Interview • 19.06.2015

"Consumer willingness to make cashless payments needs to increase"

Interview with Dr. Markus Weber, Managing Director of Ingenico Payment Services

Dr. Markus Weber: Thanks to the improved technical possibilities, the wiggle...
Dr. Markus Weber: "Thanks to the improved technical possibilities, the wiggle room for new services continuously increases."
Source: Ingenico Payment Services
Within the scope of the Regulation of the European Parliament, the payments market will continue to change. Given dwindling margins, only larger payment service providers will be able to afford the continued integration of new payment methods and payment services. We spoke with payment expert Dr. Markus Weber, Managing Director of Ingenico Payment Services, about the specific impact of the Regulation and its effect on the innovative capacity of the industry sector. 

Dr. Weber, there is currently a lot of heated debate in the industry about the EU Regulation. Can you briefly explain what it specifically contains and how the Regulation will affect retail in your opinion? 


The design of the national implementation of the EU Regulation is of utmost importance for the industry. The pricing model will influence the acceptance and future of credit card and mobile payment options. On the one hand, fees are drastically capped and the profit incentives for new market participants will decrease. On the other hand, the Regulation will make card-based payment options more attractive to retailers, especially when compared to cash payments. It is expected that more retailers will offer card-based payment options in the future since their costs will be lowered sustainably. 

The public debate is fueled by the percentage cap in the fee structure (0.2 percent for debit and 0.3 percent for credit cards). This so-called interchange fee is just one component of the total charges retailers need to pay for the international payment methods (e.g., Visa or MasterCard). In addition, retailers need to pay fees to the credit card organizations (“scheme fees” e.g., to Visa or MasterCard) as well as a fee to their own payment services provider, the so-called acquirer. The fees to the credit card organizations and the acquirer are not a part of to the EU Regulation and are therefore not subject to any regulation. 

Currently there is a heated debate as to what extent national payment methods in Germany, the EC cash method with the Girocard (debit card) as well as electronic direct debits are included in the Regulation. These very common and cost-effective methods for retailers do not exhibit varying cost components and were so far charged a standard percentage fee of the purchasing price, for instance, 0.3 percent in the case of the Girocard. Previously, there was a fixed lower price limit to ensure that payment service providers are still able to break even given even very small purchasing amounts. In the case of the Girocard, that’s 8 cents per transaction. 

With the upcoming national implementation of the EU interchange fee regulation, the German legislator under the auspices of the German Federal Ministry of Finance needs to decide on fee caps for Girocard and ELV. Here it is strongly suggested to take the different price structures of national and international payment methods into account. 

What are the distinct features of the national German payment methods? 

Germany continues to be a country where most people like to pay with cash. It is not sufficient if retailers simply provide more card-based payment methods in the future or expand the mobile payment options. Consumer willingness to make cashless payments needs to increase. The way to success is primarily paved through a simple and intuitive design of payment methods (convenience) and a certain “coolness factor".

The “war on cash” will continue and a higher level of acceptance for...
The “war on cash” will continue and a higher level of acceptance for card-based payments can be expected in the long run.
Source: panthermedia.net / Arne Trautmann
What negative impacts could there be for German retailers? 

One risk with the national implementation of the EU Regulation on Interchange Fees for Card-Based Payment Transactions could be that in the debate the regulated final price for retailers for Girocard and ELV is being equated with the regulated interchange fees for international payment methods, even though the latter only make up a portion of fees paid by retailers. 

If - spurred on by cost reduction requests of German retailers- the fees for Girocard and ELV are now being lowered to a level that no longer covers costs, the existence of these payment methods comes into question. And without the competition of national payment methods, the door is wide open for possible fee increases in the non-regulated scheme fees of Visa and MasterCard. 

In your point of view, what effects will the Regulation have on the percentage of card-based and cash payments? 

The willingness of consumers to pay with credit cards depends- among other things- on whether and how much fees they will be charged for their cards (whether you need to pay an annual fee for instance). This is where the Regulation comes into play. Thanks to the scheduled cap on interchange fees, credit card issuing banks lose a significant source of revenue. The big question now becomes how they compensate for these losses in the future. 

I don’t assume that issuers will pass their losses entirely on to the consumer by increasing fees for example. After all, there is also competition amongst card issuing banks. The “war on cash” will, therefore, continue and a higher level of acceptance for card-based payments can be expected in the long run. 

Mobile payments are also becoming increasingly popular in Germany. How does the current trend influence such innovations in payment methods? 

The Regulation will significantly alter the playing field amongst payment service providers and therefore indirectly influence the mobile payment sector. In light of the dwindling distribution margins in the value chain thanks to the Regulation, new providers like Apple Pay or Android Pay and all other mobile payment methods need to provide a benefit to retailers and users to make money in other areas. This is why they develop products in the areas of convenience, customer acquisition and customer loyalty. Unlike mere payment transactions, these products yield more attractive profit margins in the long term. 

