Convenience, not any one card, is the key to increasing conversions

Credit and debit cards continue to rule e-commerce payments, but as more of us turn to our mobiles, alternative payment methods are gaining ground. Their success lies in offering consumers the security and convenience they expect.

Old habits die hard. Today’s payments landscape, both offline and online, is still ruled by cards. Even Denmark, the biggest e-commerce market in the Nordics, remains dominated by national debit card Dankort rather than Apple Pay.

Just as no one card fits all, no one payment method reigns supreme in any of the 14 countries we present in the Arvato Payments Review. In the Netherlands, for example, using online payment provider iDEAL to pay by instant banking transfer is second nature to Dutch consumers. But our research confirmed that across all markets, pay-after-delivery is gaining ground: the high rate of returns experienced by segments such as fashion and consumer electronics makes it vital for them to maximise conversions. And, as the added convenience of payment options such as instalments and subscriptions come on stream, even the Dutch can’t resist the appeal of pay-after-delivery.

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Alternative payment methods are set to become even more relevant with the shift towards m-commerce and omni-channel retailing. New players are emerging with alternatives based not on cards but rather on direct debit or financed pay-after-delivery solutions that make life easier for consumers. Nowhere is this more evident than in the Nordics: Sweden and Denmark are racing towards a cashless society as new technology and innovation in real-time payment platforms fuel the growing popularity of mobile payment services such as Swish and MobilePay, respectively.

So, what has changed? Across Europe, regulation is creating a more competitive, secure and level payments playing field, alongside the unbundling of banks by new competitors. The first Payment Service Directive came into force a few years ago and has already pushed interchange fees on card payments down, encouraging payment providers to push alternative payment methods as they look to earn money elsewhere.

Banks, meanwhile, are being forced to open their APIs to third-party providers, meaning they will not necessarily be providing everyday banking services two years from now. Instead, you might turn to a fintech provider who bundles the information from your bank with loyalty schemes, gift cards or financial planning services. Then, you have Arvato Financial Solutions pushing convenience at the point of purchase, both offline and online.

E-wallets and mobile payment platforms are a case in point with international services like PayPal and local players such as MobilePay and Swish, Vipps in Norway and Bunq in the Netherlands all rapidly gaining ground. Having started out as platforms for peer-to-peer payments, they are now used to make offline and online purchases, primarily through instant bank transfers by mobile.

New types of identification and authorisation tools, such as electronic ID, helps consumers feel more secure and reduces the risk of fraud. Some markets are moving more quickly in this area than others. In Germany, for example, there is no common e-ID solution so it will take longer for e-wallets to take off. Elsewhere, the Nordics are proving it is just a matter of time before they do.

As we see growth in new verticals such as groceries, and consumer expectations of the same payment method working in every channel, we will also see an increase in alternatives such as instalments and subscriptions. This in turn feeds into the trend for one-click purchasing and seamless payments.

Even markets such as Switzerland and Germany will be affected, even though they are typically more conservative in their choice of payment methods. Today, the setup for pay-after-delivery in the DACH countries (Germany, Austria and Switzerland) differs from the Nordics, where an outsourcing partner typically takes care of risk, fraud and financing. As the complexity of managing risk and fraud increases, and the demand for instalments and accounts becomes greater, doing so without a partner will become riskier and more expensive.

Never underestimate the importance of the optimal payment mix on your conversion rates: cart abandonment is still largely down to not having the right payment methods. Don’t think you can manage on cards, PayPal and Apple Pay across Europe: you need the local payment hero, and you need to know which alternative payment methods are most relevant to your business, market and customers. The more convenient your payments are for your customers, the more successful you will be.

Compare country data

Compare data across the 14 different countries. Find out more about local payment methods, fraud and risk, and consumer behaviour.

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