How Germany’s EC card is set to go digital

German online payments provider Giropay is struggling to compete with US giants like PayPal and Google Pay. Could a new service for EC card-holders change all of that?

A woman pays for a newspaper with her EC card
A woman pays for a newspaper with her EC card. Photo: picture alliance/dpa | Rolf Vennenbernd

What’s Giropay?

Giropay is Germany’s primarily online payments service, which is run by a consortium of German banks that includes Deutsche Bank, Sparkasse, Commerzbank and DZ Bank. Its predecessors were the independently operating payment systems Paydirekt, Giropay and Kwitt, which merged into the Giropay brand last year.

Everyone living in Germany will have had some contact with the Girocard – normally termed an Electronic Cash (EC) card – at some point, either by getting one with their bank account or being told, in no uncertain terms, that card payments in a shop or restaurant are “EC card only”. 

Though Girocards have a lot of the same functions as debit cards, there’s one major downside to them: shopping online. Unlike a normal debit or credit card, you can’t generally use this type of card for online shopping, so the alternative is to use a service like Giropay or Paypal that lets you link your bank account to an online wallet and use that for shopping. 

READ ALSO: What to know about starting your personal banking in Germany

The problem for Giropay right now is that, despite being supported by around 1,500 banks and credit institutions in Germany, it’s struggling to compete with international payments providers like PayPal, Apple Pay and G Pay. When the companies merged last year, they only had a two-percent market share in Germany. A recent study also found that only 16 percent of people had used Giropay in the last twelve months, compared to 93 percent of people who had used PayPal. 

What’s changing? 

To try and claw back some customers from the bigger brands, Giropay is creating a digital version of the EC card that can be added to a Giropay wallet and used for shopping online.

This should benefit people who want to avoid the big US brands or for those who cannot or don’t want to pay by credit card, bank transfer or invoice. It also allows people with a Giropay account to shop online without revealing their bank details.

How else will customers benefit? 

The main aim of the move is to try and turn EC cards into a product that can compete with credit cards – which includes being able to use them internationally.

Currently, Girocards can only be used abroad if they have the Maestro function from Mastercard or the V Pay function from Visa. However, Mastercard and Visa say they want to discontinue these services in the future.

If the digital Girocard is integrated into the Giropay wallet, it could still be used for online shopping abroad as long as the international merchant supports Giropay.

READ ALSO: Why a German court decision means you could be entitled to compensation from your bank

Who will be able to get the digital EC card?

The first set of people to be offered this service will be customers of Volksbank and Raiffeisenbanken, followed by savings bank customers by the end of the year.

However, it’s likely that a number of other German banks will follow suit at a later date.

According to a study by Stiftung Warentest, customers of the major branch banks Commerzbank, Deutsche Bank, HypoVereinsbank, Postbank, Santander and direct banks such as Comdirect, DKB, N26 and Tomorrow are not yet able to digitally deposit their current cards in payment apps. Instead, they have to rely on using alternative Mastercards or Visa Cards for digital payments. 

Member comments

  1. I might be underestimating German technological hesitancy but surely this is far too late. Then again, “enter your online banking credentials on this random web form” is still a valid method of payment here.
    Please just let EC cards die, there’s no reason for their existence now interchange fees are capped for debit/credit cards at around 0.3% by the EU.

  2. “as long as the international merchant supports Giropay” – so basically it won’t be international but Germany-only.

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Germany reaches agreement on Bürgergeld – with a couple of catches

Members of Germany’s traffic light coalition government and the opposition Christian Democratic Union party have reached an agreement in the dispute over plans for a new citizens‘ income. There will be tougher sanctions against benefit recipients and fewer discretionary assets.

Germany reaches agreement on Bürgergeld - with a couple of catches

Last week, the German government’s plans to reform unemployment benefits with its new “Bürgergeld”, or citizens’ income, proposals were blocked in the Bundesrat.

The legislation was held up mostly by members of the Christian Democratic Union (CDU/CSU) which had been strongly opposed to the proposals for a six-month Vertrauenszeit (trust period) in which benefits claimants would not incur sanctions, as well as to the amount of assets recipients would be able to hold on to.

READ ALSO: EXPLAINED: Will Germany’s controversial Bürgergeld still come into force?

On Tuesday, politicians from the traffic light coalition parties and the CDU/CSU reached a compromise on the proposed reforms which means that some of the key measures will be scrapped.

No trust period

The CDU/CSU was able to push through its demand for more sanctions for recipients and the six-month trust period will now be scrapped completely.

Instead, it will be possible to enforce benefit sanctions from the first day of an unemployment benefits claim if recipients don’t apply for a job, or fail to turn up for appointments at the job centre, for example.

The CDU and CSU also demanded that unemployment benefits recipients be allowed to keep less of their own assets when they receive state benefits. The original plan had been for assets worth up to €60,000 to be protected for the first two years, but the compromise reached has knocked this down to €40,000 for one year – during which time benefits recipients will not have to use up their savings.

Following the announcement of the agreement, Green Party later Britta Haßelmann said “I regret it very much”. According to Haßelmann, the trust period was the core of the reform designed to stop people from having to take up “just any job”.

READ ALSO: Bürgergeld: What to know about Germany’s unemployment benefits shake-up

Other traffic light colleagues were more optimistic, however. Katja Mast from the SDP spoke of a “workable compromise in the spirit of the matter,” while FDP Parliamentary Secretary Johannes Vogel said that it had succeeded in “making a good law even better”.

CDU/CSU leader Friedrich Merz, meanwhile, sees the compromise as a great success for his party, though he also praised the willingness of the parties in the government to reach an agreement.

“The coalition was very quick and – to my surprise – very largely willing to make compromises here,” Merz said. 

What happens next?

Tomorrow, the Mediation Committee of the Bundestag and Bundesrat will meet to discuss the proposals. If the agreement is confirmed, the welfare reform could clear the final hurdle when it is voted on Bundesrat again at the end of the week. According to the federal government’s plans, if it’s approved, Bürgergeld will come into force in January and replace the current Hartz IV system.