In 1976, the Swedish group ABBA landed a major hit with Money, Money, Money. For the band’s singer Björn Ulvaeus, money is still a hot topic.

New payment methods are changing retailing

His plan is to do away with cash altogether and replace it with simpler and safer forms of payment such as the credit card.

And he’s not alone: the rise of e-commerce, for example, has led to completely new forms of payment. Today, online retailers offer, on average, a choice of five payment methods ranging from bank transfer to PayPal. These are now being joined by solutions that work in both online and offline environments. The thinking here is that customers who buy via different sales channels will ultimately favour a uniform method of payment. Meanwhile, the next big thing is mobile payment, whether by smartphone or even (Apple) wristwatch.

In contrast to Sweden, home to Abba veteran Björn Ulvaeus, Germany has yet to fully embrace the credit card. According to a study by PricewaterhouseCoopers, only around 40 percent of German consumers pay with electronic cash, and as few as 180,000 Germans have ever used mobile payment. Nevertheless, with experts predicting a big future for mobile money, a whole range of retailers are now experimenting with this method. That said, there are still stores in Germany that won’t even accept a credit card. The reason is simple: the so-called EC debit card provides a cheaper alternative with fees of only around 0.3 percent of the transaction.

Stores are currently experimenting with various payment methods. Both PayPal and Yapital, a subsidiary of the Otto Group, use QR codes. The code is scanned by smartphone, with shoppers then confirming the transaction via a payment app. This form of payment can also be used after hours: customers scan the QR code of a product in a shop window, the item then arrives by post and is paid for on delivery. Whereas PayPal is still in the test phase for offline retail, Yapital is already available as a means of payment at several German high-street chains, including Rewe, SportScheck and Görtz. Seemingly, there are two obstacles currently stopping the further spread of Yapital: retailers are charged fees of 2.6 percent and customers have to register to use the service.

Meanwhile, Telekom and credit card companies have teamed up to offer an alternative solution based on NFC technology. MasterCard, for example, now offers a contactless payment facility at many checkouts. Here, customers merely have to hold their credit card in front of the checkout terminal rather than inserting it in a card-reader. The same process is used by two mobile phone applications: mpass, provided by Deutsche Telekom, Vodafone and O2 in partnership with MasterCard and MyWallet, which is another Deutsche Telekom solution. More than 50,000 offline stores already accept these forms of payment.

This includes the department store Galeria Kaufhof in Cologne. “More and more of our customers are using contactless payment with a credit card. There’s less use of mobile wallet solutions via smartphone. We view this form of payment as an innovation for the benefit of our customers. They decide how they want to pay.” says Christopher Pansch, project manager for mobile payment systems.

At present, credit card companies have the edge on newcomers such as Yapital. This is because contactless payment, whether by card or phone, can be incorporated in existing checkout systems. All new checkout terminals and credit cards are fitted with the technology as standard, which simplifies things for retailers and consumers alike.

Stefan Weinfurter from Ibi Research at the University of Regensburg forecasts that solutions from the credit card companies are set to dominate the field of mobile payment for the next five years: “Only in seven to 10 years will smartphones become a significant payment tool.”

For small retailers, there’s no benefit in implementing new and expensive solutions. After all, it is still unclear which technology will prevail, and other providers – including the German banks – have announced their own systems. On the other hand, a FHI survey shows that stores that offer mobile payment are regarded as innovative by most German consumers. In other words, the availability of the technology can boost a store’s image, even if customers rarely take advantage of it.

As for the ABBA Museum in Stockholm, visitors now have no choice: cash payments are no longer accepted.

Further information: www.payment-baromter.dewww.yapital.dewww.mpass.de

By Andreas Klähn