Open Banking in Germany: the outlook

How Open Banking adoption in Germany is delivering quicker, more convenient and personalized payments.

Germany has been slower to move to digital payments than its European neighbours. That’s for a mix of social, cultural, economic and political reasons.

The way people pay in Germany is changing though. Like a slow-turning super tanker, it takes a while to build momentum but then things happen quickly.

This article also examines Germany’s journey towards greater Open Banking adoption, the opportunities and the future.

Cash usage falls post-Covid

The stereotypical German loves cash, hates credit cards and is close to their bank. Yet behind every stereotype lie a degree of truth, as we explain.

Germans love cash for brick-and-mortar payments because they’re concerned about privacy, inflation and negative interest rates. However post-Covid, there’s been a move away from cash, which now accounts for 35% of sales by value, according to EHI data.

Meanwhile around 60% of real-world purchases, equating to around €300 billion, are made cashless-ly. That’s principally via the German debit card (girocard), which is used for 42% of real-world sales, according to EHI data.

Credit, but not on cards

Only one-in-four Germans has a credit card. This is used mostly for payments outside Germany e.g. on holiday or on the internet. German debit cards do not work online.

While they are cautious about credit on cards, Germans don’t mind borrowing money via their overdraft. Typically three times their monthly salary, Dispokredit (the ‘overdraft facility’) is connected to an account holder’s income and affordability. It’s seen as ‘my money’ or ‘almost my money’, and central to the strong relationship Germans have with their bank.

100% of German adults have a bank account

Almost all adults in Germany have a bank account, according to World Bank Findex data. Current accounts with a savings or Landesbank are the most commonly held, followed by accounts with cooperative banks. Digital banks without branches are becoming more popular with those aged 25 to 34.

80% of all internet users in Germany use online banking facilities, a Bundesbank survey found. Younger people prefer apps while older people prefer online banking. This is significant because bank transfer-type payments make up around 50% of online purchases.

1-in-2 e-commerce sales made via bank transfer

Paypal continues to be the most popular way to pay online at 27% in 2023, the last year for which figures are available.

However, in second place was payment on invoice which saw a rise from 23% to 26%. Direct debit / bank transfer was the third most popular way to pay online with 16%, down from 20% the previous year. And prepayments via bank transfer made up nearly 5%.

So, in a market with a highly banked population that’s credit card-adverse and where the domestic debit card doesn’t work online, there’s huge potential for bank transfer payments. There’s also political and regulatory will to champion such payment types.

Goodbye giropay. Hello wero.

Nowhere is this clearer than with wero. The brainchild of the bank-backed EPI (European Payments Initiative), wero enables instant account-to-account transactions. Users can transfer funds using a phone number, QR code or email address, making the process both convenient and secure.

The German banks withdrew giropay / paydirekt, the online payment method, on 31 December 2024, in favour of the payment wallet, Wero. After launching in Germany in the summer of 2024, wero for person-to-person transactions was expanded to Belgium and France. All EPI bank members are expected to launch wero by 2025.

Four months after launch, wero boasted 14 million users and 8 million transactions. This is encouraging for the consortium of European banks seeking to build a rival to the Mastercard and Visa networks.

Open Banking outlook and opportunities

The market for Open Banking in Germany has grown significantly. In 2023, the market generated approximately €1.7 billion in revenue and is projected to reach €8.6 billion by 2030, a compound annual growth rate (CAGR) of 26% over the period, says Grand View Research.

Regulatory, technical and use case development will accelerate Open Banking adoption still further. Specifically, PSD3 will help foster more open competition and thus consumer choice, drive market efficiencies and boost consumer protections.

Standardizing API quality and connectivity will improve take-up and the end user experience. Whereas the speed, convenience, value and choice of new use cases will drive Open Banking adoption still further.

Open Banking payments on the rise

The top use cases for Open Banking include online checkout and transferring money between accounts, whether that’s funding an iGaming account, broker payouts or bill payments.

In fact, 78% of consumer respondents in a Mastercard survey said that being able to pay directly from their bank account is important when choosing where to shop or make payments online. Younger consumers are driving Open Banking use across transaction types, with increased appetite for online shopping and loans, the same survey found.

Gen Z leads usage, with 82% using Open Banking to pay bills and the same percentage using it to transfer money. Millennials and Gen X are not far behind in using Open Banking. And while boomers do somewhat lag younger generations in Open Banking usage, 71% of them use Open Banking to pay bills and 66% use it to transfer money. The future is open.