How Can European Merchants Benefit from New Online Payment Trends?

The online payment sphere is developing rapidly and the European authorities introduce new laws to regulate it. From this article, you will get to know about the main trends of the industry and will be able to use them for the benefit of your business.

If you are planning to register a company in Europe, you should open a merchant account. If you already have a business, you might want to boost your revenue by optimizing your payment methods. From this article, you will get to know about the most important payment trends on the continent. This information might inspire you to modify your workflow, adopt new payment solutions and explore advanced technologies.

E-Commerce Becomes Better Regulated

Financial transactions between businesses and consumers are regulated by the European Payment Services Directive. The European Commission strives to create a unified regional market where payments will be quick, safe and transparent. Regulatory bodies will need to put a lot of effort into consolidating the fragmented market and it might take them many years to achieve this goal. Nevertheless, the first steps are already being made.

• Strong Customer Authentication implies obligatory two-factor authentication for electronic payments. Most likely, mobile commerce will become the first sector that benefits from this legislative update. The biometric security options on smartphones will strengthen.
• According to the Directive, third-party entities will get a right to initiate payments on behalf of consumers.
• Internet businesses and startups will be able to access the spending data and habits of their audience. This will enable them to launch innovative and customized banking services.

UK companies will need to act according to the Open Banking Initiative. This document states that authorized online organizations can ask major banks to share their current account data with them, securely and in a standardized format.

E-Commerce Popularity Is Increasing

Germany, France and the UK are considered mature e-commerce markets and are growing relatively slowly. The Czech Republic, Italy and Spain are embracing this sector quicker than other states.

Mobile commerce is developing especially rapidly. The residents of the Czech Republic and the UK make most of their online purchases from their smartphones. The Swedes, the Norwegians and the Irish also display a steadily increasing interest in mobile shopping.

Discounts Are One of the Main E-Commerce Drivers

If people have a chance to buy something in a foreign shop cheaper than abroad, they will be likely to do it. They will not mind waiting longer for the delivery. To detect the best offer, savvy consumers rely on price-comparison sites. One-off discount events, such as Cyber Monday or Black Friday, permanently attract a lot of attention.

Most Europeans Still Use Cards to Pay for their Purchases

The residents of wealthy, digitally advanced countries with high bank penetration remain loyal to cards. Citizens of less affluent states are more eager to explore alternative and innovative payment methods. According to J.P. Morgan, cards are the primary e-commerce payment option in Denmark (63.4% of payments), Ireland (60% ) and the UK (53%).

In most European countries, each resident has at least one card. Most likely, this payment option will remain relevant for many years ahead. These are the main reasons for it.

• They feature strong 3D Secure protection and other anti-fraud technologies are quickly developing too.
• Mastercard and Visa are powerful brands that millions of people trust.
• Cards are ideal for recurring payments.

For repetitive transactions, direct debit also comes in handy. This payment system has good chances to thrive thanks to the Europe-wide rise of subscription services.

Open invoicing and bank transfers, on the contrary, are not suitable for recurring payments. But the former has not become obsolete yet. In Germany, this method together with direct debit payments accounts for 40% of online sales. As for bank transfers, people in the Netherlands, Switzerland and Finland keep on using them much more often than in other countries.

Web Wallets Are a Hot Trend

The main shortcoming of cards is that consumers need to share their financial credentials with merchants. This is why consumers became so enthusiastic about web wallets. On average, 1 in 4 purchases in the UK is carried out using a digital wallet. In Italy, it is 1 in slightly less than 3 purchases.

The authors of The State of Online Banking survey asked people whether they would be ready to buy something at a foreign online shop if they did not need to provide their payment card details to an unknown international merchant. The following number of respondents said yes.

• Spain — 68%
• Italy — 66%
• France — 61%
• Germany — 55%
• The Netherlands — 55%
• Sweden — 51%

People confessed that the main argument against shopping on foreign sites for them was fraud risks.

The Benefits of the Card Plus Strategy

To expand their client base, boost their sales and maximize their revenue, merchants should offer their clients multiple payment options. But it does not mean that business owners should add to their sites as many payment methods as possible. Shops of any scale and sphere should accept Visa and Mastercard because these cards are popular all over Europe. Plus, they need to consider 1-3 alternative methods for domestic and foreign consumers.

The exact choice should depend on the national legislation of the merchant’s country and the preferences of their target audience. Ideally, all the payment solutions should be mobile-friendly. At least one solution should offer customers maximum privacy. Apart from web wallets that were mentioned in this article, the merchant might consider prepaid cards. This is one of the safest and the most confidential ways to transfer money online — but its penetration within the European market is still very low. According to Statista, only 8% of UK residents have used prepaid cards within 1 month in 2018. In Germany, that ratio was 5% and in Austria — 4%.

Conclusion

European merchants should keep up with the news of the payments sphere. Numerous exciting changes are going on in this industry, which opens excellent opportunities for business growth and development. While it is still premature to talk about a unified European market, entrepreneurs should understand that many foreign customers might be eager to buy their products — provided that they can pay for them safely and without revealing too many personal details.

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