Thomas S. Willenborg

Germany’s attempt to build a payment champion has come to an end. What are the reasons, implications and lessons learnt? Let’s take a look. Back in 2005 a consortium of German banks decided to launch an online payment method called Giropay, which would be: —    integrated in the online banking of participating banks —    able to make #payments (direct online transfers) from bank accounts —    tailored for e-commerce (i.e. buyer protection, no sharing of data with merchants) In debt-averse Germany credit cards were never popular.  Which explains why the most successful payment methods always involved finding direct ways: —    PayPal, which allows you to mask your account or debit card behind —    Payment by invoice, which involves paying via credit transfer after receiving an invoice —    Sofort, which involved screen scraping (banking customers sharing their login credentials with 3rd parties) —    Direct debit In 2021, Giropay was acquired by Paydirekt in order to bring 3 payment methods under one roof (the Giropay brand): —    Giropay —    Paydirekt —    Kwitt (a P2P method) The idea was always to replicate the success of the girocard, Germany’s most widely used offline payment method (card) to the online world and compete with PayPal (almost 30% online market share). In practice, Giropay never managed to take off, staying at irrelevant levels (market share below 2%), which last week marked the banks’ decision to discontinue it. Several reasons are behind: 1. User experience not as easy and straightforward compared with PayPal or Klarna:  Giropay requires online #banking with a participating bank and has a more complicated checkout process. 2. Limited merchant adoption because of the complex and rather expensive structure to maintain behind. 3. Despite the high ambitions, Giropay was always one step behind the market. Even the announced discontinuation of Sofort as a stand-alone payment method and the consolidation to the Klarna App was an opportunity that Giropay didn’t succeed in taking advantage of. 4. The participating banks behind Giropay never managed to articulate a solid, fast-moving decision-making structure emulating iDEAL in the Netherlands or Twint in Switzerland. 5. Immediate rivals like Sofort managed to more successfully address key market elements under one bundle: user experience, pricing, Go-To-Market and market coverage. 6. Bad timing: Giropay bet on #ecommerce when e-commerce was still in its infancy (especially in Germany) and at the same time it failed to capitalize on the success of the Girocard. What happens next? The European Payments Initiative (EPI) wants to do with wero what Giropay failed to do not only in Germany but across Europe. Germany is one of the first and key markets. Had Giropay been successful in its #strategy, it could have been the preferred acquisition choice in place or next to the Dutsch iDEAL. Opinions: my own, Graphic sources: PayZen, Giropay, Heidenheimer Volksbank

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