Germany’s Paypal

Better Late Than Never

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Buying online content? In Germany, users often do so via Paypal.
  • Why it matters

    Why it matters

    Germany’s online payment system Paydirekt could become a rival to PayPal and credit card companies MasterCard, Visa and American Express.

  • Facts


    • The market launch of Paydirekt is scheduled for November 8, following a test phase over the summer.
    • Paydirekt is being organized by the German banking industry, but cooperative banks are the only ones who have started promoting the system to their customers.
    • Experts warn that German banks need to hurry up and hook as many online retailers up to the system as possible before the Christmas business starts.
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PayPal, the U.S. online payments system, has been a thorn in the side of Germany’s banks for over a decade.

Bankers such as Theodor Weimer, the head of Bavaria’s Hypo-Vereinsbank, or HVB, have been struggling to come up with a German answer to it. Now, finally, he’s going to get his chance.

On August 17, HVB will begin testing “Paydirekt,” a payments system designed by the German banking sector, using online furniture retailer D-Living as a testing partner, according to a presentation made at a top-level meeting of banks last week that Handelsblatt has seen.

Paydirekt GmbH, the company that developed the system, and HVB declined to comment. D-Living said in a statement: “We think this payments system will give customers a new and good alternative to existing forms of payment.”

To say that German banks have been latecomers in the surging online payments market would be putting it mildly. PayPal has 16 million customers in Germany, and it’s among the most popular payments systems in the booming Internet retail market.

“If there’s no Big Bang and only some customers can use Paydirekt at first, it will have a negative impact on the readiness of retailers to adopt the system quickly.”

Ulrich Binnebössel, Payment systems expert, German Retail Federation

Paydirekt will enable consumers to make payments online, directly charged to their bank account, using their e-mail address and a password. The system enables an online shop to directly check whether an account has sufficient funds or not. Paypal by contrast uses an intermediary account, where money is transferred from a consumer’s account via a PayPal account to the retailer’s bank account.

The test period for Paydirekt is scheduled to last until November 3. In addition to D-Living there are 18 further online shops that have expressed an interest in joining up as test partners, but they haven’t decided yet.

Further banks are also due to join the test, said financial sources. Ulrich Binnebössel, a payment systems expert at the German Retail Federation, said it was important that a critical mass of online retailers take part in the pilot phase.

“The online shops use different systems, so the process must be tested for different configurations,” he told Handelsblatt.

The public will be excluded from the test phase, said people involved in the project. Initially, only staff from Paydirekt GmbH and the participating banks will have access to the system.

Paydirekt won’t be available to consumers until the market launch, which is scheduled for November 8. The banks aim to focus distribution on the top 200 Internet retailers, the presentation showed. But only seven additional online retailers will be added to the system between the end of the testing phase and the end of the year.

Paypal Usage on the Rise-01


Mr. Binnebössel said banks must hurry up and get more retailers on board as soon as possible. “After the fall vacation in October at the latest, most online shops refrain from any technical changes because they don’t want to endanger their important Christmas trade.”

The most convincing argument for retailers to adopt Paydirekt would be if as many customers as possible were able to use the system as soon as it is launched in November, said Mr. Binnebössel.

He added that all the banks should try to introduce the system simultaneously.

“If there’s no Big Bang and only some customers can use Paydirekt at first, it will have a negative impact on the readiness of retailers to adopt the system quickly,” he warned.

While most German banks are still keeping quiet about the system, an increasing number of the country’s more than 1,000 local cooperative banks have begun advertising Paydirekt to customers on their websites.

“We are confident of the new online payments system Paydirekt,” the National Association of German Cooperative Banks said. “So it makes sense and is to be welcomed that many cooperative banks are already informing their customers about Paydirekt on their websites.”

It’s a wakeup call for the other banks. Many customers and retailers have several bank accounts, but will probably hook up only one to Paydirekt — and that will be the bank that earns fees from its use.


Laura De La Motte is an editor at the Handelsblatt finance desk and a specialist banking correspondent. To contact the author:

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