As e-commerce sales increase, banks and retails are under increasing pressure to offer new electronic payment options. There is enormous potential: A safe and still user-friendly system would boost online retail immensely. It is also an opportunity for banking to earn customer loyalty with new services. Time is running and the competition is huge in this field.
E-payments: Innovative online payment methods
The term e-payments (Electronic Payments) refers generally to Internet payment systems and it is included in the concept of e-commerce. E-payments include payments by credit card, PayPal, Mobile Payments such as Google Wallet, e-money (e.g. Bitcoin and even electronic direct debit processes.
So far, providers such as PayPal, Amazon Payments and Google Wallet have been a long step ahead of German banks regarding e-payments. Measured by the current turnover from e-payments and compared to classical payment methods, the matter may not sound particularly threatening. However, if one considers the growth rate of e-commerce, and the resulting growth of e-payments, it becomes evident that this is one of the important drivers in an otherwise relatively saturated market.
The pressure banks are facing is put in a nutshell by the following quote: "Banking is necessary – banks are not" (Bill Gates). This is compounded by FinTechs increasingly pushing into on the core business of banks. In 2005, the German process 'giropay' was placed on the market. it-economics played a central role in the project management and technical implementation of 'giropay' at a major computer centre. Since August 2015, banks and savings banks have their common project 'paydirekt' in the market. This created a competitor to PayPal, so as not to lose any more market shares in this growth area. Whether a so-far only national solution can hold its own for long against global payment systems can only be seen in time.
The implementation of SecuRe Pay ("Recommendations for the Security of Internet Payments") plays into the hands of banks. This ECB-run initiative of the Federal Financial Supervisory Authority is implemented in the scope of MaRisk, the minimum requirements for risk management, and thus has a regulatory character. SecuRe Pay sets minimum standards for e-payments. What this means, specifically, is that a second authentication is required before a payment is cleared, which most processes do not offer. "User/password"-based payment systems, for example, do not satisfy the requirements for this so-called "strong authentication". According to SecuRe Pay, at least two of the following three elements are required for payment clearance:
- Knowledge (which only the user knows, e.g. PIN/password)
- Possession (something only the user possesses, e.g. smartphone, smartcard or token)
- Inherence (biometric recognition, e.g. fingerprint or eye scan)
The requirements of MaRisk are leading to a change in e-commerce payment processes. Banks enjoy a great deal of trust among both retail and end consumers regarding their security aspects and handling of transactions. They have a far better reputation in this respect than the competition. Accordingly, banks have an opportunity to expand their market share throughout Europe with instant payments and, with innovative payment products, to hold its own against the international competition.
The stipulations of PSD II, too, need to be paid careful attention in the e-commerce sector. You can learn more about this here.
"Web 2.0 and social networks – risk or strategic opportunity?"
Together with more than 30 authors from banking, management and IT consulting, payment transactions, social media, science and law, we have addressed the question "Web 2.0 and social networks – risk or strategic opportunity?" and published a book under the same name. Our contribution was focused on the chapter of online payments and e-mandates in e-commerce.
Our range of services:
We offer the following services in relation to e-payments:
- We advise you on e-payments and alternative ways they can be used.
- We help you identify new market opportunities arising from e-payments and give tips for your Europe-wide business development.
- We inform you of the enormous potential of e-commerce and the opportunities of e-payments.
Would you like professional advice?
Our consultants will be glad to arrange a one-on-one consultation with you
E-mail : payments (at) it-economics.de
By phone: +49 89 215 488 0-0