Editor in chief at IamExpat Media
It took a global pandemic to get people in Germany to truly fall in love with card payments, but now things look set to change again. A big shakeup might spell the end of the ubiquitous EC card (Girocard) in Germany. We take a look at what’s going on, and what it means for customers with German bank accounts.
When Germans pay by card (which isn’t necessarily very often in a country where cash is king), in most cases they use a so-called Girocard, which is often still known by its old name “EC card” (the original EC card was phased out in 2007).
To put things simply, the Girocard is a payment solution specific to Germany - and so German banks have had to make agreements with partner companies to allow the Girocard to function abroad. The main ones are Maestro from Mastercard and V Pay from Visa. You can see which one your card uses by checking the logo next to the Girocard logo.
Up until now, the system has worked perfectly fine and even grown in popularity in recent years as providers ironed out some of the Girocard’s major drawbacks, for instance making it possible to use the card to shop on the internet. In 2021, EC cards were used 5,9 billion times, an 8 percent increase on the previous year, when Girocard transitions rose by more than 20 percent.
However, according to a new report in the Frankfurter Allgemeine Zeitung, the whole Girocard system is now standing on the brink of collapse. This is due to the fact that, while Maestro is ubiquitous in Germany, nobody else in the world really uses it. According to The Local, German cards account for approximately half of all worldwide Maestro transactions, while the other half is made up of scattered tiny proportions.
With the whole Maestro system being considered increasingly expensive and difficult to maintain, Mastercard announced a while back that it would not be issuing new Maestro cards from 2023, although it will allow people to use their current cards until they expire. It is rumoured that Visa is on the verge of making a similar announcement about its V Pay system. It seems reasonable to suggest that both American companies are also keen to push their own credit and debit cards into the German market.
It’s important to make clear that this change would not stop the Girocard from working in Germany. This could continue indefinitely. It would just leave Girocard customers unable to use their cards abroad - and so in the long term puts a big question mark over the entire system.
Some banks in Germany have already begun abolishing the Girocard as their main debit card and instead offering Visa and Mastercard debit cards. Others still offer the Girocard but are now asking customers to pay a small monthly or annual fee for it. This might result in a situation where people have two cards: one debit card for use in Germany, and another for use abroad, with the user transferring money between the two.
But while banks might be pushing Visa and Mastercard, it’s not certain that retailers will be quick to follow. Around 250.000 businesses in Germany still only take Girocard payments, and they’re not going to be in a hurry to make the switch, because it’s a lot cheaper for them. Visa and Mastercard’s market dominance allows them to charge high transaction fees - sometimes up to four times higher than the Girocard, according to CHIP. If the switchover does come, it’s not likely to be sudden.
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