Payments at the POS

The differences in cost, security and handling of the POS payments in Germany

The card payments at the German POS are largely based on proprietary German methods, due to the history and technical specifications of the cards used. Originally just a cheque-guarantee card for the now-defunct eurocheque system, the "ec-card" soon gained popularity in Germany as a means of accessing one´s current account through ATMs and debit card payments at the POS. Since the full account number and bank sorting code are encoded on the magnetic stripe of German cards, this data was soon used by merchants to create direct debits, circumventing the approved payment methods established by the German banks.

Today, the following card payment schemes are in use in Germany:

• Electronic Cash (the logo shown is the new one, see table below for the established logo)
   "electronic cash" is the most secure of the card payment schemes in Germany and is supported by all German banks. Transactions are confirmed by the cardholder by entering his PIN (personal identification number) after first having confirmed the transaction amount at the merchant terminal. On-line authorization of all electronic cash payments is mandatory and both the PIN and the amount are verified and approved by the issuing bank or a delegate authorization centre.
  With the new "electronic cash Chip or electronic cash offline", PIN verification and authorization may take place off-line inside the card´s chip, as opposed to the online, magnetic stripe based traditional electronic cash payment. To facilitate this, an internal amount and day counter inside the chip can be pre-approved by the issuing bank during an online-transaction, so that e.g. 500 EUR can be spent within 10 days without another online verification.
  If positively authorized transactions are cleared within 8 days, the payments are guaranteed to the merchant by the issuing bank and irrevocable. The fee payable is 0,3% of each transaction (a minimum fee of 8 Cents per transaction applies).
  All terminals handling electronic cash transactions must pass a certification procedure and use an encrypted PIN pad.
• POZ "Point of Sale ohne Zahlungsgarantie" (Point of Sale without payment guarantee)
   POZ is a less secure payment method than electronic cash and was created by the German banks as an alternative after merchant complaints about the high costs of electronic cash. Supported by all German banks, POZ payments are signature-based and a check of the German "hot card file" is mandatory for transactions of over 30,68 EUR (formerly 60 DEM). Below that threshold, checks are at the merchant´s discretion. No authorization of the payment amount takes place and payments are not guaranteed.
  POZ payments can be returned to the merchant unpaid or following a customer´s complaint to his bank. The flat fee of 5 Cents per hot-card-file check is purely a service fee and no guarantee is implied. Should a payment be returned unpaid, the issuing bank may provide the cardholder´s address details on request (and payment of a service charge) of the merchant provided the hot-card-file was checked and the card was not reported lost or stolen.
• ELV "Elektronisches Lastschrift Verfahren" (electronic direct debit)
  ELV is a system pioneered by merchants and some network operators, it is not approved by the German banks. (While not officially sanctioned by banks, most will offer it in the terminals they sell to merchants but there have been repeated attempts t pull the plug on ELV by technical or regulatory means). Payments are approved by the cardholder by a signature, similar to POZ, but in contrast, the account data from the magnetic stripe is used to create a "normal" direct debit without any checks against hot-card-files etc.
  While being cheaper for the merchant, this system can prove risky because like normal direct debits, payments can be returned unpaid for whatever reason and the merchant may be unable to recover his loss for lack of an address of the cardholder (as opposed to POZ, issuing banks are not required to provide the cardholder´s address, but some do anyway).
• OLV "Online Lastschrift-Verfahren" (online direct debit)
  Also not officially sanctioned by the banks, OLV is an extension of ELV offered by some network operators. The general procedure is the same as with ELV but local or chain-wide hot-card-files may be used or other risk management methods like velocity checks (only accept a card x times in a day without requiring further identification) etc. might be employed and charged for.
• GeldKarte (literally CashCard)
  The chip-based electronic purse scheme of the German banks was intended to replace cash payments for smaller transaction amounts where any of the methods mentioned above were not commercially viable. Payments are approved by the card-holder by inserting his card (with the GeldKarte-enabled chip on it) into the merchant terminal and optionally pressing a conformation button. Funds are transferred from the customers´s chip to a merchant card held inside the terminal without the need for an online connection.
  The maximum amount to be loaded into a GeldKarte is 200 EUR. At the end of the day, the merchants transmits the transactions from his terminal to his bank via remote data transmission and later receives the cleared funds by means of a credit transfer. Payments are guaranteed by the issuing bank and a fee of 0,3% of the payment amount (with a minimum fee of 1 Cent) is charged on all payments.
  In everyday life, the GeldKarte has established itself as a niche product mainly geared towards acceptance at ticket machines, vending machines and the like. Transactions and turnover are way lower than originally projected by the banks when the product was piloted in 1996.
• Maestro
  Since the late 1990s, all German bankcards enabled for electronic cash have also been enabled for Maestro, MasterCard´s international debit card scheme. Likewise, all German ATMs have been opened up for withdrawals using foreign Maestro-branded cards.
  A German merchant accepting Maestro payments from foreign card-holders pays a fee of 0,95% of the transaction amount for the payment guarantee afforded by that issuer-authorized scheme. All domestic transactions are handled via one of the methods described above.
  Acceptance of Maestro payments remains low outside some key industries like petrol stations and merchants in regions frequented by tourists. For domestic payments, one of the methods described above is used and for international card-holders, credit cards are a more typical method of payment.

Costs of card acceptance

A merchant looking to accept card payments needs to look at different costs when accepting cards:

• Terminal
  A POS terminal can either be bought or rented from his bank or independent network operators and
  re-sellers.
• Service charges
  The network operators charge for transactions, maintenance and other services during the life-time of the terminal.
• Telecommunication
  Telecommunications costs for obtaining authorizations and clearing the accumulated transactions need to be considered.
• Charges depending on payment method
  As described above, some payment schemes attract costs for payment guarantees, hot-card-file checking etc.
• Bank charges
  Since most transactions are cleared as varying types of direct debits, the normal bank charges for electronic transactions may apply.

Comparative table of card payment schemes in Germany

This page is part of www.payments-in-germany.de and copyright by Christian Bartsch

Disclaimer: All information on this site is provided "as is" without any guarantee as to it´s correctness, suitability for a particular transaction etc. While all reasonable care has been taken to ensure that the information is correct and up to date, no responsibility will be accepted for business transactions conducted or losses incurred due to relying solely on the information contained here. Please check with an independent source wherever possible.
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