GUEST BLOG: Consumer payment preferences for EU transactions

By Heather Landau, Open A European Company.com

According to Internet Retailer, web sales through e-commerce platforms increased by 16.8% last year and the global e-commerce market is projected to reach over $2tn by 2017.

The e-commerce industry is huge business, accommodating both established international companies, and smaller, niche organisations that sell a variety of products ranging from disruptive technologies to Unicorn meat (apparently it’s infused with magic and rainbows).

Regardless of the industry you’re in, the scope and variety of business opportunities available are staggering. However the e-commerce industry isn’t without its challenges, especially for businesses that are looking to expand their reach overseas.

There has been an increasing discussion on how to accommodate the diverse payment preferences of consumers located in different countries. While it’s often assumed that most consumers use international credit cards to make online purchases, this is far from the reality in a number of markets.

The term where shoppers buy from businesses in other countries is often referred to as cross border e-commerce, and considering 21% of international trade is derived from this type of transaction, the challenge for many companies has been selecting the right payment method for their customers.

Depending on the country you’re looking to expand into, one of the first steps will be to ask yourself questions pertinent to your potential market: how do Italian consumers pay online, is PayPal widely used in the Netherlands and do German consumers use credit cards for online payments?

The answers can vary widely across countries:

Germany
While face-to-face credit card spending is increasing by 3% per annum in Germany, this trend doesn’t necessarily translate to online consumer behaviour.

Customers in Germany prefer to use bank transfers and direct debits to make the majority of their e-commerce payments (67% in 2015).

The most preferred online payment method is called Elektronisches Lastschriftverfahren (ELV), an electronic direct debit payment method that’s supported by the majority of banks in the country.

Netherlands
If you’re looking to expand into the Netherlands, then iDeal is an absolute necessity. It’s a local payment method covered by the major Dutch banks and accounts for approximately 60% of all e-commerce transactions.

France
Visa and Mastercard are the most popular options in France, used in conjunction with an interbank scheme called Carte Bancaire (often co-branded with Visa or Mastercard) they account for 83% of all e-commerce transactions.

Mobile purchases at 20% are however below the global average of 24%.

The UK
Similar to France, in the UK credit or debit cards are the most popular with consumers holding between two to three cards at any one time.

Cards account for around 90% of all transactions (Visa 55% and MasterCard 32%) and online banking is rarely used.

PayPal has also gained ground accounting for 10% of consumer activity.

Heather Landau

The task of setting up a merchant account and catering for all audiences can seem daunting, with merchants typically having to undertake a range of activities (setting up local bank accounts, managing transactions, complying with regulatory requirements) for every single new payment method they accept.

However considering that the top 10 payments types account for the vast majority e-commerce spend, then by incorporating the most popular payment methods, you’ll most likely be able to cater for the vast majority of your consumers preferences.

Another consideration when determining which markets to enter will be how ‘open’ a particular country is towards buying goods from an overseas supplier.

In a recent report by Adyen:

• 25% of Swiss, Belgian, Irish, Dutch, and German shoppers are relatively open to making cross border purchases.
• Danish, Swiss & Italian are 10-25% open to cross border payments.
• The French, Portuguese and Spanish are the most adverse at below 10%.

Another consideration when determining which markets to enter will be how ‘open’ a particular country is towards buying goods from an overseas supplier

Online businesses looking to enter different e-commerce markets throughout the EU (or indeed around the world) will need to research not only the likelihood of overseas customers using your services, but which payment preferences has the very best chance of turning visitors to your website into paying customers.