Alternative payments will soon overtake online card payments

With e-commerce growing significantly and more products and services becoming available online, consumers in the UK have started looking for faster and more convenient ways to make online payments, and are increasingly turning to alternative payment tools to meet these needs, according to GlobalData. Or so says GlobalData, a leading data and analytics company.In 2012 online card payments dominated, with a 59.7 per cent. market share by value of transactions online, while alternative payment tools (dominated by PayPal) only held a 30.8 per cent market share. Over the last five years, however, numerous alternative payment methods have launched in the UK, including Apple Pay, Visa Checkout, and Google Pay. This has led to a shift towards alternative payment tools, and has translated into significant market share growth, reaching 41.7 per cent (£62.4bn, up from £48.3bn in 2016) in 2017. At the same time, card payments decreased to 45.8 per cent (£68.6bn, up slightly from £68.4bn in 2016) of total online spending. Given these figures, the share of B2C e-commerce paid by alternative payment methods is expected to surpass cards by the early 2020s.

The UK economy saw just 1.7 per cent growth in 2017, and inflation that exceeded the Bank of England’s target, reaching 3.1 per cent. This has led to higher prices in the shops and a squeeze on consumers’ budgets. But 2018 could be a better year as inflation is set to reduce and wages may start to rise.

Madalina Aghinita, Financial Analyst at GlobalData, comments: “Despite the positive forecast for 2018 spending, the year has so far seen a number of physical stores close down, and it is likely that there will be acceleration in this respect. More consumers are moving towards online shopping in order to save time and ensure they get the best value for money – particularly given the performance of the economy.”

GlobalData’s E-commerce Analytics database shows that the UK is the largest e-commerce market in Europe, with a market size of £149bn, and growth of 12.8 per cent in 2017 compared to 2016. Based on the current growth rate, it is expected that UK e-commerce will exceed £200bn by 2021.

The growing digital channels are disrupting not only the retail landscape, but also cash and card payment methods. Internet penetration has facilitated the growth in e-commerce, with 89% penetration in 2012 and 96 per cent in 2017. Technology has innovated the way consumers shop online and pay for their products or services.

Aghinita adds: “Consumers want a quick and frictionless payment process, and having to enter their card details every time they purchase something online, or the unavailability of their preferred method of payment, can be frustrating and lead to shopping cart abandonment. Retailers need to understand the benefits of these alternative payments and work closely with payment processors, in order to ensure customers are happy when it comes to parting with their money.”