How Apple and Google are changing the way people pay

Why things are changing when it comes to payment in Germany and how online and offline retail can benefit from it.

How Apple and Google are changing the way people pay
© 2019 Apple Inc.

For many years, Germans were among the most avid fans of cash payment. Even EC cards (now called Girocards), which almost every bank customer had in their pocket, were rarely used as a means of payment. Credit cards played an absolute niche role, especially in comparison to other European countries.

Since 2018 it looks as if this may change and sorting through one’s pocket change at the checkout could actually transition into holding one’s smartphone up to the payment terminal. Apple Pay and Google Pay were primarily responsible for this and launched last year to great media fanfare. Contactless payment methods could achieve that, which neither credit card companies nor banks managed to do in the past by establishing cashless payment even for smaller purchases in brick-and-mortar retail shops. “Germany certainly seems to be taking an unusual path here by skipping over plastic cards in its discovery of cashless payment,” observes Ralf Ohlhausen, CEO of PPRO, a service provider for payment solutions.


Significantly higher number of sales to iPhone users

To achieve this, customers need an NFC-enabled smartphone, which is now a standard feature even in mid-range phones, and the retailer needs a POS terminal suitable for contactless payment. This no longer presents a problem either, because the banking industry has been equipping all new terminals with NFC scanners for years, which also work with contactless bank cards. By 2020, such terminals should be available across the board; more than two thirds are already NFC-capable today.

Although the iPhone only has a market share of around 20 percent, it accounts for about half of all mobile sales. The plausible explanation for this is that customers who can afford an iPhone generally have purchasing power. The fact that Google Pay had a little less publicity at the start of the summer may also have something to do with the fact that Google under Android tolerates other payment providers in addition to its own payment service. Apple Pay, on the other hand, is the only option on the iPhone. “We are noticing a slightly higher interest in Apple Pay than in Google Pay, both from a consumer and a merchant perspective,” explains Ralf Gladis, CEO of payment service provider Computop, which enables merchants to integrate payment methods at the POS and online.

Unlike Google Pay, Apple Pay users have to have the luck of their bank supporting the service. Around a dozen German banks already do so, but savings bank customers will probably have to make do without Apple Pay. In particular, Google’s move to virtually bypass banks by offering Google Pay with the help of the more than 20 million German Paypal users could pay off.


No more queues at the POS

Apple Pay and Google Pay are not only suitable for brick-and-mortar shops, where they create real added value because the payment process is completed in less than three seconds. They are also used in e-commerce, where they compete with numerous other payment methods. Experts nevertheless advise online merchants to offer both payment methods as part of their payment portfolio to keep the number of checkout cancellations as low as possible. “For integration in the online shop and the app, the first step is to check whether the acquirer can handle Apple Pay in e-commerce,” explains Gladis. In addition, only a certificate, which the retailer obtains online from Apple, is required. Google Pay is similarly easy to integrate.

Brick-and-mortar retailers stand to benefit in two ways from the popular cashless payment procedures that customers aren’t hesitating to use. Experience has shown that customers spend more money when they do not physically feel the loss of cash and such a strategy is also a good way of shortening queues because you don’t have to wait for people to count their pocket change. This is connected to a trend that is more common in other countries than in Germany. Especially in brand stores and in the luxury segment (clothing and shoes, perfume and cosmetics, electronics and accessories), there is often no cash register with the corresponding queue. “Queuing at the cash register is an activity that customers do not like at all,” Gladis says. “Retailers who remove this annoyance for their customers can boost their sales.”


The bottom line: increased revenues for retailers

Google and Apple could make smartphone payment popular because of their widespread use, and the simplicity could help increase the share of cashless transactions in brick-and-mortar shops in the next few years. Merchants should therefore implement the two payment methods, regardless of whether they offer their goods online or offline. This increases convenience for the customer and turnover for the retailer, especially at the POS.