The global payment landscape is fragmented. Whilst cash transactions still dominate in many regions, we’re also seeing an increased adoption of card and other digital payments. Smartphones and wearable devices have introduced the option of mobile payments. Online shoppers choose between card payments, bank transfers, and other digital solutions to pay for purchases.
In this article, we’ll examine the key payment trends affecting merchants today. Beginning with a global perspective, we’ll then focus in on Europe and four countries in particular: Switzerland, Belgium, the Netherlands, and Germany. Finally, we’ll consider the implications of these trends on businesses.
Across the globe, traditional paper-based payment methods are in decline. During the last five years, the share of the world’s transactions carried out in cash has fallen from 89% to 77%, according to McKinsey. Certain countries buck the trend; 70% of Japanese consumers, for example, favour cash, citing security concerns with digital payments.
Meanwhile, global non-cash transactions have been predicted to grow at a compound annual growth rate (CAGR) of 12.7% between 2016 and 2021. An enduringly popular payment method is the debit card, whilst newer tools such as digital wallets are also on the rise. It’s estimated that digital wallet apps added 40 billion USD (35.7 billion EUR) to global payment revenues in 2017.
In Europe there are huge variations between countries in terms of the most popular payment methods. As of 2016, 79% of European POS transactions used cash: in southern Euro area countries, as well as Germany, Austria, and Slovenia, this rose to above 80%. Conversely, in the Netherlands, Estonia, and Finland the use of cash fell to, or below, 33%.
Despite the high numbers of cash transactions across Europe, more and more Europeans are also embracing digital payment methods. In 2017, 77% of Europeans were already using mobile banking and/or payments, and 68% had used a digital wallet. With the increasing availability of contactless payment facilities, we can expect to see a rise in these payments in the future.
Amongst Swiss consumers, the debit card is the winner; it’s considered an easy, practical, trustworthy payment method, and accounts for 25% of total expenditure. However, the debit card’s popularity hasn’t displaced cash, which is still used for 49% of transactions. Cash is the most likely payment method for small sums – up to CHF 20.
The Swiss are yet to fully embrace digital payments. Only 7% of those surveyed by the Swiss Payment Monitor used contactless payments, and only 2% used mobile payments. Although 47% of Swiss people research products on their smartphones, very few use them for purchase – perhaps because of the higher phone tariffs in Switzerland.
In Belgium, consumers resemble the Swiss in their preference for card payments. An enormous 97% of Belgians surveyed by Bancontact Payconiq in 2019 had complete confidence in the security of their PIN-protected bank cards. Cash payments tend to be reserved for purchases in a café or bakery; bank cards are used for more expensive items.
Belgian consumers are also beginning to get on board with contactless and mobile payments. As a whole, 68% of Belgians have downloaded a banking or payment app, and 83% of those under 35 years old have such an app on their mobile device. In addition, 32% of Belgians say they’ve used contactless payments – that’s four times more than in 2017.
Consumers in the Netherlands have embraced contactless like nowhere else in the EU. According to the Dutch Payments Association, the majority of card payments are now contactless. As of 2017, contactless payments were used for 10% of all retail transactions, whereas cash was used for less than 45%. The trend continued over the following years.
Mobile payments are a different story: the DPA say that “contactless payments with smartphones or wearables…are still rare but are expected to become more common in the years to come.” In the area of eCommerce, most Dutch customers choose bank transfers to make a payment, with iDeal being the most popular provider.
Germany presents a contrast to most other northern European countries, as it’s still a heavily cash-focused society. As of 2017, 80% of POS transactions were made with cash. This enduring attachment to cash seems to have historic roots; as Bloomberg’s Matthew Campbell writes, “…the use of cash has…become a proxy for profound concerns about trust, privacy, and the role of the state.”
On the other hand, there is evidence that German attitudes are shifting in favour of card or digital payments. Of those polled by First Data in 2019, 42% said that contactless payments were more convenient – whilst only 22% thought that cash was more convenient. But mobile payments still have a way to go, with only 11% of German smartphone users using mobile payment apps.
In a complex global payment landscape, perhaps the one unifying factor is the choice of most individual consumers to use several different payment methods – depending on the situation. Whether it’s cash for a coffee, a credit card for fuel, or a bank transfer for an online shop, customers often pick their payment method based on the type of store or purchase.
Therefore, as a merchant you need to be ready with the facilities to accept all kinds of payments, and to promote these to your customers. No matter the size or scope of your business, CCV can help you find a POS system that’s right for you. Feel free to get in touch with us today to learn more.