Status: 10/22/2021 8:18 a.m.
Thanks to the Maestro function, Germans can pay abroad with their normal Girocard. Soon, however, the two colored circles will disappear – with consequences for consumers?
Whether they are customers of the Sparkasse, Volksbank or Deutsche Bank – most Germans should know the blue and red points on their bank cards. The logo belongs to the so-called Maestro function. This system will soon expire Mastercard, as the US credit card provider officially confirmed this week.
According to Mastercard, a total of 400 million Maestro cards are in circulation across Europe. In Germany, too, the majority of the approximately 100 million giro cards are equipped with Maestro. But what does the announcement change? And what do consumers actually need the function for?
What the Maestro function is good for
“In Germany we have a payment method that is extremely successful and works great: the Girocard as a classic German debit payment system,” explains Jürgen Moormann, Professor of Bank and Process Management at the Frankfurt School of Finance & Management, in an interview with tagesschau.de. However, the Girocard has two major disadvantages: On the one hand, it is not suitable for e-commerce or for payments between individuals.
On the other hand, for historical reasons, the procedure only works in Germany, since the processing takes place via the network operators authorized by the Deutsche Kreditwirtschaft. “So that the Girocard can also be processed in other European countries, cooperation with organizations such as Mastercard is necessary. The process behind this is called Maestro,” says Moormann. This means that payments can also be made in an Austrian supermarket, for example. In addition to Maestro, there is also V-Pay, a counterpart to its competitor Visa.
What is the difference between giro cards, debit cards and credit cards
The Girocard, formerly known as the EC card, is part of a purely German system. Consumers can use their money to withdraw money or pay in stores. The respective amount is debited directly from the credit balance of the current account. The collective term for such payments is the debit card.
In contrast, credit cards are cards that can be used to pay on credit – i.e. from a non-existent balance. “The boundaries are floating,” says Jürgen Moormann from the Frankfurt School of Finance & Management. The collected amount of debt is debited, for example, after a month – sometimes with high interest. In Germany, however, credit cards are usually issued as debit cards.
Cards are replaced
What initially reported by “FinanzSzene.de” and the “Handelsblatt” has now also been confirmed by Mastercard: From July 2023, the issue of new Maestro cards will be over across Europe. Then banks will start replacing expired or lost ones.
The other cards remain valid until the end of the term. However, experts expect that the Maestro function could disappear sooner. Because banks as well as retailers and ATM operators could adapt to the development earlier. “It is a huge hammer that Mastercard wants to abolish the Maestro function,” says Moormann.
“Providers want to expand market power”
As a justification, Mastercard refers to the growing e-commerce industry. Nowadays, “when the growth in online trade far exceeds that in retail”, it is necessary to renew the Maestro card, says manager Valerie Nowak in a blog entry on the company’s website. Because “after it was originally created for a physical world”, it can not be used consistently for payments on the Internet and must be adapted to the digital lifestyle.
However, banking expert Moormann believes in another reason: “It’s simply about the two credit card providers want to expand their market power.” Because according to estimates, the pure Mastercard and Visa debit cards only have a market share of less than one percent in this country. The popular Girocard, on the other hand, is used for 44 percent of stationary sales. “The US corporations Mastercard and Visa are currently pushing their own payment card systems, ie debit cards,” said Claudio Zeitz-Brandmeyer from the Federal Association of the News Agency dpa.
Institutes need new partners
What will change for banks and savings banks? “Something will definitely change in the medium term,” emphasizes Moormann. First of all, the German institutes would have to find another partner. V-Pay is particularly suitable for this. Industry insiders, however, expect Visa to follow suit soon and also terminate its function.
There are hardly any alternatives, because the two providers dominate the market – and are pursuing an aggressive strategy. “There are various banks such as the DKB or Comdirect, which have been convinced by attractive conditions that customers should only be given a pure Visa or Mastercard debit card instead of the usual Girocard,” says the expert.
Multiple payment systems
For several months now, the cooperative banking group has been examining the possibility of designing the “co-badging” for the Girocard. One speaks of “co-badging” when a bank card has several payment methods. The Sparkassen- und Giroverband points out that a new generation of the Sparkassen-Card has already been created with the combination of the debit payment method Girocard and Debit Mastercard (DMC). This is available to the financial group’s institutions as a possible successor product.
And yet: Without Maestro and V-Pay, the two pioneers have even more power to win over other financial institutions for their own solutions. “I don’t see why Mastercard and Visa should enter into a new co-badging,” said Moormann. A possible deal is an illusion. The dependency of banks and savings banks on Mastercard and Visa could thus increase further.
Additional costs for retailers – and consumers too?
Consumers can continue to use their Girocard with the Maestro symbol until the end of the term – no later than December 31, 2027 – as announced by the Federal Association of German Volksbanks and Raiffeisenbanks (BVR). Consumers who regularly received a new card after the expiry date would only see a different acceptance symbol instead of Maestro. This will also enable the European or worldwide acceptance of the Girocard at ATMs or when shopping at the cash register.
“But you have to take into account that we currently have very low card payment costs,” said Moormann. Merchants as acceptance points have to pay different fees for offering card payment. With Mastercard and Visa these are higher.
If the Gircocard is slowly withdrawn from circulation, there will only be a card that runs through the infrastructure of Mastercard or Visa, says Moormann. “The retailer will presumably pass the corresponding additional costs on to the consumers.”
Possible payment system from Europe
“I’m pretty sure that the Girocard will disappear in the medium term,” said Moormann tagesschau.de. Because this is becoming less and less attractive and is a discontinued model – especially without an e-commerce function. Therefore, there are only two options: “Either payment transactions will be transferred even more to American hands or the European Payment Initiative EPI will succeed in launching the market.”
30 European banks are currently examining whether they can set up their own payment system. The idea is to establish a counterweight to the US companies and not to give the whole thing completely out of hand. A decision is expected this year. Moormann hopes for success: “Otherwise we can finally pack up in Europe.” Because whoever controls payment transactions knows what the customers are doing.