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Mode of payment – definition, examples and stats

GoCardless
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Last editedAug 20222 min read

Consumers’ shopping habits are changing. The global pandemic has hastened a shift among consumers towards digital payment methods, e-commerce, contactless cards and interest-free Buy Now Pay Later (BNPL) arrangements.

In order to deliver an outstanding customer experience and gain an edge over your competitors, it’s necessary to offer a range of payment options to customers. It lets them shop with confidence, knowing that they’re getting the perfect combination of security and convenience. 

But which modes of payment are your customers using? While there’s no substitute for first-hand market research, we assess the different modes of payment available to UK consumers and find which are statistically the most popular.

What is a mode of payment? 

A mode of payment is the way that consumers choose to pay for their purchases. Modes of payment may refer to transactions taking place in a physical location like a store or market stall, online via your ecommerce site or over social channels like Instagram. 

Different modes of payment

Let’s take a look at some of the payment methods favoured by UK consumers:

Card/contactless

Credit and debit cards are extremely popular today, overtaking cash as the UK’s favourite payment method in 2017. As of 2020, over half of all online sales were made with a credit or debit card according to JP Morgan. Contactless payments are especially popular in the post-Covid age, soaring by almost 30% when the spend limit was raised from £45 to £100 in October 2021.

E-wallets

Electronic wallets, also known as e-wallets or digital wallets, work just like a physical wallet, storing payment data from numerous credit or debit cards securely. Software such as Apple or Google Pay can be installed on smartphones to facilitate frictionless online and contactless payments. Some e-wallets even store cryptocurrencies and other digital assets. 

Bank transfer/direct debit

Bank transfers and direct debits make up a relatively low proportion of online sales at the moment, but they are predicted to be among the most popular. The rise of open banking has enabled fintech solutions to provide secure, convenient solutions for fast, secure and low-fee bank-to-bank payments like Instant Bank Pay powered by open banking, providing instant confirmation for one-off payments. 

Cash

For decades, cash was king. However, that king has been dethroned since well before the pandemic. However, the risk of viral contamination via banknotes and coins, combined with the plethora of secure alternative payment options, make cash unlikely to make a comeback in the foreseeable future. 

According to a 2021 report by UK Finance, the most popular modes of payment for UK consumers are currently as follows:

  • Credit/debit card – These account for the most payments, with 44% attributed to debit card payments alone. Furthermore, 25% of all payments were made via contactless means in 2020

  • E-wallets – E-wallets like Apple Pay, Samsung Pay and Google Pay have become increasingly popular, increasing in popularity by 75% between 2019 and 2020

  • Bank transfer – UK consumers made 4.5 billion Direct Debit payments in 2020, along with 1.9 billion Bacs Direct Credit payments and 44.5 million CHAPS payments. While the latter accounted for just 0.1% of transaction volume, they made up over 91% of transaction value. 

  • Cash – Cash use has declined considerably in recent years with just 17% of consumers citing it as their preferred mode of payment. 

What is the best mode of payment for my business?

That depends on your company’s priorities and your customers’ needs. The advantages of bank-to-bank payment merit consideration. We provide a recurring payments solution within the UK based on our Direct Debit network, making it easier and more cost-effective to receive payments via Direct Debit.

We can help

GoCardless is a global payments solution that helps you automate payment collection, cutting down on the amount of financial admin your team needs to deal with. Find out how GoCardless can help you with one-off or recurring payments.

Article Sources

  1. https://gocardless.com/guides/posts/how-can-ecommerce-benefit-your-business/ 

  2. https://gocardless.com/guides/posts/what-is-buy-now-pay-later/ 

  3. https://www.jpmorgan.com/merchant-services/insights/reports/uk-2020 

  4. https://www.finextra.com/newsarticle/39887/contactless-payments-soar-as-limit-increase-takes-effect 

  5. https://gocardless.com/solutions/instant-bank-pay/

  6. https://www.ukfinance.org.uk/sites/default/files/uploads/SUMMARY-UK-Payment-Markets-2021-FINAL.pdf

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Interested in automating the way you get paid? GoCardless can help

Interested in automating the way you get paid? GoCardless can help

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