E-payments to be integrated into E-commerce German Startup
Confused about e-payments to use for a startup idea? Launching the selling process is incredible, selecting a payment solution…not so much.
German market features
The German market includes the most diverse payment methods. Shoppers still like to use invoices when paying online. Direct debit, PayPal, and credit cards are also among widespread payment methods.
Always study the particular market you’re planning on entering. German consumers are scrupulous: they compare and shop around. Thus, they’re well-prepared and aren’t impulsive buyers. So, if there is no preferred payment service, they would opt for another place to purchase. According to Kreditkarte.net, professionals recommend offering no less than four or five ways for the customer to pay. The more methods businesses provide to customers, the more likely they are to convert.
Winners choice
We’ll share our client’s experience with you. Lesara is a European tech startup, that is a global online Agile retail pioneer. They offer amazing fashion and lifestyle products at the best prices and operate in 24 countries.
Since its launch in 2013, Lesara has expanded into 24 markets across Europe, as well as growing its product line to more than 100k SKUs and growing the team to over 300 employees.
We looked at Germany’s top choices in this market and jotted down the pros and cons to get a clear idea of the best choice of payment gateway. Short descriptions, methods of payments to work with, and, of course, pricing — which is what we’ll focus on.
General advice on a payment service provider can’t really be given. Actually, it’s up to each online business to choose what works best for them, but the main principle is: he or she who cannot offer specific payment methods, may harm its turnover in the end.
What are the options?
Before we start: a payment gateway differs from a merchant account, which is a type of bank account that enables accepting payments via debit/credit card from clients. A payment gateway provides the secure information transfer from the website or application to that merchant account.
Credit and debit card payments only constitute about 10% of all online transactions in Germany. Actually, only 53% of Germans above the legal age even have a credit card according to a Statista.com report.
Perhaps merchants are simply used to open invoices and third-party payment gateways? Or is it that they are driven by German banks to use their own payment methods, such as Paydirekt?
Paydirekt is a recently launched payment system, introduced at the end of 2015 by the largest German banks.
It allows the client to pay for online goods through their own banking system, instead of relying on a third party. By eliminating transaction charges it provides incentives for both shoppers and consumers. A penny saved is a penny earned.
The most popular e-payment gateways in Germany are PayPal, Stripe, ApplePay, Sofort, Klarna, and Adyen. We agree this info is not helpful. That is why we did some further research.
PayOne
Although PayOne was not mentioned above as one of the popular payment gateways and even though open invoices may hardly be considered as e-payment, we still feel the need to talk about it.
According to https://www.export.gov, for the last 10 years, 63% of all transactions within the German online payment market has been dominated by open invoices, which rely on the sellers delivering the products with an invoice. Lesara obtained PayOne, which is the must-have type of payment system in Germany for providing its transactions with invoices.
Buyers aren’t required to pay up front, and this makes the method so popular. Customers have an opportunity to try out goods first and decide if they are worth being paid for. Also, there is no need to enter personal data, only an address is required. Therefore, the security of purchasing is high.
The drawback for merchants is a high percentage of goods returned. In fact, they may even reach around 50%. The increased operational costs of dealing with the returns can be a turnoff for larger brands entering the German market and here are even some gaps for fraud.
PayPal
It is easy for a merchant to accept PayPal, which offers a variety of opportunities. Nowadays PayPal is broadening, diversifying, and keeping up with the times. This makes it an industry leader.
Moreover, there are 254 million active consumer accounts in the world, according to a recent PayPal statement. So you should take PayPal into account when you set out to conquer the foreign market.
Stripe Payment via ELV
ELV is also called “bank debit” or “debit notice.” Using an automatic debit method is also a popular payment method in Germany as well.
The Stripe service allows users to pay for orders using direct online bank transfers. It’s a third party transaction tool that pops up at the point of payment, asks the user to enter their bank details, asks for a 2-step authentication code, and then returns to the merchant’s site once completed.
Payment bank transfer systems charge a percentage and a fixed charge for each transaction. These additional payments cannot be canceled by the customer, which is a benefit for the seller, but not so good for the buyer. Due to the trustworthiness and simplicity, they can survive through that.
Klarna
During the checkout process, Klarna offers the following payment options for purchases:
Pay later: it’s “try before you buy” option — you choose the goods online and try them out for 14 or 30 days. In case you return the purchase, or leave it and pay the full price within the trial period, you don’t have to pay any interest.
Pay over time: it’s “slice it” option — gives a client a line of credit to shop online and pay over time, similar to using a credit card. The available credit limit is formed based on the size of the purchase and the credit history of the customer.
Adyen
It’s a solution that provides payment gateways, takes on risk management and merchant procurement responsibilities when handling the entire payment process.
The company supports payments in as many ways as possible apart from standard credit and debit cards. Adyen is an international processor due to having more than 250 payment methods and the ability to provide transactions in more than 150 currencies.
It has a minimum invoice of €100 per month or 1000 transactions. Therefore, it is suitable for larger merchants.
Apple Pay and G Pay
Despite the fact of open invoices and bank transfers being popular, the use of e-wallet-related payments is increasing. Online transactions using Apple Pay and G Pay are expected to overtake bank transfers in the coming years, claiming 23.9% of the market.
These well-established payment methods are driven by the desire for both security and convenience.
Another driving factor for the use of e-wallet payment methods could be the rapidly growing smartphone usage in Germany. Mobile shopping has become more and more common and instant payments meet the requirements of modern consumers.
In fact, the growing pace of E-wallet payments is so fascinating, that it’s almost certain that in the near future Apple Pay and G Pay will be telling the banks “thanks, we’ll take it from here.”
Main Point
Want your startup ship to fly using a full sail? Provide as many easy methods as you can for your customers to make their purchases online a pleasure instead of a pain. The whole journey will become a lot brighter!
