If you want to sell goods both in physical stores and online, you should ask yourself as early as possible: “What payment options should I offer my customers?”

In this article, we’ll explain why it’s important to choose the right payment methods, highlight the most popular online payment methods in Germany, and discuss their pros and cons. We’ll also explain what buyer protection is and which payment services offer it.

What’s in this article?

• Why should e-commerce businesses choose the right online payment methods?
  
• Which online payment methods are most popular in Germany?
  
• Pros and cons of the most popular online payment methods in Germany
  
• Which payment services offer buyer protections?
  
• Which payment methods should e-commerce companies in Germany offer?
  

Why should e-commerce businesses choose the right online payment methods?

Choosing the right online payment methods is key for the success of businesses in Germany that sell products online. Customers now expect to have multiple payment options in online stores. According to a 2022 Stripe report, 82% of German shoppers abandon their purchase if their preferred payment method isn’t available. And 61% of German customers use smartphones more often than desktop devices to shop online. But even here, the abandonment rate is high. In studies across Europe and the US, the abandonment rate reaches nearly 80%, depending on the device used.

One reason might be that the payment process doesn’t support mobile wallets or isn’t user-friendly on mobile devices. For example, the numeric keypad for entering card information might be missing. Customers also might prefer certain payment options out of habit and convenience, but security is also a key factor. Familiar and trusted payment methods increase the likelihood of a purchase by building trust in the online store.

Another reason for businesses in Germany to offer various online payment methods is to support the different preferences of their target groups. While younger customers increasingly use modern payment options such as mobile payments or digital wallets, older customers might prefer traditional methods such as purchasing on account.

Due to geographic differences in payment preferences, international businesses selling products and services in Germany should consider the payment habits and preferences of Germans. If they don’t choose the right payment methods, these businesses might lose customers.

In general, a wide range of payment methods can set you apart from the competition. Offering different options can help you reach new markets and customer groups. However, merchants don’t have to offer every payment method available. Instead, they should carefully choose options that fit their business, their industry, their customers, and their buying habits.

Which online payment methods are most popular in Germany?

There are many surveys and studies on the payment behaviour of online shoppers in Germany. The data collected varies based on when the studies are done, who is surveyed, and who conducts them. The following figures are from the Online Payment 2024 study by the EHI Retail Institute, a research and educational institute for the retail sector and its partners.

The EHI study shows that PayPal is the most popular payment method for online purchases in Germany. In 2023, nearly 28% of online purchases were made using this US-based company. This was closely followed by purchases on account, which made up about 27%. Next, direct debit accounted for just under 17%, while credit card or international debit card transactions made up around 11%. Together, these four popular payment methods accounted for over 80% of sales in the German e-commerce market. All other payment options each held market shares well below 5%.

Further information on the Online Payment 2024 study is available on the EHI Retail Institute website.

Pros and cons of the most popular online payment methods in Germany

Each payment method has its own advantages and disadvantages to consider. Here are the top online payment methods in Germany, along with their main pros and cons for businesses and customers.

PayPal

PayPal is a virtual online platform that users connect to their bank accounts or credit and debit cards. This enables them to send and receive money, as well as pay for goods and services online. This means they don’t have to share their data with the different businesses they make transactions with.

The main advantages of PayPal are its widespread use, high acceptance, and easy integration. Many shop systems and payment providers now support PayPal. Payments are processed instantly, which benefits both businesses and customers. There are also some security factors: PayPal uses encryption technology and fraud prevention measures. It also offers buyer protection, which protects customers if there are problems with their online purchases.

Some businesses might consider PayPal’s fees as a drawback, since they can be higher than those of other payment methods. Additionally, fraudulent actors frequently target PayPal accounts. It’s also important to note that PayPal data is stored on servers around the world, which has both practical and legal implications.

Purchase on account

For many years, purchase on account was the most popular payment method in Germany, until it was recently overtaken by PayPal. Customers receive their goods first and then pay the invoice afterward.

This payment option is especially convenient for buyers. They don’t have to enter sensitive payment information online, and they receive their goods quickly because the items are shipped immediately after the order is placed. Customers can then inspect the products before deciding whether to keep and pay for them. This can increase the likelihood of purchase, giving retailers a competitive advantage.

For businesses, the risk with purchase on account is that customers might not pay the invoice or pay it late. These non-payments can cause cash flow problems for companies. Managing and tracking outstanding invoices can create additional work and costs. To mitigate the risk of non-payment, retailers often perform credit checks, which also add cost.

