Germany country guide

The European SaaS market has boomed in recent years. Germany has the fourth largest number of SaaS companies in the world, with nearly 1,000 SaaS platforms, beating both India and China. In Germany there are growing concentrations in retail, healthcare, financial services, F&B, and Beauty & Fitness.

For example, Sport Alliance, a leading German fitness platform, offers a built-in payment system called Magicline.

"By integrating payments into our existing infrastructure, we offer our customers a holistic solution that covers all aspects of their business and improves their operational efficiency."

Dean Ranzenberger, Product Manager, Magicline

The competitive landscape in Germany

With the largest economy in Europe and the third most diverse economy globally, there’s a significant opportunity for SaaS companies looking to expand their reach.

The advanced tech infrastructure in Germany provides a solid foundation for SaaS companies to deliver their services effectively to customers. In addition to high-speed internet connectivity and reliable data centers, the German workforce is highly qualified, and the political environment is stable and actively supports tech innovation.

The EU is pursuing deeply embedded payments with software and bundled payments that create secure and seamless processes owned by a single party or tightly integrated software and payments partners.

Leading fitness platform Sport Alliance typifies this forward-thinking approach:

“Integrating payments into our platform means a new revenue stream, both for our customers and for us as Sport Alliance."

Nico Richter, Group Product Manager, Sport Alliance

SMB appetite in Germany

There is also a growing demand for B2B SaaS solutions in Germany as businesses recognize the benefits of cloud-based software in improving productivity, reducing costs, and gaining a competitive edge.

This demand opens up a considerable market for SaaS companies to tap into. 77% of German SMBs use a platform to run their business, and 72% are interested in embedded payments via their platform. There’s a big opportunity for German SaaS platforms to offer Embedded Financial Products (EFPs) to SMBs. Currently, just 20% of German SMBs use EFPs via their platform, but 62% are interested.

Before expanding into Germany, remember the importance of localization in language and content. It’s an integral part of a customer-first mindset that can help a brand stand out.

Local payment methods landscape in Germany

Germany is Europe's second most populous country, with a population of 83 million. A culturally diverse nation, Germans are keen cross-border shoppers. In fact, over 50% have placed an order on an international website.

Germany is particularly fragmented in terms of payment methods. Instead of credit cards, payment methods such as SEPA (Single Euro Payments Area), Direct Debit, and SOFORT make up most online transactions, while over 100 million Girocard cards are in circulation. Girocard has also led the way in providing contactless payments.

Germany is also one of the main European markets for Buy Now, Pay Later (BNPL), with Klarna being particularly popular. Dean Ranzenberger of Sports Alliance also notes PayPal's popularity domestically. PayPal was the most used online payment method among German online shoppers in 2023, accounting for 27.7% of online consumer purchases.

Coupled with this openness to payment innovation is the enduring popularity of cash.

The security and regulatory context in Germany

SaaS platforms in Germany face particularly stringent regulatory challenges because they handle vast amounts of sensitive data from multiple users. Failure to meet these requirements can result in legal consequences, financial losses, and reputational damage.

Key considerations:

Adhering to Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations to build trust with users and regulatory authorities.
Meeting PCI DSS standards to prevent payment-card data breaches and ensure user-data security
Implementing fraud prevention measures like multi-factor authentication and transaction monitoring to protect your platform and SMBs
Navigating GDPR data protection laws to safeguard user data and avoid non-compliance penalties
Under German data privacy law, every collection, processing, or use of Personally Identifiable Information (PII) needs to be justified, either by consent of the individual or by legal permission.

Regarding financial services, the most commonly encountered financial regulators for platforms operating in Germany are BaFin and DIHK.

Our banking infrastructure and compliance teams provide vital support to our platform customers. We handle much of the regulatory burden to ensure continuous compliance, mitigate transaction risks and liabilities, and ultimately let platforms focus primarily on core objectives and support their users.

Key considerations for expansion to Germany

Here are three things SaaS platforms hoping for success in the German market should bear in mind.