When using payment initiation services, you are redirected automatically from the retailer’s website to the service provider’s payment form. In the payment form, you are required to enter your bank sort code and your usual online banking login details. You are then asked to confirm the transfer with a TAN. The online retailer then receives a confirmation and is therefore immediately able to process and send the order.

Payment initiation services are already subject to Europe-wide regulation in the form of the Second Payment Services Directive. Providing such services requires prior authorisation from BaFin. More information can be found in our Guidance Notice about the Payment Services Supervision Act (Zahlungsdiensteaufsichtsgesetz – ZAG) and on the pages relating to payment services and the Payment Services Directive.

Periodic billing, such as is offered by mobile service providers, is a long-established alternative payment method. An invoice shows the amount to be paid, and this amount is collected or deducted from the customer’s prepaid phone credit. This method is often used to pay for apps or for in-app purchases, and is already extensively covered by existing provisions. Further information on this can be found in our Guidance Notice about the ZAG, in particular in section 3k.

These credit-based payment methods enable customers to pay the invoices for consumer goods later and/or in instalments. Legally, this includes loans, instalment purchases, deferral agreements and any type of financing assistance. These are usually offered to consumers via specialised payment service providers. As the threshold for consumers to use such payment types is low, which can lead to debt accumulating rapidly, BaFin has issued consumer information to warn consumers of the risks. Depending on the business model, offering such credit-based payment methods often triggers an authorisation requirement under the German Banking Act (Kreditwesengesetz – KWG) or the ZAG. Further information on the ZAG can be found in our Guidance Notice about the ZAG.

When you use an electronic wallet, you do not pay directly from your main bank account. In order to pay with an electronic wallet in an online shop, you first need to open an account with an electronic wallet provider. To do this, you will need to provide personal data and provide details of a valid mode of payment (e.g. a bank account or credit card) to be linked to the wallet. When you make a purchase, the provider of the payment service collects the money to be paid from your linked bank account or credit card and, in turn, pays the online retailer.

Contactless payment either uses certain (wireless) technologies such as near-field communication (NFC) or works without special hardware using payment apps. NFC chips are special radio frequency chips that make it possible for two devices to exchange data quickly, for example between an NFC-enabled smartphone or a credit card, debit card or prepaid card with an NFC chip and a payment machine.
Prepaid modes of payment (e.g. prepaid cards) first need to be loaded up with credit before they can be used. This is usually done via bank transfer or by card payment. Purchases with these modes of payment are restricted to the available credit balance. Prepaid payment cards can be used to make purchases online and often in brick-and-mortar shops as well. Issuing and distributing such cards can trigger an authorisation requirement under the ZAG or KWG, as this is often deemed e-money business or associated (distribution) services. More detailed information on this can be found in our Guidance Notice about the ZAG, in particular in the section on e-money.
Making payments with an NFC-enabled smartphone requires a wallet app to be installed.
Contactless payment at tills is often restricted to a low two-digit amount (e.g. EUR 25). A PIN is usually required for higher amounts.
There are also payment apps for smartphones that enable contactless payment without NFC technology in brick-and-mortar shops. These apps usually require the user to register by providing personal details and account or credit card information. Unlike payments with NFC, this payment method does not use a direct radio connection between the mobile device and the payment machine. Instead, both devices connect to a central server via the internet. A common example is the barcode system, in which the user uses their smartphone to scan a QR code on the payment machine or printed on a paper bill.
The consequences under supervisory law for the various methods of contactless payment via smartphone depend largely on the specific technical details of the system and on the business model. The extensive information available in our Guidance Notice about the ZAG can provide an initial overview. You can also use our contact form for individual enquiries.

Whether you require authorisation depends on how payments are processed and on the contracts that form the basis of your business activities. In general, the following applies: if the service provider takes possession of customer funds, either by accepting them in the form of cash or into accounts, this is likely to require authorisation for payment services or e-money business. If the service provider issues a monetary asset in return for payment of a monetary amount, this can constitute e-money business. The legal basis in both cases is the Payment Services Supervision Act (Zahlungsdiensteaufsichtsgesetz – ZAG).

If the company simply provides the technology without itself being involved in processing payments, and this is instead carried out by a partner payment service provider, the company may be able to benefit from the exception for technical service providers. The important factor here is that the partner payment service provider must conclude contracts with users regarding the provision of payment services. The users must be able to exercise their contractual rights vis-à-vis the payment service provider. Contracts that the other company concludes with the users of the payment services must be restricted to technical services.

Even if the company offering innovative payment methods co-operates with a payment service provider that itself has the required authorisation from BaFin, this may be of relevance from a supervisory perspective. This is the case if the company concerned is providing payment services as an agent on behalf of a payment institution, is acting as an e-money agent and distributing e-money on behalf of an e-money institution, or is an external service provider for a payment service provider.

You can find information and other resources on this under “Authorisation procedure under PSD2 and ongoing supervision”.

An overview of the supervisory regime for authorised payment service providers and e-money institutions can be found under “Payment services and PSD2”.