Last editedApr 20222 min read
If your business isn’t catering to customer payment preferences, you could be missing out on revenue. The rise of online payments has led to the fall of cash and cheques. So, what does the payments landscape look like in 2022? Here are the most popular online payment methods today.
How UK payment methods are evolving
Spurred by the pandemic and the growth of fintech innovation, online and mobile ecommerce is now the mainstream rather than a mere trend. It’s important to understand the rise in digital payments technology to cater to your customer base.
Demographics play a major part in preferred UK payment methods. For example, according toMerchantSavvy research Gen Z and Millennial shoppers make 55% of their ecommerce purchases using a mobile device. In-app purchasing is also more popular with these age groups, though roughly 70% of all UK residentsreport using apps to make purchases.
The most popular online payment methods
With the backdrop of a growing digital landscape, how does this translate into today’s online payment options?
Credit and debit cards
For B2C purchases, debit and credit cards are currently the most popular payment options. Credit card spending varies in popularity across different countries and age groups, with Millennial and Gen Z shoppers holding14% fewer credit cards than prior generations. Debit cards are the preferred payment option alongside alternative forms of payment like digital wallets.
The UK’s Faster Payment Network makes it easy for customers to make rapid transfers to businesses online, as well as facilitating peer-to-peer payments. In a2021 GoCardless report investigating consumer payment preferences, bank debit came in as the preferred choice for recurring online payments not only in the UK but also in France, Germany, New Zealand, and Australia. This research showed that 27% more consumers use bank accounts and debit cards than PayPal. Benefits highlighted by customers include ease of use, automation, and the fact that bank debits are widely accepted.
Digital or mobile wallets are another popular online payment option for UK businesses and their customers. While PayPal has waned in popularity over time, newer digital payment providers like Skrill and Revolut are chipping away at its dominance. TheOpen Banking initiative makes it easier for start-ups and fintechs to use customer data in fresh, innovative ways, particularly when it comes to easy online payments. Apple Pay and Google Pay are also widely used by smartphone holders, both for online and in-person purchases.
Buy Now, Pay Later
Although the idea of paying off a purchase using a series of instalments is nothing new, providers like Klarna have madeBuy Now, Pay Later a very popular online payment method for ecommerce retailers. These service providers foot the bill upfront and then offer the customer an interest-free instalment plan to pay it off over time. So, how popular is it? According toFinder.com statistics, nearly 4 out of 10 UK consumers have used some form of BNPL payments and 9.5 million shoppers said they would stay away from retailers who don’t offer this online payment option.
Is cash dead?
With so many payment options to choose from, is there any place for cash anymore? If you take online payments, it may not even be necessary. Cash is by far the least favourite online payment method, used in just17% of ecommerce transactions during 2020. The pandemic has accelerated this drop in useeven further, a finding backed up by the GoCardless study which found most countries showed little interest in returning to pre-COVID cash spending habits.
If there’s one takeaway from this guide, it should be that there is no one-size-fits-all payment preference. For both B2B and B2C customers, preferred UK payment methods will vary by demographic and region. It’s best to offer a payment mix across multiple channels, offering both credit and debit cards as well as alternative payments and bank transfers.
We can help
GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.