Mobile payment services on the rise

Header Mobile payment services on the rise

Contactless payments are pushing forward

The global trend towards contactless payments in the retail trade continues especially in times of the coronavirus pandemic. Banks and payment service providers are entering the brick-and-mortar retail trade to enable customers to pay via their system using a smartphone or a smartwatch. Even payments by QR code, as offered by China's financial giants, AliPay and WeChatPay for tourists from China, has long found its way to Germany's chemists, discounters, and department stores. For toy shops in Europe, the Chinese payment systems are appealing in special cases only. Thomas Weiden, expert for cash-free payment systems and head of Wolf & Wolf Consulting emphasises this. Only if a shop is located near places that are highly frequented by Chinese travel groups is this payment option mandatory. For this, however, retailers need to keep an eye on the trend towards mobile payments by smartphone or smartwatch. Weiden estimates the share of mobile payments in the toy trade to reach on average between 20 to 25 per cent.

Mobile payment is very popular with the younger target groups

The payment service provider Mastercard further confirmed the advance of mobile payments in its study by the market research company GfK. Apparently, almost two thirds of customers in Germany leave their coins and bills at home and prefer to pay contactless, a development further accelerated by the Covid-19 pandemic. One in five prefer to pay cashless as their first choice all the time, because it's faster, more hygienic, or simply more convenient. Moreover, roughly a quarter of consumers in Germany, Austria, and Switzerland are already using a smartphone or smartwatch to pay, Mastercard reports. In the category of those aged between 18 and 29, that figure applies to one in three already. It is therefore only a matter of time that this age group will predominantly want to make mobile payments only when shopping in person at a store. After all, three quarters of the younger customer group already banks online using their smartphone.

The technology behind it all: NFC interface vs QR or barcode

Technically speaking, the new payment methods at the terminal either use a Near Field Communication – or NFC – interface, or the QR (Quick Response) or barcode reader. When using the NFC interface, customers hold either their credit card, debit card, or prepaid card near the payment terminal or they use the NFC interface for the mobile payment process with their smartphone or smartwatch. For this, the cards must have been added to an app or a Wallet, such as with Apple Pay, Google Pay, or the girocard system of the German banking industry. 

When paying with the QR code, mobile payment solutions are used, e.g., by the US’ Payback-Pay, Europe's Bluecode – a mobile payment solution – or Chinese providers.

Banks offer additional domestic solutions

In Germany, Sparkasse as the market-leading group of banks recently launched a further payment version for smaller retailers that do not have their own card terminal. They can convert their smartphone using the Sparkassen app into a card terminal. The requirements for this include an NFC-compatible smartphone, a business contract for card payments, and a reliable Internet connection. This allows retailers to accept contactless payments of up to 50 euros without a separate card reader.

China and USA are frontrunners for mobile transactions

Looking at payments around the world, mobile payment options are forecast to grow dramatically in the future. The British consultancy Finaria has forecast for the ongoing year an increase of 24 per cent to globally 2.4 trillion dollars. This amount is the result from brick-and-mortar and particularly, booming online sales. Pioneers here are Asian countries with China at the top. In second place is the US market with a volume of 465 billion dollars. Finaria quantifies the average receipt of a mobile transaction at more than 1,600 dollars – and this trend is continuing energetically. For 2023, the Finaria report suggests that mobile payments will experience a further leap to 3.5 trillion dollars.

Mobile payment trends are reaching the toy trade

The uptrend of mobile payment systems also calls on retailers in the toy industry to offer new payment options to their customers. It follows that they upgrade their terminals to be able to accept future payment trends. After all, half of all payment terminals in Germany's retailscape are aged 7+ years. This can result in technical issues when wanting to make a mobile payment. Payment system consultant Weiden points out a further aspect: In his experience, almost every other retail specialist does not know what their payment system and the different types of payment cost them. Yet, the systematic analysis of all costs concerning payment systems could result in savings of up to 30 per cent.


How to save: Avoiding payment systems' cost traps

  • acquisition and operating costs for modern terminal equipment/ renewal 
  • cost of transactions for girocard, debit cards, credit cards, Bluecode, Alipay, etc.
  • account fees for processing payment transactions
  • payments processing when purchases are returned or exchanged
  • integration of card payments and mobile payment systems into accounting

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