Card payments disruption: Financial regulator Bafin is investigating problems

Frankfurt The problems with card payments in Germany call the financial regulator Bafin on the scene. The authority is in close contact with the Bundesbank, the Federal Office for Information Security (BIS) and the payment service providers Concardis and Payone on the current situation, a Bafin spokesman told the Handelsblatt. “The priority now is to find a solution to the problem for the affected dealers and their customers as quickly as possible.”

The Bundesbank explained that the simultaneous failure of a significant number of payment terminals “represents a serious incident for card payment transactions. Although it is not of systemic importance for the system as a whole, this disruption can damage consumer confidence.” Troubleshooting with the German banking industry “fundamentally work up”.

Immediately after the disruptions became known, Bafin launched a query among payment service providers that might be affected in order to get a better picture of the extent of the disruption. The financial regulator is keeping a low profile on the question of whether only the card reader manufacturer Verifone is responsible for the failure or whether Concardis, Payone and the banks are also responsible.

“The cause of the disruption can only be considered after a more detailed analysis,” said the Bafin spokesman. According to current estimates, “the affected payment service providers reacted immediately and are examining various possible solutions”. Concardis and Payone are supervised by the Bafin, but the US-based manufacturer Verifone is not. While the failed devices and the software on them come from Verifone, network operators such as Concardis and Payone take care of payment processing.

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Payments by Girocard (better known by its old name “EC card”) and by credit card have been disrupted since last Tuesday. This is due to problems with the Verifone H5000 card reader. The retail research institute, EHI, estimates that 90,000 to 100,000 such card terminals are in use nationwide, as EHI payment expert Horst Rüter told the Handelsblatt. That would be about every tenth device.

Aldi Nord, Netto, dm, Rossmann, Edeka and Esso rely on device replacement

Card payment glitches have happened before, but they’re usually resolved within a few hours. Most of those involved see Verifone as the main culprit. The company, which belongs to the financial investor Francisco Partners, simply justified the ongoing outages with a “software malfunction”. Contrary to claims to the contrary, this is not about an expired certificate. A solution has been developed to fix the problem.

Many large retailers are affected by the disruption, including Aldi Nord, Netto, dm, Rossmann, Edeka supermarkets and gas stations, for example, but also many smaller shops. Like the payment companies, however, they often do not seem to trust in a Verifone update or do not want to wait for it, but exchange the card terminals.

Aldi Nord announced that card payments for customers will be possible again in all markets at short notice. Any failed H5000 devices would be replaced with a new model. “Some of the stores were already converted at the weekend, the rest will follow in the next few days.” Aldi Nord is relying on a newer Verifone device, the P400. According to the company, EC card payments are also working again in the entire branch network at Netto. The group did not exchange the devices, but technically converted the relevant terminals to the electronic direct debit procedure.

Other merchants are also in the process of replacing card terminals with the help of payment service providers. Concardis and Payone both said they would quickly make alternative devices available. However, this is a logistical effort that should usually take several days. Concardis is part of the Italian payment service provider Nexi. Payone is majority owned by the French payment group Worldline, while the savings bank finance group holds 40 percent of Payone.

Card payments: Retail considers the disruption to be unique in Germany

The trade demands that the reason for the disruption be determined. “The case is unique in Germany and must therefore be completely cleared up,” said Rüter.

The HDE trade association also requires the problems to be dealt with “so that a certain type of terminal does not generally fail again,” said payment expert Ulrich Binnebößel. “One should also think about the introduction of emergency mechanisms that take effect in such cases.”

It is unclear who will bear the costs for the large-scale terminal exchange. That should depend in many cases on what the contracts of the dealers look like exactly. “Smaller retailers often have contracts with a payment service provider or even their bank or savings bank, which may even cover a terminal exchange,” explains Rüter. Large dealers, on the other hand, often concluded contracts directly with Verifone or other terminal manufacturers. According to the EHI, Verifone has a total market share of 47 percent for card terminals.

On request, Concardis stated: “If merchant customers have concluded corresponding maintenance contracts for rented payment terminals with us, this is free of charge for them.”

The industry is also discussing whether retailers can ultimately file claims for damages in view of the loss of sales and higher costs for cash logistics. The option might also be an option for payment service providers.

The frequently failed Verifone H5000 terminal is a discontinued model. The terminal type, which has been on the market since 2011, is considered “outdated and should have been replaced long ago,” explained Ralf Gladis, head of the payment service provider Computop. Using the working hardware longer could become a risk. Gladis pointed out that the extension of the approval of the equally outdated software standard TA 7.1 until 2024 by the German banks and savings banks is not exactly an incentive to quickly replace outdated devices.

For dealers who bought devices themselves, it could be attractive to let them run as long as possible. Long-term operation is also probably worthwhile for payment service providers who rent out card readers.

More: Manual intervention necessary: ​​In Germany, there will still be problems with card payments for some time

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