Direct debit (bank collection)

When customers use direct debit, also called “bank collection,” they give the business permission to take the payment directly from their bank account.

This means customers don’t have to worry about making the transfer themselves. They also receive their goods quickly. If they’re not satisfied, they can cancel the transaction. Direct debit also has advantages for businesses: transaction costs are relatively low, especially when compared to credit card payments, for example. In addition, direct debits can be processed quickly and easily with a regular business account. Businesses get their money faster than with other payment methods, such as purchase on account.

However, direct debit also has some disadvantages: if there are insufficient funds in the account or the bank details are incorrect, the debit may fail, leading to payment defaults, extra fees, and more administrative work for the business. Returned direct debits can also lead to extra costs that affect both the business and the customer. Additionally, it’s important to consider that due to security concerns, some people might hesitate to enter their bank details online and agree to direct debits.

Credit and debit cards

Credit and debit cards are among the most popular online payment methods in Germany.

One reason is that the payment process is easy and convenient for customers, they only need to enter their card details. Because payments are authorised in real time, merchants know immediately if the transaction was successful. In addition, advanced security protocols such as 3D Secure enhance transaction security and protect against fraud. Businesses also benefit from the fact that unjustified chargebacks are less likely than with direct debits. This is because direct debits enjoy special protection under German law, they can be revoked within eight weeks without a reason given (under Section 675x (4) of the German Civil Code). But with credit and debit cards, unauthorised transactions must be proven and chargebacks must go through a more complicated procedure that is determined by international rules of the card networks.

One disadvantage for businesses can be the fees. These are typically higher for credit card transactions than for other payment methods. Card payments also carry a higher risk of fraud, as cards can be stolen and misused. Implementing and maintaining security measures such as 3D Secure can also be an additional burden and cost for merchants.

Bank transfers and prepayment

When paying in advance, customers transfer payment directly from their bank to the merchant before the goods are shipped.

This benefits buyers because they do not have to provide or submit their banking information to the online store. The main benefit for retailers is that they don’t incur any transaction costs. In addition, there is no risk of default or fraud because the merchant does not ship the goods until payment is received.

Because the risk of paying in advance falls on the customer, the customer has to trust that the merchant will actually ship the goods. This can be a barrier, especially for new or unfamiliar stores. There is also the extra effort required by the buyer to complete a manual transfer. Another major drawback is that paying in advance often results in longer delivery times. Therefore, this payment method is not ideal, especially if buyers need the goods quickly. If no other payment options are available, requiring payment in advance might cause customers to abandon the order.

Pros and cons of the most popular payment options in German ecommerce

Choosing Stripe as your payment service provider means you don’t need to integrate these payment methods individually into your website. Instead, you can access over 100 payment methods. And with Stripe Payments, you can always show your customers their locally preferred payment options to boost your conversion rate. You can also use Stripe Checkout, our prefilled payment feature, or Stripe Elements – our suite of user interface components – to ensure a quick, easy, and seamless customer experience. You can accept payments using Payment Links – even without a website.

Which payment services offer buyer protections?

Buyer protection is a service that protects buyers from financial loss if there are problems with an online order – for example, if items are not delivered, are defective, or do not match the description. It also covers unauthorised transactions, such as fraud. With buyer protection, affected customers can get a refund or help to find other solutions if sellers are uncooperative.

Several service providers offer buyer protection. However, at Stripe, fraud can be addressed before it happens with intelligent solutions such as Radar. Radar uses machine learning to detect and prevent fraud, offering better protection than traditional fraud prevention methods.

Service providers such as PayPal, Amazon Pay, Klarna, Apple Pay, and Google Pay also offer buyer protection to secure transactions. The same is true for credit card providers such as Visa and Mastercard.

You can find more information in our article on e-commerce chargebacks.

Which payment methods should e-commerce companies in Germany offer?

Ideally, e-commerce businesses should offer most of the common and popular online payment methods in Germany. This way, they can better meet the diverse needs and preferences of their customers. For instance, retailers should focus on offering PayPal, purchase on account, direct debit, and credit or debit card payment options.

Sofort, Giropay, and Amazon Pay are also excellent options as they allow online purchases without a credit card and are highly trusted by shoppers. Cash-on-delivery also remains popular, as goods are shipped immediately and shoppers pay upon receipt. Retailers targeting a more mobile audience can skip this payment option, as customers need to be at home to accept the goods. Depending on their industry, products, and target audience, retailers should also consider offering instalment plans and the ability to pay with vouchers or coupons.