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Payments

Every country in Europe is different. So, it’s no surprise consumers of these countries have different online payment methods they prefer to use. In 2017, DPDgroup released its Barometer E-shopper report which shows the most popular online payment methods in Europe. When it comes to paying for the goods they have ordered online, shoppers in Europe globally prefer to pay through digital wallets, such as PayPal and Alipay. Visa and Mastercard are also very popular, followed by domestic bank credit and debit cards.[1]

Credit and debit cards popular in Western Europe

In Western Europe, it’s very common to pay with credit or debit cards for online purchases. But also here, there are many big differences among the countries. For example, in the Netherlands the credit card isn’t very popular, because 84 percent of the Dutch use the national payment method iDeal for online purchases. And in Germany, consumers prefer to pay by invoice and digital wallets, followed by direct bank transfers. And did you know Portugal is the only country where Visa/Mastercard doesn’t appear in the top three of most popular payment methods?[2]

Cash-on-delivery popular in Eastern Europe

In Eastern Europe, cash-on-delivery is still very popular. In Slovakia for example, 72 percent of online purchases is made this way! A huge advantage of this payment method is that online shoppers don’t have to give their personal data over the web and pay only when they have their goods in their hands. And in Poland, the majority of people (51 percent) use Payu, which is also popular in Turkey.

One might think that when you offer a digital wallet, Visa/Mastercard and a domestic bank credit or debit card, you can suite all shoppers in Europe. But each country has its own special needs when it comes to paying online. You should adapt your offer to each country if you don’t want to miss out on sales. These are the most popular payment methods per country, accompanied with the percentage per country.[3]

Most popular payment method per country

Austria / Invoice / 43%

Belgium / Visa/Mastercard / 51%

Croatia / Digital wallet / 53%

Czech Republic / Bank transfer / 58%

Estonia / Bank transfer / 67%

France / Visa/Mastercard / 45%

Germany / Invoice / 51%

Hungary / Cash-on-delivery / 54%

Ireland / Digital wallet / 46%

Latvia / Visa/Mastercard / 56%

Italy / