The way people pay for things is changing, and it’s changing fast. Some economists believe that cover-19 lockdowns have forced people to change their behaviour so that 10 years of behavioural consumer change has happened within the space of only a few months.
The rate of change in payment behaviour is different in each country and there is often a direct correlation to the way that people pay for things and how often they shop online. In this article we will look into the dominance of certain digital payment solutions vs the use of cash in certain countries.
Let’s start with the US. It may be surprising to know that in the land where credit is widely used one third of people still pay with cash. However an increasing number of consumers are looking to pay by digital means. 74% percent of US consumers have expressed they still want to use contactless payments after the pandemic has passed. Incidentally ecommerce sales shot up by over 70% in 2020 during the pandemic, thats a huge shift and will have long term impacts with online payments in the US.
How people pay for things online is fairly varied, but once again that’s changing fast. Credit cards make up the bulk of payments with 30% of the share of online payments, with debit cards standing at 21% (Credit cards are used in the US more widely than in any other country in the world).
Digital wallets are catching up fast with 30% of online payments however this is divided up into a plethora of providers including PayPal, ApplePay, Google Pay & Venmo. PayPal is still dominant, appearing on 65% of US smartphones. Other payment options like Apple Pay and Google pay are catching up, however they lack the peer to peer application where friends can pay one another, at the moment these solutions are purely focusing mainly on ecommerce payments and App Store payments.
Next moving on to Germany which sings to a different tune when it comes to payments. In Germany cash is king with 67% of all transactions made in cash, this means that retail still dominates in a country where consumers tend to be more conservative and security conscious. Incidentally debit cards and credit cards are used, but they tend to be used for larger amounts adding to this current account transactions dominate with €13 billion of revenues transferred out of a national total of €25 billion.
My good friend in Berlin used to work in a bank as a student and talked of stories where older customers would come in once per week to have their money in their account counted out to them in Euro bills.
While cash is still hugely popular Germans are changing their behaviour and the pandemic has changed peoples perspectives quickly, it’s calculated that over the next few years cash usage will drop down by 30%.
But what about digital payments? People shop online right? Yes of course people shop online and more than ever. Paypal & Amazon are dominant in Germany:
*”PayPal is the leading APM in Germany. For eCommerce transactions in 2019, there were 312,000 daily active users in Germany on PayPal. 57% of German consumers used PayPal most for mobile payments, and similar online payment methods to PayPal and Amazon Pay were preferred by 74% of German consumers in 2020.”* Source
PayPal is seen as a preferred payment option by many ecommerce platforms due to it’s secure set up, and Amazon are making their payment API more widely available with greater support.
On to the next country (where I live) the flat lands of the Netherlands. While it neighbours Germany, the Dutch market is very different from it’s cousins. Only 15% of payments are made in cash and that’s expected to reach almost zero by 2025. Most Dutch people pay with a solution called iDeal which is barely known outside of the Netherlands. iDeal accounts for 60% of all online payments as the Dutch tend to avoid the use of credit cards. iDeal is effectively a direct debit from a current account and banks provide interfaces in their app to make payments. In direct correlation to iDeal the Dutch love to shop online with 81% of the population buying something online in 2019 (I’m sure that number has now increased) trails behind the UK which leads at 87% of the population.
In Sweden by 2022 cash usage will be virtually non-existent and it’s highly likely to be the first entirely cashless country in Europe, even homeless people accept digital payments on the street. Online payments like Klarna are increasingly popular and use the Buy Now Pay Later (BNPL) model for online payment where fees are passed on to vendors which they often grumble about. Vendors complain yet consumers like Klarna as they experience growth and expand into other markets.
Global payment behaviours offline and online are changing, and there is often a direct correlation between the use of cash and the uptake of online shopping. For ecommerce vendors it’s important to take into account that consumers from different markets will expect different ways to pay and this will directly affect the success of a conversion in an online setting.
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