Payment methods in 2020 – The global overview

It has never been as imperative for merchants to ensure a sleek, clean shopping experience for their customers: many merchants spend large sums to draw customers in, only to lose them on the checkout page. However, if your payment methods are fully aligned with consumer demands and your checkout is seamless and reliable, you could increase conversion by 35.26%, according to a research by the Baymard Institute. These figures are based on the testing of checkout processes from leading ecommerce sites, such as Walmart, Amazon, and Wayfair. When surveying customers that abandoned their purchase, they found friction during the checkout process (in the form of obligatory account creation, opaque costs, and crashing websites) and a lack of the right payment methods among the leading reasons for abandonment. 

When it comes to payments trends, we’ve seen that COVID-19 and the economic disruption that swiftly followed have acted like a catalysing agent for the global move towards Digital and Cashless (and preferably contactless). Therefore, it is paramount for merchants to have a reliable and seamless online offering. In the following chapter, we decided to take a closer look at some of the most relevant regions and specific consumer markets all over the world and closely document the current state of affairs, the latest developments, and the most-used payment methods in ecommerce and online payments. 

E-wallets, online banking e-payment methods (a.k.a. Account to Account) and pay later solutions have seen a massive rise, while pundits (e.g. Ovum) predict that the market share of credit cards will further decline in the coming years. With people turning towards digital and seeking easier ways to pay online, keeping informed and adapting to the market will be the key differentiator for ecommerce players in 2020 and beyond. 

Europe – staying the course on the path to digital 

Europe is a fragmented market: every country has its own context and history which determines their payment preferences. However, there are a couple of common trends that we have observed: while in many markets cards are still kings of ecommerce, all throughout Europe payment methods based on the banking rails are becoming more dominant, pay-later solutions are on the rise, and e-wallets are becoming more widely accepted. Europe holds a lot of opportunity: the ecommerce market value is said to be worth EUR 717 billion at the end of 2020 (with a 12.7% increase from last year at least). 

Germany has seen a rise in electronic payments: even though Germans have traditionally preferred cash, they have come around to electronic payments as a safe and secure way to pay during the pandemic. Deutsche Bank goes as far as to say that contactless card payments may have replaced a certain share of cash payments permanently in the country. Polish consumers are displaying a tendency to adopt new payment technologies with ease with payment methods such as mBank and Blik being increasingly included in the payments offering of merchants in the region. 

Spain reaps more and more fruits of its homegrown players such as Bizum, which even though started out with a P2P offering based on SEPA Credit Transfer, pivoted towards ecommerce payments (POS and mobile payments), expanding its reach and adapting to market needs. The Netherlands has seen a more robust penetration than ever for its iDEAL online banking e-payments scheme with the pandemic pushing its popularity from an already majority share of 59% towards an unprecedented 68% of market share. 

Meanwhile, The Swedish Parliament has voted new laws that require online merchants and checkout providers to present customers with debit payment options before credit options as a way to protect consumers from excessive credit purchases. Adding to this, in 2019, Pay.UK launched the Request to Pay service, and in May 2020, they launched the Request to Pay Framework – the message standards, rules, and terms and conditions for the development of these services.

North America – credit cards still rule, but watch out for e-wallets 

In the US, online shopping dominated by credit cards, fintech start-ups, and alternative payment methods (using a different payment instrument) have found it hard to compete with the credit card giants more than anywhere else at this economic level. And the reason is that, in the US, credit card issuers offer an incredibly lean process when it comes to fast chargebacks, cashback policies, customer care and a myriad of loyalty programmes that offer a level of convenience and nurture a sort of devotion on the consumer side that is really hard to beat. 

However, especially in the Gen Z and Millennial age groups, e-wallets gained a massive following, with Venmo and Square creating a visible shift in payments behaviour. This is aided by the fact that e-wallets such as Apple Pay and Google Pay offer contactless payment options in-store where cards do not always offer this. 

Lastly, the American ecommerce market has seen a surge in pay-later and instalments options, with AfterPay, Sezzle, or Klarna visibly penetrating the market. Even though it’s still hard to grasp for many online shoppers, the convenience of these options has breached a lot of barriers and quickly gaining market share, while continue to grow at a rapid pace. 

