percentage of mobile payments at first glance: 26% of people are said to have tried this at least once. A closer look at the survey reveals that 4% are for Apple Pay and 5% for Google Pay. The remaining percent are largely due to the use of PayPal and Payback. This shows once again how far the term “mobile payment” can be understood.

From a bank’s point of view, what was the biggest challenge in implementing mobile payment?

Due to the large number of participants, we had a complex project structure. We also had to integrate new IT systems and create new processes.

It would have been technically possible to pay by smartphone a long time ago. Why was this relatively late (or is it just starting now)?

Google Pay and Apple Pay have only been available in Germany since last year. And it was only gradually that the POS terminals were equipped for contactless payment. When I offer a solution, as a developer I want to be sure that you can use it. This is now the case, Visa, for example, says that by the end of 2020 all POS terminals will have been converted for contactless and thus also for mobile payment.

The advantages are obvious: mobile payment is flexible, convenient and fast. What are the disadvantages? Keyword: security?

In fact, mobile payment is even safer than traditional card payment. For security reasons, the card data stored in Apple Pay or Google Pay differs from that of the physical comdirect Visa card. This virtual card number, also known as a token, is permanently linked to the smartphone used and can only be used with it.

“Cash will not disappear in the foreseeable future. But other forms of payment, including mobile payment, are becoming increasingly possible. I have a positive view of that.”

How inclusive is this payment method? Older people or people who have missed the digital shift for whatever reason will be left behind by this technology.

Mobile payment is not a question of age, but of technical affinity. As consumers in Germany, we still have the choice of how we pay. Cash will not disappear in the foreseeable future. But other forms of payment, including mobile payment, are becoming increasingly possible. I have a positive view of that.

For retailers, these are undreamt-of possibilities that arise with an enormous amount of data if even the smallest amounts are now paid digitally (“I know what you bought yesterday”). Data protectors are not particularly happy about this development…

Trade itself does not even have this data available for mobile payment, keyword token. Apple also doesn’t know who is buying what where – the transaction data is only stored on the device used, not on the Apple servers. With Google you can object to the storage.

What’s next? Paying by voice control or with face recognition like with Alibaba?

That’s an exciting question. I am very sure that we are just at the beginning in Germany and Europe, because we currently have to always use a device for mobile payment. That won’t last long and we can already see that there are solutions in Asia that are suitable for the masses, are accepted, and are based entirely on biometric data. What is certain is that we want to remain the innovation leader here.

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