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The Bundeskartellamt, Germany’s antitrust authority, has said it has no objections to the further development of the giropay online payment system after the payment service provider conceded on initial plans for an exclusivity agreement.
Further developments to the giropaay payment system that are being overseen by Germany’s Deutsche Kreditwirtschaft (German Banking Industry Committee) have been cleared to go ahead by the Bundeskartellamt.
Approval was granted following the parties involved agreeing to give up their plans for an exclusivity agreement with the banks, which the venture had wanted to include to protect its substantial investment in the project, according to the regulator.
In 2020, the regulatory previously assessed the merger of giropay, paydirekt and Kwitt systems (a P2P mobile payment app) under the joint brand name giropay.
For this second part of review, the regulator assessed the role of the joint venture and paydirekt as the central provider of the giropay payment system.
“From a competition point of view the centralised structure of the giropay business model does not raise any concerns,” said Andreas Mundt, president of the Bundeskartellamt. “As an online payment system, giropay competes with powerful service providers such as Paypal, Visa or Mastercard.”
However, the Bundeskartellamt had expressed concerns that such an exclusivity agreement would restrict competition and innovation.
“Economic progress is largely driven by innovation and market entries. Established payment systems, large digital companies and also FinTechs continuously work to develop new or improved solutions for digital payments. What we see as a simple e-wallet design today can tomorrow develop into a comprehensive payment system with a broad range of functions,” Mundt said.
Some of giropay’s competitors might have to rely on cooperation partners from the German banking industry for entering the German market or expanding the functions they offer, he continued.
“Refraining from using an exclusivity clause ensures that such innovations are not impeded by a self-imposed commitment undertaken by Deutsche Kreditwirtschaft as a whole, which would be problematic in terms of competition law.”
Banking on payments
Launched in 2007, giropay is an internet payment system used across online banking services in Germany. It is primarily used among Germany’s Sparkassen (public savings banks) and cooperative banks, two of Germany’s three pillars of banking (the third being private banks).
At present, it is accessible by more than 40 m shoppers and accounts for 16 percent of all online transactions in Germany.
Giropay was owned by giropay GmbH until December 2020, before the company was acquired by paydirekt, in a merger that was completed last year. Now, paydirekt and giropay operate under a joint brand name.
Paydirect itself is a joint venture of coopeartive bank DZ Bank, GIZS (a joint-venture representative company for Germany's savings banks), and two of the largest private banks Commerzbank and Deutsche Bank.
Paydirekt is responsible for the contracts and fees required for participating in the giropay system, which involves a centralised pricing scheme.
In addition, the company is responsible for enabling customers to use the digital girocard for authorising payments made via giropay and is planning to obtain the relevant approval for this purpose within the girocard system.
Announcing the merger last year, Christian von Hammel-Bonten, CEO of paydirekt, said: "The new, uniform payment brand puts the checking account even more at the centre of convenient payment — in e-commerce and for sending and requesting money via the P2P function."
He added: "With the go-ahead for the brand conversion and the integration of giropay into the checkout, we are taking another important step towards a uniform German payment method."
