Voice of the Industry

E-payment in Germany: traditional and secure

Wednesday 1 July 2015 09:14 CET | Author Melisande Mual | Voice of the industry

Miriam Wohlfarth, RatePAY: Germans tend to be conservative by nature, and this is also reflected in their attitudes toward online payment

Open invoice and direct debit (SEPA-ELV) are the most popular payment types in German online retail. But why is that the case?

Germans grew up with catalogues from companies such as Otto and Quelle. Many will remember the great tomes laying on their parents’ and grandparents’ coffee tables. Large mail order businesses enjoyed success with the slogan: “try before you buy!” In this way, open invoice and instalment payments became part and parcel of everyday life. Germans became used to merchants bearing the cost in advance.

Today, not much has changed: open invoice is still ranked first for online shopping in Germany, with this option being particularly popular among women. Direct debit (SEPA-ELV) is the second most popular method. Consumers pay in advance with this method, but can then easily reverse the money order via their bank within six weeks. Any cancellation charges incurred are initially borne by the merchant.

While it is hard to imagine retail without credit cards in countries such as England and France, acceptance issues are barriers to adoption in Germany. Credit cards are rarely used on the highstreet and only 10% of Germans use them to pay for online purchases. Germans dislike accumulating debt. Established payment types in online retail like iDeal in the Netherlands and Carte Bleue in France do not exist in Germany.

However, payment types such as open invoice and instalment payments represent a certain risk for online merchants, as they must pay in advance. Previously, it was often tricky for smaller shops to offer their customers the most popular payment types in Germany. Payment processing, risk management and dunning processes all cost time and require a certain degree of knowledge, meaning payment defaults were almost inevitable.

Over the past few years, new service providers have entered the market offering solutions to this problem by assuming total responsibility for processing unsecured payment types. These include buyer risk identification, invoicing, dunning processes and bookkeeping. This saves the merchant time, allowing them to concentrate on their core business.

There is a great demand for this service: according to a recent study, 41% of German online merchants plan to move open invoice processes to a professional service provider in the next months. Merchants have evidently recognised that open invoice is integral to maximising sales.

After all, it is clear that open invoice has the most significant influence on conversion rates. A study of merchants conducted by the German ibi research institute has shown that the abandoned purchase rate was down an impressive 79% following the introduction of open invoice.

Given that ever more internet shoppers are abandoning their online purchases when they are unable to pay via their preferred method, shops wishing to trade in Germany would be well-advised to offer their customers open invoice, instalment payments and direct debit.

About Miriam Wohlfarth

Miriam Wohlfarth is Managing Director and co-founder of RatePAY, with responsibility for the divisions marketing and sales. She has been working in the e-payment sector for 15 years. Prior to founding RatePAY, she was country manager Germany of Ogone, a leading European Payment Service Provider with international reach. Before joining Ogone (Ingenico Payment Services), Miriam Wohlfarth was mainly in charge of establishing the online payment business of Royal Bank of Scotland (RBS) and for its payment service company, Bibit, in Germany.

About RatePAY

RatePAY is a payment service provider offering local DACH payment methods with a payment guarantee for merchants. The company provides e-payment solutions to online shops, taking over the complete payment process for online merchants, while bearing the full risk of any default payments. The products offered by RatePAY include instalment payments with real-time online checks that do not require any Postident procedure. Moreover, the company offers the online payment methods open invoice and direct debit. RatePAY GmbH, based in Berlin, was founded in December 2009 and is a member of the Otto Group.


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Keywords: Miriam Wohlfarth, RatePAY, expert opinion, invoicing, payment on invoice, instalment, payment on instalment, SEPA direct debit, SEPA-ELV, ecommerce, online shop, merchant, conversion rate, payment guarantee
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Countries: World