Increasing digitization throughout Europe continues to influence the way consumers make payments. Compared to a decade ago, and even more so since the pandemic, the ways people pay have changed dramatically. Now people are paying not just with cash or cards, but also using a mobile device or a mobile app. From buying daily groceries to splitting bills with friends to shopping online. Digital payments have grown rapidly throughout Europe. Recent reports from Statista indicate that digital payments will amount to €1,751.23 billion by the end of 2023, driven by the boom in e-commerce. But Europeans still love using cash, as studies show. The payments landscape in Europe is fragmented, and consumer payment preferences are not always laid out in black and white. Business owners must have an understanding about consumers’ payment preferences because it is critical to increase conversion and drive sales.
So, let’s take a look at how consumers in Europe are paying.
Consumers still prefer Cash
The European Central Bank studied the payment preferences of consumers across Europe and the results are compelling. While cash usage has dropped, it is still the most often used means of payment at point of sale (POS) terminals, such as shops, restaurants, etc. In 2022, more than half (59%) of all payments at POS were made with cash, compared to 72% in 2019 and 79% in 2016.
Though it might be difficult to pinpoint an exact reason for this shift, it seems to be the effect of payment behaviors that have followed the pandemic. But even as more people move towards digital payments, more than 60% of those in the Euro area want to have the option to use cash. 22% of consumers who use cash as their primary means to pay, do so because it is easier to track expenses and is more private.
Cards have not gone away…yet
Cashless payments are increasing throughout Europe, with 55% of consumers preferring cards or other forms of cashless payments. Almost 60% of all cashless payments are made with cards, mostly by people shopping online. Card usage is still growing throughout Europe, despite the rise of alternative payment methods. Not only are there more cards in the market, they are also being more widely used. And, what’s surprising is that debit cards are more popular than credit, accounting for over 70% of all cards in Europe. Debit card usage has increased at almost twice the rate of credit cards.
Digital wallets top the Consumer’s Payment Preferences in Europe
Mobile wallet usage has risen across Europe and they are now the most used payment method in Europe’s five largest e-commerce markets, with more than 44% of consumers using them. In the UK, Europe’s number one e-commerce market, over one in three consumers use a digital wallet. PayPal, a popular digital wallet, is preferred by 93% of Germans and 91% of Italians.
Digital wallets are seemingly more popular with the 18-34 year olds, with 64% in the age group using a digital wallet. PayPal, Apple Pay, Google Pay, and Samsung Pay are popular ones, though there are several popular local ones as well, such as iDEAL in the Netherlands, Swis in Sweden, or Qiwi in Russia. Security, flexibility, and convenience are the three main factors behind the huge appeal of e-wallets. And the rapid growth in mobile commerce has catalysed much of this change. But while mobile wallets have become a preferred method for online payments, at POS terminals, the only make up about 9% of all transactions.
Alternative Payments are on the Rise
Alternative payment methods, such as Buy Now Pay Later (BNPL) or Account 2 Account transfers, are growing across Europe, especially as e-commerce picks up. In 2021, 13% of e-commerce payments in the region were Account-to-Account (A2A) payments. 81% of consumers in the EU saying they are “likely” to make an A2A payment in future. The demand for A2A payments has grown, thanks to a maturing open banking framework in Europe, demand for instant payments, and consumer behavior shifts driven by the pandemic. An example of A2A transfers include SEPA payments in Europe.
How Can Novalnet Help
We can guide you with the right payment strategy to help your business succeed in a digital-first world. We are trusted advisors to Europe’s leading brands, helping them to process payments smoothly and securely. Our technology allows you to accept payments globally in 125+ currencies in 150+ automated country-specific payment methods. Plus, AI-based risk management solutions and advanced analytics solutions help you design the best payment experiences for your customers, all in a fully secure PCI DSS-certified environment.
Reach out to us today to know more about how we can help.
Jose Augustine is the Chief Business Development Officer at Novalnet with extensive experience in European payment industry and a knowledge powerhouse.