Thanks to the improved technical possibilities, the wiggle room for new services continuously increases. The financial technology companies of the world all benefit greatly from payment methods as the core product. Yet with all the excitement about technology, we must not forget one thing: ultimately, it’s the consumer who needs to accept these things. This applies to both the mobile payment sector as well as card-based payments. The user experience is the key element. There are many new ideas in the making because they are technically feasible, but they do not hit the convenience mark with the mass market. In the future, this will be a much bigger challenge than the Regulation. 

Interview by Daniel Stöter, iXtenso.com

related articles:

popular articles:

Thumbnail-Photo: The future of retail: AI is changing everything...
08.07.2019   #digital marketing #visual merchandising

The future of retail: AI is changing everything

AI-enabled systems help retailers understand their customers

For retailers, winning is still all about delighting the customer. The trick is to move fast enough and to be as nimble as possible to satisfy the customer not only today, but in the future. ...

Thumbnail-Photo: The iXtenso editors tested self-scanning ......
30.09.2019   #mobile payment #self-checkout systems

The iXtenso editors tested self-scanning ...

... with an app of the Hobbymarkt Knauber in Bonn, Germany

Snabble has developed a payment app that allows customers to scan their purchases in retail stores and pay online. I wondered: How does it work?The app is in use in the Bonn DIY and hobby market Knauber, among other places. Let’s make a move ...

Thumbnail-Photo: Smart meters: Be proactive and reap the benefits...
12.08.2019   #energy optimization #electrical installation

Smart meters: Be proactive and reap the benefits

The Metering Point Operation Act calls for smart meter rollout

The black and analog electric meter box has become obsolete: The mandatory smart meter rollout will commence in a few months. What does the installation of digital, smart electric meters mean for retailers and chain stores? ...

Thumbnail-Photo: Mobile payments at the supermarket checkout
05.08.2019   #mobile payment #smartphone

Mobile payments at the supermarket checkout

An early adopter’s experience of mobile payments

Or: "What’s that you’re doing with your watch?“I still remember the first time I used mobile payment technology and paid for items with my smartphone at a supermarket checkout: It was October 17, 2018, exactly seven days after ...

Thumbnail-Photo: Well cooled shopping entertainment, please!
15.07.2019   #refrigeration cabinets #refrigerated counters

Well cooled shopping entertainment, please!

What about modern refrigeration technology?

Pierluigi Schiesaro and Gian Paolo Di Marco from Arneg, a company focusing on food service equipments, talk about refrigeration systems as "shopping entertainment".They also tell us what sustainable refrigeration could look like and why ...

Thumbnail-Photo: Retail Asia Conference & Expo (RACE)
07.10.2019   #online trading #retail

Retail Asia Conference & Expo (RACE)

As the leading retail exhibition in Asia, RACE is taken place from 6 – 8 May 2020.

As the leading retail exhibition in Asia, RACE is recognised as the must-join event among the industry’s most influential retailers and customers. RACE features three focus areas: Retail technology, retail design & in-store marketing ...

Thumbnail-Photo: New year brings new regulations
13.09.2019   #data management #receipt printer

New year brings new regulations

What are the big changes for German point of sales systems come 2020?

Big changes are coming to Germany’s point of sale systems starting January 1, 2020. Two terms that are tossed around in this connection are "Belegausgabepflicht" (Receipt Provision Ordinance) and ...

Thumbnail-Photo: Introducing a new, powerful mobile POS in Posiflex’s MT series...
25.06.2019   #epos systems #cashpoints

Introducing a new, powerful mobile POS in Posiflex’s MT series

MT-5310W from Posiflex combines the mobility of a tablet with the functionality of a fixed POS terminal. .

Today’s customers have higher expectations than ever when it comes to service. To meet and exceed customers’ ever-growing expectations, Posiflex is pleased to present MT-5310W, the latest addition to the popular MT series: a hybrid ...

Thumbnail-Photo: 45th anniversary of the barcode in retail
01.07.2019   #barcode scanner #qr code

45th anniversary of the barcode in retail

GS1 US celebrates the barcode’s relevance as the backbone of commerce

GS1 US®, the information standards organization best known as the administrator of UPC barcodes, this week celebrates 45 years since the debut and first scan of the iconic barcode. On June 26, 1974, a pack of Wrigley's chewing gum carrying a ...

Thumbnail-Photo: Innovative ICA store triples revenue
22.08.2019   #electronic shelf labels (ESL) #price labelling

Innovative ICA store triples revenue

Automatic price updates and product information at the shelf

Since ICA merchant, Jan Sikström, took over the ICA Ettan store in Sundsvall (Sweden) in 2016, he has almost tripled the turnover from SEK 15 million to SEK 40 million. Today, the store has 15 employees and approximately 5,000 different items ...

Supplier

APG Cash Drawer
APG Cash Drawer
4 The Drove
BN9 0LA Newhaven
iXtenso - Magazin für den Einzelhandel
iXtenso - Magazin für den Einzelhandel
Celsiusstraße 43
53125 Bonn
Delfi Technologies GmbH
Delfi Technologies GmbH
Landgraben 75
24232 Schönkirchen
Superdata GmbH
Superdata GmbH
Ruhrstr. 90
22761 Hamburg
Permaplay Media Solutions GmbH
Permaplay Media Solutions GmbH
Aschmattstr. 8
76532 Baden-Baden