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And yet it moves – Banks’ initiatives in the market for payment services

Key Facts

  • New products and initiatives by banks in the Payment Transactions segment

  • giropay and eps offer transnational payments between Austria and Germany

  • Further development of Girocard to “Girocard online”

  • Paylib introduced as payment service in e-commerce field by three French banks

  • Competitors such as PayPal and Yapital pursue strategies to gain comprehensive market presence

 

Report

It’s not news to anyone that innovative developments in the financial services market have an impact on the payment transactions segment. While six months ago the market was being flooded by attachable devices for smartphones and tablets, followed by the introduction of multiple apps targeting the payment transactions at supermarket tills, the next wave of developments already seems to be heading our way, only this time, the main initiators are actors who are rather new participants in the field of innovation: the banks.

Three initiatves by banks have recently been made public – giropay/eps, Girocard, and Paylib – all of which can be regarded as signs of renewed engagement in innovation by the established players.

 

Figure 1: New products of giropay/eps, Girocard, and Paylib

giropay and eps – both of which are real-time transfer services founded by multiple major banks on the basis of online banking in Germany and Austria – have announced the roll-out of a joint service during the first half of 2014. Within the framework of an interoperable payment process, users will be able to conduct transnational payments between Germany and Austria. Noteworthy here is the publication of the technological interface specifications in order to enable additional partners to integrate with the system. The banks are using this approach to internationalize a process that was initially created for online usage.

By contrast, initiative focusing on the Girocard – widely referred to as an EC Card – aims to turn an offline medium into an online and mobile payment method. The goal is to roll out this method in 2014, as announced during a meeting of the German credit sector. The approach builds on the wide distribution and fully developed infrastructure of the Girocard system, which could also be used for “Girocard online” services. One motive behind this initiative is the need to implement increased security requirements as a result of regulatory parameters (MaRisk, SecuRe Pay).

In France, BNP Paribas, Société Générale, and La Banque Postale have rolled out their new joint service called “Paylib”. When registering for this service, users link a credit card with their Paylib account. In order to pay in online stores, customers can use their username and password as well as the code sent to their smartphone as authentification. The institutes have been able to sign deals with several major e-commerce merchants. This was probably influenced by the fact that the service offers lower fee rates than those set by PayPal. In addition, Paylib promises its users added convenience and security, not least because the relevant data are not stored externally by anyone other than the banks.

These three initiatives show that banks are now clearly feeling the competition in the field of e-commerce payment services posed by companies such as PayPal in particular. Banks are reacting to this competition with their own payment services that promise added value in terms of security and, to some extent, convenience for users as well as lower fees for merchants.

Two aspects stand out about this development. On the one hand, these initiatives are the work of a number of institutes that develop and roll out new products and services in cooperation with each other. On the other hand, these institutes want to use their initiatives to attract even more partners, as reflected in the publication of the technological interfaces.

It remains to be seen to what extent these processes will be able to establish themselves on the market. PayPal has made massive progress with its app, founded a partnership with NCR, and landed its latest success with “Beacon”. Both PayPal and Yapital, to name another market participant, are committed to implementing their strategies to overcome the boundary between offline and online realms and to be present everywhere in commerce where they can support the purchase of goods through uncomplicated monetary transactions.

 

Figure 2: PayPal’s Beacon, Otto’s Yapital