Insights into local developments and payment preferences in the UK and Australia

Thursday 16 February 2023 10:40 CET | Editor: Raluca Constantinescu | Interview

Andy Mulcahy of IMRG and Andy White of AusPayNet elaborate on the main local developments impacting ecommerce and consumers' payment preferences in the UK and Australia.


What are the main local developments impacting ecommerce? 

Andy Mulcahy: If we take ourselves back to the very beginning of the 2020s, we can see that the pandemic was a great catalyst for strong online retail growth. As we approach the third year into this new decade, we can see how the Ukraine conflict and subsequent spikes in the cost of living resulted in growth dropping away. From January 2022 until now, we have seen consistent year-on-year negative territory growth for revenue by month, which implies reduced customer confidence and heightened disenchantment for retailers as they look toward the year ahead. Furthermore, the Bank of England is forecasting a recession that could last until the end of 2024, the longest in 100 years, so that confidence is likely to be impacted for the foreseeable future. 

Andy White: Australia has a high level of ecommerce penetration, and online retailing has increased still further since the advent of COVID-19. In non-seasonally adjusted terms, online retailing increased from AUD 33 billion in 2020 to AUD 42 billion in 2021. This growth is continuing through 2022. 

Technology availability helps meet this customer demand and is also changing the way Australians pay. Revised regulation, which seeks to support the growth of the digital economy, facilitate innovation, and ensure consumer protection is another factor. 

What can you tell us about consumers’ payment preferences? 

Andy Mulcahy: While customers continue to choose traditional methods of payment, whereby credit/debit is still dominant, and the likes of PayPal are still significant too, there has been a shift that sees ‘Buy Now, Pay Later’ (BNPL) services becoming more popular. IMRG’s survey of 1,000 UK respondents from August 2022 reveals 55% have used ‘BNPL’ methods in the last 12 months, suggesting that more people have altered their payment preferences as the cost of living rises. A considerable amount of respondents, 43%, answered ‘No’, albeit we might see more of an uptick in the next couple of months as more people start to buy Christmas presents but cannot afford heavily dented pockets. Only 2% of respondents exclaimed that they are ‘unsure’, demonstrating that the option is now known and well-versed in discourse. 

Andy White: The number of methods by which Australians can now transact has also grown significantly. Today, Australians can use credit cards, debit cards, mobile wallets, Buy Now, Pay Later (BNPL), and account-to-account payments, as well as cash and cheques. 

The Reserve Bank of Australia’s ‘Consumer Payment Survey’ in 2019 showed that card payments made up 48% of online payments in 2019 and that mobile wallets made up 40% (double the 2016 share). Indeed, between March 2020 and March 2021, the number of monthly digital wallet transactions increased by 90%, from 36 million to 68 million, and the total dollar value of digital wallet transactions more than doubled, from AUD 1 billion to AUD 2.1 billion. Nearly half of Australians now use their mobile phones to make payments

Whilst the pandemic has driven some of these changes, consumer preference for the convenience and ease of use of ecommerce continued unabated and across all demographics, with 93% of Australians going online in 2020 compared to 68% in 2017. 

This growth in digitisation requires a focus on payments modernisation to optimise outcomes efficiently and simply for the end-users of payments. It also has a profound impact on paper-based payments, such as cheques and cash, whose usage continues to decline (for example, cheques now account for under 0.2% of consumer payments). 

What are the specificities of consumer behaviour that brands should be aware of before entering the market? 

Andy Mulcahy: Conversion rates are around 20% lower in 2022, revealing that there is less customer propensity to spend. However, traffic growth has continued to be positive, with IMRG’s year-on-year (YoY) weekly results presenting numerous peaks since April. Thus, we can infer that if we can get over the worst of this economic crisis, customer demand on online retail sites should return. 

Whilst retailers continue to push collect in-store options, such as ‘Click & Collect’, there continues to be a big preference for home delivery (87%), much more so than is typical in some other European markets. IMRG’s UK Customer Home Delivery Review reveals that where C&C was proving more popular a few years back, it has become less desirable since the pandemic. As customers have adapted and become well-accustomed to home life, fewer (12%) are willing to alter their habits and visit stores. Additionally, while waiting for their parcel at home, most customers (68%) prefer to be alerted the morning of delivery, with a time window specified. 

IMRG Buy Now Pay Later service use in the UK

Andy White: In such a highly digitised marketplace, new entrants will need to focus on consumer preferences in payments, ensuring simplicity and ease of use for end-users whilst managing the ever-present and evolving risk of economic crime. 

Fraud perpetrated on Australian cards totalled AUD 500 million in the period 1 July 2021 to 30 June 2022. The overall fraud rate was 54.7 cents per AUD 1,000 spent, down from 57.8 cents in 2021. Card-not-present (CNP) fraud accounts for 91% of all fraud on Australian cards, reflecting the rising volume of payment transactions online post the pandemic. However, the reduction in the fraud rate indicates that industry collaboration is having an impact on the level of CNP fraud. Similar industry collaboration on scams is now underway.

This editorial piece was first published in The Paypers' Cross-Border Payments and Ecommerce Report 2022–2023, which taps into the fast-growing cross-border market and provides a comprehensive overview of trends and developments that are pivotal in this space, being the ultimate source of information for ecommerce businesses interested in expanding globally. 

Andy Mulcahy, Strategy and Insight Director, IMRG 





Andy White, CEO, AusPayNet




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Keywords: BNPL, ecommerce, online shopping, retail, COVID-19, regulation, payment methods, account-to-account payment, online payments, digital wallet, marketplace
Categories: Payments & Commerce
Companies: AusPayNet, IMRG
Countries: Australia, United Kingdom
This article is part of category

Payments & Commerce




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