Take out your phone and hold it to the terminal – and that’s it: Your shopping is paid for. What was dismissed just a few years ago as science fiction has long since become a natural part of life. Smartphones are poised to overtake cash and cards.
Younger target groups in particular rely increasingly on their mobile phones, and growing numbers of them are using their smartphone as a wallet. But they are not the only ones who appreciate the advantages of contactless payments, such as their speed.
According to estimates, one in three Germans has already made a payment with their smartphone or smartwatch. This method is especially popular for supermarket purchases. But more and more transactions in furniture and fashion stores are being made in this way.
Mobile payments are not just for the young
This means that retailers in various sectors can no longer ignore the fact that payment behaviour is currently changing dramatically. Only slightly more than half of Germans prefer to pay cash – four years ago that figure stood at nearly two-thirds.
This data comes from a survey by the Initiative Deutsche Zahlungssysteme, which represents market actors in the payment systems sector. But let’s get back to smartphones: Whereas credit cards are replacing cash for purchasers in the 30-plus age group, younger target groups can leapfrog straight over this development – smartphones are clearly on the rise among this demographic.
Coronavirus is boosting the trend
By card or with a mobile device, the growth of contactless payments did not start with the coronavirus crisis, but it has moved up a gear because of the precautionary measures. Simply holding a card or a smartphone in front of the terminal has proved itself to be a practical, quick and safe method, especially for small purchases.
Any security concerns that may have existed – such as doubts about the NFC standard that may be used to transfer data – have now largely been dispelled, and hardly anyone is still afraid that their money will be taken from their account without them noticing it.
But there is one golden rule when it comes to mobile payments: Nothing is set in stone. The technical requirements may now be established in principle, but the competition between providers and systems has made the issue confusing for retailers up until now. It comes as no surprise, then, that the European Commission has recently called for a pan-EU payment solution. The commission believes that the market is too fragmented.
In fact, there is no solution yet that can really be used in all EU countries, in all shops and on all Internet portals. Instant payments, or real-time transfers, are a key focus of the Commission’s latest push in this regard.
This would see payments arrive in a recipient’s account – i.e. the seller’s account in a retail scenario – within a few seconds. However, the technical arrangements and legal requirements (such as how to deal with incorrect transfers) must be put in place first. Despite mobile payment, the EU definitely doesn’t want to do away with cash.
The fact that establishing a new payment system is not always easy can be seen through the example of Apple Pay. The payment service provided by the US corporation, which was not launched in Germany until the end of 2018, is still a long way from being available to all current account holders. Samsung, one of Apple’s competitors, is now attempting to penetrate the market with its own service.
Although this is an interesting prospect for owners of Samsung smartphones, the multitude of different options is nevertheless confusing for customers and making it more difficult to find a standardised solution – and that goes for retailers, too. The EU Commission therefore wants to give preference to payment options that are open and not tied to specific devices.
This can only be a good thing as far as the furniture trade is concerned, because retailers currently have to offer all options – or risk upsetting customers who favour a certain form of payment.
Popularity of invoice methods continues
In the meantime, paying by invoice remains the most popular method for Germans shopping on the Internet with almost a third of all online purchases being paid for this way according to a study into current e-commerce behaviour by the Cologne-based EHI Retail Institute.
In second place, and continuing to grow in importance, is PayPal. The coronavirus crisis has boosted the trend towards payment methods that are as simple, comprehensible and secure as possible when it comes to online shopping sprees – and it’s on these points that PayPal scores highly.
Meanwhile, certain options, which were especially significant in multichannel sales, have lost ground. Cash on delivery has been particularly affected.
Author: Robert Prazak