Our analysis: What does this step mean for the card business, customers and last but not least xPay/DK & Paydirekt?
It became known that the Sparkassen financial syndicate is merging the well-known Girocard with Mastercard Debit. Mastercard Debit is obviously intended to replace the previous Maestro logo for international use. We here at Payment & Banking already pointed out this fact as a rumor a few weeks ago. Pure debit cards based on Mastercard are no real innovation in Germany. They have long been issued by Deutsche Bank, Commerzbank, and many neo-banks such as N26, Fidor Bank and others. The Sparkassen financial syndicate also already had a pilot project with Sparkasse Siegen. The revolutionary thing about the approach of the Sparkasse is now the merger of Girocard with Mastercard Debit. This brings together the best of both worlds. The national acceptance of the Girocard (which is more favorable for trading), ensuring broad national acceptance among SMEs for customers, up to international use as a payment card at all Mastercard acceptance points and ATMs. Of course, and this is probably the most important step: the card can then be used “everywhere” on the Internet, finally!! The Sparkassen are following the French model, which has been very successful for decades, where the local Cartes Bancaires coexist harmoniously with Mastercard and VISA on one card. The effects of this step by the Sparkassen, which is very welcomed by the customers, are far-reaching.
Sparkassen are stabbing xPay / DK in the back?
As I already wrote in my detailed article on xPay/EPI a few weeks ago: The debit products of the international schemes Mastercard / VISA have long since solved all customer acceptance problems. National and international as well as online and at the stationary terminal. The challenges for the acting people behind the credit industry initiatives xPay/DK will be to deliver an even more “better” product.
“If the customer can pay with his account via his Sparkassen-card “everywhere”, how likely is the merged product, which is from the xPay initiative, to be used? Does this step also mean a break with Paydirekt, which was recently aggressively promoted only by Sparkassen on both the acceptance and cardholder side?”
Sparkassen cannibalize their credit card business with Mastercard Debit, or not?
If every customer has a Mastercard Debit as a Sparkassen card, what should be the reason for a separate Mastercard or VISA credit card? At first sight, the Sparkassen are cannibalizing their own credit card business. At second glance, perhaps not. I am thinking about the additional interchange earnings of customers who previously did not have a credit card, but who now use debit more abroad and online. A look at the “card countries” France, the UK and the USA also helps. There, debit and credit cards continue to coexist harmoniously at the banks there as well.
Finally, German debit cards in Apple Pay
Up to now, German banks and Sparkassen have found it difficult to meet customer demand for the Girocard in Apple Pay. If you ask three insiders in banks and Sparkassen about this, you will hear five different opinions. A frequently mentioned reason would be Apple, who still has to develop a technical integration of the Girocard. Even if this was possible, Girocard could not be used online with Apple Pay. All these problems are solved with the step of the Sparkassen.
Basis for a later lucrative exit of the Girocard to Mastercard or VISA?
Many other European countries have lucratively sold their national payment schemes to Mastercard. Is the step of the Sparkassen a first step for a later exit of the Girocard procedure to Mastercard or Visa? It could be used to finance the necessary investments in the European Instant Payment Scheme dreams of the banks at EPI/PEPS-I. Here, the few associations/board members without any P&L/product responsibility in their lives and the few product people from banks are in a lost position, compared to the tens of thousands of Mastercard and Visa employees. But realities are of little interest in the politically charged discussions in the “Reality Distortion-Field” until the hard awakening in the market and customers comes. In the online payment against PayPal, the same colleagues have already gone through it 1:1, which, despite the “success”, does not stop them from wanting to turn the same wheel in payment, even bigger and even European.
Back to MC Debit and Girocard: The Sparkassen have taken a courageous, but, especially from the point of view of customers and the market, very consistent and welcomed step! Besides the big praise for this, there is still a lot of room for further speculation as to how it will continue. Payment remains exciting!
What do the other colleagues from Payment&Banking think about this?
Is this really new or is this not death on installments for Maestro (and let’s be honest, does anyone else really need VPay, Cirrus and other art creations of the payment industry)? And the opposite pole to the excursions into the “Girocard Only” world? (small straw fire) and now finally online capable (even if it is a confession of failure that one didn’t manage to do this with the Girocard). What remains the GC? – an argumentation about the price (or about “nationalism” as the French show us), with it you stay on the market but thinking ahead and developing looks different. In a nutshell – thought by the customer – finally – it will pay off. Only for whom (except the customer)?
I have the Mastercard Debit of Sparkasse Siegen – which by the way does not support Apple Pay. Otherwise, the Mastercard Debit of Sparkasse Siegen is the better “Girocard”, because credit cards debit the account immediately. The now announced Girocard with Mastercard Scheme, i.e. the combination of Girocard and Debitcard is not really new: With the Fidor Smartcard a similar solution has been available for years.
With this combination the customer has the advantage of being able to pay really everywhere (even online) and the way to Apple Pay is an easy one. But which scheme is used at the POS when the customer is asked whether he wants to pay by card is an exciting question, in my opinion. Apart from that, I think the move is a surprisingly good one. Who knows, maybe that is the slow end of the Girocard.
My spontaneous reaction to this “news” via Twitter was this: Tweet. -) By looking closer at it, of course, some questions do arise, including:
- How do you want to build an “opposite pole” to the International Schemes, if you will ultimately remain dependent on them, at least for your foreign assignment?
- How do you intend to explain to the German end customer the “patchwork” of branding and payment methods and processes, resulting from various debit card products (Girocard, Mastercard-Debit, Visa-Debit), various credit card/charge card products (Mastercard, Visa), online payment products (Giropay, Paydirekt) or various mobile payment products (Girocard-Mobile, Apple Pay, Google Pay)?
- Does the Girocard-Online, which some Girocard fans would still like to see, now makes any sense at all?
- How many product teams, marketing budgets (bank internal), WKZ-agreements (with the schemes), funding rounds (e.g. for Paydirekt) cloud the transparency of a possible ROI, which is resulting from the various possible fee income?
- Are there any further consequences for any current (#DK) or future (#EPI) strategic considerations of DK in cashless payment transactions?
- Has the Sparkassen decision reduced or extended the scope of action for other banking groups?
Viewed soberly, the Sparkassen probably had no choice but to take this step. Because Mastercard wants to bury the Maestro brand. And also, Visa will in the future rely on Visa debit instead of V-Pay. This raises the question of whether Visa might also be interested in “slipping in” co-badging portfolios, which previously had a Maestro logo, with their new debit product.
The developments in cashless payment transactions in Germany are always reminiscent of the Echternach Jumping Procession. The only dilemma here is that this “slow motion” does not achieve the “speed to market” and clarity of product positioning that consumers (increasingly) expect in the digital age or even one or the other retailer. By the way, it will also be interesting to see which new variants will result for the acquirers from the greater penetration of international brands. This will certainly not harm competition on the issuing and acceptance side.