7th April, 2023
A report by FIS has highlighted that consumers in Europe are drifting from paying with cards and cash towards alternative payment methods (APMs).
The popular alternative methods are digital wallets, account-to-account (A2A) and buy now pay later (BNPL). Credit and debit cards’ collective share of regional e-com transaction value is forecast to decline from 40% in 2022 to 35% in 2026.
Also, the alternative methods are the most preferred payment method in 10 out of the 14 European countries featured in the report, GPR 2023. There is no one preferred e-commerce payment method among all. This is due to multiple factors, including differences in local culture, regulation and technological innovation.
Some of the highlights from the report:
- Digital wallets are projected to grow at 12% CAGR in e-com between 2022 and 2026.
- Europe also has by far the largest regional share of BNPL e-com transaction value in the world, estimated at 10% in 2022.
- A2A payments represented 18% of Europe’s e-com transaction value in 2022, but there are huge differences in adoption rates by country. In Poland, Finland and the Netherlands, A2A is the dominant online payment method. Cards and digital wallets dominate in Denmark and the U.K., with A2A representing only single-digit shares.
- PayPal is still popular in countries like France, Germany and the U.K., while local A2A brands are flourishing in markets across Europe. These include MobilePay in Denmark, Vipps in Norway and BANCOMAT Pay in Italy.
- Cash use continues to decline rapidly in Europe, in line with global trends. Cash’s regional share of POS transaction value dropped from 40% in 2019 to 22% in 2022.
Travellers are increasingly opting to pay via AFPs. Entities like UATP let airlines streamline AFP implementation using existing connections and technologies, in support of a unified payments strategy.
Mechanisms have been worked out to pave way for faster speed to market at lower cost through the use of existing connections, and also streamlining of back-office reconciliation, including reconciliation reports.
During one of Ai’s events last year, it emerged that the top reason behind airlines opting to accept AFPs is lower merchant fees (according to Edgar, Dunn & Company’s research). This is owing to the fact that net profit margins are typically low in this sector.
By Ritesh Gupta, Ai Events