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The Top Payment Methods in the United Kingdom

The Top Payment Methods in the United Kingdom
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  • The Top Payment Methods in the United Kingdom

A Market in Flux Creates Opportunity for Businesses that Quickly Adapt to Changing Consumer Behaviors.

Between Brexit and the coronavirus pandemic, the United Kingdom is in a moment of massive economic upheaval. U.K. consumers across Britain, Northern Ireland, Scotland, and Wales are turning toward ecommerce like never before. Population-wise, the European eCommerce 2019 report says 87% of U.K. residents are eshoppers.1

The B2C ecommerce market in the U.K. is presently valued at US$233 billion2; Germany’s market, by comparison, is valued at $82 billion.3 According to trade magazine Internet Retailing, mobile shopping accounted for 55% of the U.K.’s ecommerce spend. “In terms of scale,” writes JP Morgan,4 “the U.K. mobile commerce market dwarfs all others in Europe.”

Mobile adoption is a major driver, particularly among Gen Z and Millennial shoppers.5 Consumers in the U.K. use mobile and desktop sites as well as apps to complete purchases, but in-app purchasing may soon overtake other options as smartphone penetration grows beyond the current 83%.6 Already, 63% of U.K. residents report regularly using apps to shop.2 Growing your sales with U.K. consumers means understanding both how they prefer to shop and how they want to pay.

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Here Are the Most Popular Payment Methods in the U.K.

Cards

Debit and credit cards remain the top payment method—for now, with 53% of online sales4 being paid for with a card. Debit is particularly important in the U.K., with the Bank of England reporting debit cards overtook cash in 2017.7

Longtime U.K. payments company PayZone has, since the 1990s, helped make cards a ubiquitous option throughout the country by leasing and selling payments terminals and other equipment to vendors.8 More recently, it has helped provide digitized credit card solutions, such as pay-by-phone parking.

An interesting fact is that a growing percentage of U.K. consumers are gravitating toward contactless purchasing. The majority of these people use tap cards and mobile. A small but growing minority are using wearables.9

Digital Wallets

Digital wallets have become a popular payment method in the U.K. with PayPal leading the fray. Recently, multiple smaller, more bespoke payments and financial services providers are chipping away at PayPal’s commanding lead.10 The U.K.’s Open Banking initiative has, since 2018, made it easier for fintechs to get their hands on historical user data collected by institutional banks to develop competing products.11

Cash

In 2018, just 7% of ecommerce purchases were done with cash.4 Amid the Covid-19 pandemic, even cash in storefront retail saw its usage halved in a matter of days12 after the national government restricted people’s movements. As the fear of viral contamination endures, cash may take a long time to come back—if it ever does.

Bank transfers

Although bank transfers only make up 3% of ecommerce payments4 right now, this could be one payment method that makes some interesting gains in the years to come, especially with the concurrent decline of cash.

The U.K. has had the framework for peer-to-peer bank transfers through its Faster Payments Network since 2008. In December 2019, Faster Payments processed 226.7 million payments13—the most it had ever processed in a single month. As real-time payments technology cuts processing lags down to almost zero, bank transfers will surge in popularity with consumers and merchants.

Building a Digital-Forward, Inclusive Payments Framework

The U.K.’s payments landscape will be in a major state of flux for some time to come, but one thing is for certain: mobile shopping and payments for local and cross-border purchases are on an upward trajectory. Having a card-first, digital-friendly approach to payments is important, but merchants need a flexible and inclusive solution to capture all customers.

Learn More about Rapyd’s All-in-One Payments Solution in the United Kingdom.

Sources:

  1. https://www.ecommerce-europe.eu/wp-content/uploads/2019/07/European_Ecommerce_report_2019_freeFinal-version.pdf
  2. https://internetretailing.net/industry/uk-ecommerce-accounts-for-19-of-total-retail-making-it-worth-233bn-20971
  3. https://www.statista.com/outlook/243/137/ecommerce/germany
  4. https://www.jpmorgan.com/merchant-services/insights/reports/united-kingdom
  5. https://www.merchantsavvy.co.uk/mobile-payment-stats-trends/
  6. https://newzoo.com/insights/rankings/top-countries-by-smartphone-penetration-and-users/
  7. https://www.bankofengland.co.uk/knowledgebank/will-cash-die-out
  8. https://www.payzone.co.uk/
  9. https://www.psr.org.uk/sites/default/files/media/PDF/Contactless_mobile_payments_July_2018.pdf
  10. Fintech Magazine, 2020
  11. https://www.pymnts.com/smarter-payments/2018/deep-dive-uk-open-banking-initiative/
  12. https://www.theguardian.com/money/2020/mar/24/uk-cash-usage-halves-in-few-days
  13. http://www.fasterpayments.org.uk/our-achievements

 

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