Eurasia and Latin America – bridging online with the offline 

Russia and Turkey are telling examples of how technology shaped itself on the backbone of consumer behaviour. The faster payment system (FSP) of the Central Bank of Russia is developing a simplified one-click payment method. Following its launch, the central bank also added a QR-based functionality to the system, enabling payments of goods and services by using mobile devices, thus contributing to the proliferation of digital payments and cashless society in the country. 

Turkey is typically an instalments market, so in the advent of the pandemic, credit cards and their instalments functionality proved to be factors in maintaining merchants afloat and boosting cashless payments. Moreover, Mastercard and ING Turkey developed the Tap-on-Phone solution that enables small merchants and SMEs to turn a smartphone into a POS and accept contactless payments via NFC. 

Across the ocean, in Latin America, even though cash-based payments are hard to beat in ecommerce (with notoriously convenient kiosk cash payments methods such as Boleto Bancário, or OXXO setting the tone these days), central banks actively collaborate with the fintech environment and the government to create a climate of financial inclusion and offer unbanked citizens easy means of paying and purchasing online in faster and safer conditions. In Mexico, debit card penetration is still incredibly high, with cash on delivery and digital wallets tied as the second-most used payment method. 

Asia – super apps, super everything 

With an ecommerce sector predicted to surpass USD 150 billion in value by 2025, Asia once more comes into the scene offering a vivid performance of tenacity. ‘Super apps’ are the buzz word of the industry in China, with WeChat continuously innovating, and the rise of facial payments technologies, such as Alipay’s upgraded ‘Smile to Pay’ system or Tencent’s facial payment machine. 

And while India is finally seeing the apex of applying its Unified Payment Interface (UPI) to allow ecommerce merchants to reach unbanked and rural customers, Japan and Singapore are two examples of bona fide rock stars when it comes to the rise of cashless societies – from Japan pushing to become cash-free by employing QR code payments, digital wallets, or cryptocurrencies to Singapore’s ambition to become a technology-driven ‘Smart Nation’. To this end, Enterprise Singapore (ESG) revealed the ‘Singapore E-Commerce Programme’, built in collaboration with ecommerce platforms Amazon and Lazada Singapore. 

It was an acknowledged truth that Southeast Asia was a fintech and an ecommerce hub, but 2020 has seen a resounding increase in the speed with which the region pressed the gas pedal towards online payments in ecommerce, riding the trend created by the pandemic swiftly into establishing cashless society as the new normal.

Africa – the land of contrasts 

While it is true that ecommerce has been a challenging space in countries such as Kenya due to infrastructure gaps and customers’ reluctancy, while also online shopping as a whole being something predominantly present in urban areas, the huge success of mobile money has created an environment in which more and more users are offered options to shop online and are included in the ecommerce value chain. Moreover, as part of its Financial System Strategy 2020, the Central Bank of Nigeria is focusing on financial inclusion by bringing unbanked consumers under the purview of the banking system, aided by mobile money operators and telecom companies, who are making efforts to create traction for the financial inclusion programme. 

While there are several barriers in their paths, African countries such as Kenya or Nigeria are making visible efforts towards building a better logistics infrastructure and promoting financial inclusion, so that ecommerce can expand outside the confines of big cities such as Nairobi, Mombasa, or Lagos. 

Read more 

In conclusion, the world is at a boiling point in 2020 and a close look into the ecommerce markets and payment methods is the foundation to understanding where we’re heading and, specifically, at what speed. Download our most recent Payment Methods Report to dive deeper into each region and learn about what are the most used payment methods and brands that dominate each market, with a close eye on the latest developments and the numbers to back everything up. 

We talked to specialists, market experts, local consultants, and actively involved players in the market to rank and put together a visually comprehensive page-by-page collection of data on the payment methods and trends in ecommerce governing the world at this time, in a ‘one-sheet-per-country’ format, that you will also be able to access in the report in cohesion with the data enclosed in this article. 

About Alexandra Constantinovici

Alexandra is Senior Editor at The Paypers, specialising in payments and ecommerce. A passionate writer, Alexandra has an extensive background in journalism – as a graduate of Journalism and Communication studies –, as well as editing, publishing, and marketing. Together with the team of editors, she strives to bring forward the latest trends for our readers, while investigating and sharing with our community the upcoming innovative industry shifts.