Conquer the German market with "German" webservices

By Jens Leinert

Taken together Germany, Austria, and Switzerland represent a German-speaking market with a population over 95 million, and may soon number among the world's largest markets for betting.  In 2004, German-speakers spent 28 billion euros on various kinds of bets, and the trend is growing (see box "Betting in Germany").  And the market hasn't even been deregulated yet!  Experts predict massive growth following deregulation, which the EU has already repeatedly demanded of the German government.

In the internet, the laws regarding games of chance are virtually irrelevant today, and international gaming providers can already begin conquering this market.  But anyone who wants to make serious money should be aware of the special preferences of German internet users.  Studies like the PAGO Report 2005 show two major characteristics of German online customers: devotion to the German language (Germans make over 95% of their online purchases on German-language websites), and a preference for paying by direct debit (almost 60% of all payments are direct debits, with a mere 38% by credit card).

Creating a web-page in German is no great problem, but accomodating German-speakers' payment preferences is another matter.  Only 20% of German internet surfers even have a credit card, but over 90% regularly use direct debits.  So anyone wishing to sell via the internet in the German market must really offer a German-language website with the option of paying by direct debit.  Direct debits are widespread and common in Europe.  For web-marketing, the relevant form of direct debits is:

Collection authorization:  the payor provides the casino written permission to debit funds for a specified purpose from his account.  The banks involved may demand to see this authorization, though in practice this hardly ever happens.

For this method, payment is credited to the casino's account provisionally: he can not actually dispose of the funds until they have been credited from the payor's bank.

Besides rejection of a direct debit on account of insufficient funds or invalid account, the payor can also peremptorily reject any payment within 6 weeks after it was debited to his account, in which case the entire transaction is rolled back.  Such a reversal is described as a "rejection".  A status message on account of insufficient funds or invalid account is generally delivered within four workdays; a rejection however can occur anytime up to 6 weeks after payment.

At 64%, direct debits are the most significant internet payment method in Germany, the largest European market, though one not yet open to online gambling until deregulation occurs.  Any German with his own bank account can pay by collection.  There are currently 70 million German accounts qualified for collections.  Since almost every German has an account, collection authorizations are the most generally available means of internet payment.

The advantage for the casino lies in the certainty of credits received.  Rejection of the debit is a rare occurance, and this is reflected in the minuscule percentage of reversals: in practice, rejections have no significant effect on business.  The use of Fraud Prevention Tools and automated collections, together with the already negligible rejection rate in Germany ensures web marketers a maximum in payment security with direct debits.

Foreign internet marketers, however, frequently have difficulty integrating direct debits in their websites.  For example, they must open an account with a German bank, for which they need a German subsidiary.  Additionally, creating a fully-automated direct debit connection to the German banking system can be fairly complicated for someone without the appropriate business contacts and specialist knowledge.

Online business can safely rely on providers of web payment services in Germany, who are specialized in offering foreign companies a full-service package for direct debit processing. Those payment companies help international online businesses to get access to all local markets - especially those that prefer alternative payment methods.

In addition to collection authorization direct debits, such payment service providers offer automated capture of payment rejections.  The casino is informed daily about rejections, allowing it to immediately close a rejecting member's access.  Furthermore they offer casinos, in addition to simple reporting of rejected debits, dunning and debt collection via local debt collection agencies.  In the event of a payment rejection, the customer is informed by email that he can settle the matter by a simple bank transfer of the original amount plus the direct-debit rejection fee to an appropriate account.  If there is no reaction to the email, two letters from an attorney follow, as well as several telephone calls.

The advantages of these solutions and services for international online casinos are evident.  They need neither establish a local subsidiary with its own German account, nor develop and implement direct debit processing:  Payment service providers offer their customers single-source debt collection services.

International casinos which contract complete direct-debit processing from payment service providers can thus readily expand their business by exploiting the direct-debit payment option.  From fraud-prevention to the final credit to the company's account, payment service providers cover all the bases.  Missing payments are reported immediately, enabling instant blockage of the offending customer.  Integrated dunning and debt-collection services minimize write-offs.

International casinos and bookmakers can use these Managed Services to connect to one of the world's largest potential markets, without having to establish an in-house center of expertise in the German banking system.  This helps guarantee cost calculations and protection of investment for expansion in the German-speaking internet.

Diagram: German betting, 2004 (Source: www.leinert.com)

About Pay4:

PAY4 GmbH's payments business unit has specialized in processing and clearing internet payments.  Its spectrum of services includes procurement of credit-card acceptance contracts, fraud prevention (address verification and scoring), as well as international payment processing, including both international and domestic direct debits and internet payment processing. Billing and clearing for internet content, memberships, and data transfers has become a major focus in addition to numerous "old economy" services.

http://www.pay-4.eu/en/

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