Brave New World: A Futuristic Vision of Payments

Brave New World: A Futuristic Vision of Payments

James Booth

VP, Head of Partnerships in EMEA at PPRO

Views 580

Brave New World: A Futuristic Vision of Payments

30.03.2020 05:00 pm

Over the last ten years, the retail e-commerce ecosystem has undergone a wide-ranging transformation. As recently as 2010, the e-commerce and payments value chain were relatively straightforward: Any eCommerce merchant could integrate a payment processor’s front-end HPP into their checkout or perform a deeper API integration for a customised checkout experience. The customer then enters their card details or other bank details, which were passed on to payment platforms and schemes for processing.

In 2020, we are now well into the era of open banking, and things look very different. The volume of payments has exploded. By 2018, global digital payments were worth US$3,417.39 billion, and are expected to increase to US$7,640 billion by 2024. Using integrated real-time payments systems — which incorporate everything from authentication through settlement to confirmation — consumers send and spend money in the blink of an eye. And the speed and volume of transactions are made possible by the increased use of technology and artificial intelligence to do everything from risk assessment to anti-fraud measures.

But this very visible — and much written about — transformation is not the only way in which the payments and e-commerce landscape has been changing beyond recognition. Because while e-commerce over the last ten years has gone increasingly global, the way people pay online is more than ever local. In some markets, low rates of financial inclusion make cash-voucher schemes the best option. In others, bank-transfer apps are the most popular.

Our research has shown that between 2017 and 2019, the number of UK online transactions paid for using a bank transfer increased by 36%. Driving the use of bank transfer payment methods by UK consumers to now account for  8% of all British online transactions, with cards and e-wallets, including PayPal, leading the race. In fact, card payments account for 56% of transactions, followed by e-wallets (25%), bank transfers (8% ) and lastly cash (7%).

Some markets prefer e-wallets or primarily use locally issued credit cards. In the Nordics, deferred payment methods are becoming the norm. And in countries such as Germany, most online shoppers prefer via direct debit.

The result is a global online and digital payments market that is now incredibly diverse. And even more complicated. Even markets right next door to each other may have very different payment preferences. In Latvia, for instance, 49% of online transactions are paid for using a credit card [2]. In neighbouring Lithuania, it’s just 24%.

Globally, by 2021, only 15% of all transactions will be paid for using the brands of credit cards familiar to most Western merchants. That number is only set to decrease. Today, local payment methods account for 77% of e-commerce spend; by 2024, it is forecast that this share will increase to 82%. There are an estimated 450+ significant local payment methods worldwide, so considering the UK mostly rely on PayPal and card payments, there is a big world of alternative payment methods the British public are yet to realise. To truly go global, merchants don’t just need break down language barriers, but also payment barriers.

Already, Klarna, one of Europe’s most popular bank-transfer and pay later app, processes €53.4 billion in online payments every year. Merchants operating in or entering Europe which doesn’t support Klarna are effectively saying that they’re not interested in any part of that €53.4 billion. And this situation is not unique; it applies to markets throughout the world.

Local payment methods, as they drive financial inclusion, will only proliferate.

When we look forward to the state of e-commerce in 2030, a personalised shopping experience is not a nice-to-have. It is an absolute requirement. Consumer preferences must be noted; if they aren’t, retailers will miss out on sales. Almost half (47%) of UK consumers will end a transaction if their preferred payment method is not available, according to PPRO research, so customising payment options for cross-border shoppers is vital. This is highly important to attract international customer bases beyond a retailer’s local remit. It’s no longer adequate to offer customers one single way of paying – in-store or online. Payments aren't a one size fits all approach.

The best brands do this already. Those who don’t will struggle to make it to 2030.

Latest blogs

Ian Johnson Marqeta

UK finance finds that 7.4 million in UK living "almost cashless" lives

These findings show that even before COVID-19 struck, digital banking was increasing exponentially. As more people adopt online and mobile banking, the demand for greater personalisation, flexibility and value that consumers expect from their Read more »

Ian Bradbury Fujitsu UK

UK Finance's UK Payment Markets Report - Comment from Fujitsu

Over the past months, businesses have had to rapidly move away from physical cash in order to provide consumers with a safer service. However, this data shows us that a gradual movement away from cash in society started long before the Read more »

James Turner Turner Little

Protecting yourself against a recession

The coronavirus outbreak has spread to businesses, leaving many around the world counting costs. Notoriously, known as the Great Lockdown, it’s been affecting the world economy since early this year. The predicted recession is considered to be the Read more »

Alan Cole JHC Financial

Every Cloud: Covid-19 and the opportunity for digital transformation

Faced with tighter regulations and changing customer needs, over the last decade Wealth Managers have not had it easy – but with the development of new technologies, many have been able to create efficiencies, reduce costs and shrink operational Read more »

Nabeel Irshad Mastercard

Two sides of the same coin: Financial and digital inclusion

The issue of how to tackle financial inclusion has long been a part of the conversation in banking and financial services circles. Regulations have ledto the UK’s biggest banks having to provide ‘basic bank accounts’ to cater for those who do not Read more »

Related Blogs

Ian Bradbury Fujitsu UK

UK Finance's UK Payment Markets Report - Comment from Fujitsu

Over the past months, businesses have had to rapidly move away from physical cash in order to provide consumers with a safer service. However, this data shows us that a gradual movement away from cash in society started long before the impact of Read more »

Lauren Jones Icon Solutions

5 Ways to Maximise the Value of Instant Payments

Instant payments are the ‘new normal’. The last decade saw a ramp-up in adoption as regulation, customer expectation and technology dovetailed to create immediate, 24/7 demand for financial services. This means that banks and payment service Read more »

Otabek Nuritdinov Safenetpay

Effect Of Big Changes: The New Concept Of Location

COVID-19 marks a really big change - and a very fast one. Read more »

James Booth EMEA for PPRO

Payments in a time of social distancing

It’s not news that the global pandemic has seen dramatic changes in consumer behaviour. People who have previously resisted shopping online now have little choice and are signing up to e-commerce sites by the millions. Read more »

Otabek Nuritdinov Safenetpay

Just getting paid

  Most small and medium-sized enterprises (SMEs) in the UK suffer from delays in being paid. Research by Pay.UK - the country’s independent payments operator - late last year found that late payments owing to SMEs amounted to GBP23.4 billion. The Read more »

Free Newsletter Sign-up
+44 (0) 208 819 32 53 +44 (0) 173 261 71 47
Download Our Mobile App
Financial It Youtube channel