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FinTechs belonging to this category offer alternative payment services which are supposed to provide a faster and cheaper way for national, European, and international payments for private and business customers by using new technologies. For example, payment service providers hereby offer solutions to easily integrate several payment services in online shops. Some FinTechs furthermore provide real cash register systems and online-reservation solutions for restaurants and shops providing their own payment services or making use of the payment services of FinTechs described above.
Introduction
Attitude of the country towards modern payment services
Although payment methods in retail business are still dominated by cash payments, there is an accelerating decrease in cash payments (from 74% of all payments in 2017 down to 60% in 2020). In retail business, contactless payments are becoming more and more popular – 12% of customers use smartphone or wearables payment solutions. In the e-commerce business, 30% of all payments are invoicing-based, whereas PayPal is the most popular payment service of choice with approx. 25% market share, followed by direct debiting (approx. 18% market share). Not least did the Covid-19 pandemic lead to a rapid increase in online shopping behaviours. This led to a growing demand for new payment methods. This can be seen from the latest payment behaviour study published by German Federal Bank (Deutsche Bundesbank). The two most interesting developments are the so-called Buy-Now-Pay-Later models in e-commerce and invisible payments in retail businesses.
Legal affairs
Obligations and requirements to provide payment services or ancillary services described above
In Germany, payment services are regulated in the Payment Services Supervision Act (Zahlungsdiensteaufsichtsgesetz – ZAG). In addition to the ZAG, anti-money laundering and data protection regulations are also to be complied with.
According to the ZAG, a license is required to offer payment services as long as the service does not only consist in the provision of the technical service for the implementation of the payment service. The costs of a license range up to EUR 13,523.00 and additional time spent costs depending on which and how many kinds of payment services the license is supposed to cover.
To get a license, among other things, the applicant must have a business model setting out, in particular, the type of the envisaged payment services and evidence must be shown that the payment institution has the amount of initial capital of up to EUR 125,000.00 depending on the exact payment service to be offered; for e-money institutions similar requirements apply with the difference that an e-money institution needs an initial capital of at least EUR 350,000.00. The license also covers the provision of operational and closely related ancillary services.
Additional comments regarding the legal situation for payment services or what FinTech’s must be aware of in this business area
Many German regulatory requirements are derived from EU law or are influenced by EU-wide developments. EU requirements are implemented and transposed into German law rather strictly. Therefore, the German market is an ideal entry market for EU-wide payment businesses.
Economic conditions
Market size for payment services and biggest payment service providers
Payment services make up the largest FinTech market segment in Germany. In 2019, 147 FinTechs revolved around payment services. Those payment services had a total volume of EUR 24.6bn in 2019. The transaction volume for mobile payment solutions in Germany is expected to amount to around EUR 26bn in 2022.
Additional comments regarding the economic situation for payment services o