Electronic cash card payment system of German banking sector raises competition concerns

The Bundeskartellamt takes a critical view of the agreement of the German banking sector on the existing electronic cash card payment system. Today the authority communicated its (preliminary) concerns to the leading bank associations participating in the electronic cash agreement.

Electronic cash is a system used for non-cash payments at the point of sale by means of the so-called "ec card". It is by far the leading card payment system on the German market, with an annual transaction volume of 128 billion euros.

Andreas Mundt, President of the Bundeskartellamt: "Up to now merchants have had to pay a standard fee set by the banking associations for each payment transaction. This has nothing to do with competition in the market. Our aim is to allow different fees between individual merchants and banks, on the basis of individual negotiations. The banking associations have to some extent already started negotiations in this direction. However, this process still has to be guaranteed structurally and in the long term. In addition, the banks are planning technical modifications which would make it impossible to use the so-called electronic direct debit system (ELV). We want to keep the direct debit system as a rival product to allow for competition between the two systems."

Apart from the mutually agreed set by the banking associations which retailers have to pay to use the payment billing system, the authority also criticizes the fact that retailers have had no possibility so far to reject business relations with individual banks. However, from the beginning of this year retailers have been able to demand a surcharge for girocard payments. The leading associations have refrained from prohibiting such a charge on the advice of the Bundeskartellamt.

Also of concern are the planned technical modifications which would make it impossible for the merchants to switch to the only serious competing product, ELV. These include replacing the account number and banking code recorded in the magnet strip or chip of the girocard with card numbers which cannot be used in the ELV system. It is also planned to impose a five-day period on the creditors’ banks before billing ELV transactions. The resulting delay in payment would make the ELV system economically unattractive for most retailers.

The banking associations now have the opportunity to comment on the individual points and offer means to remedy the situation.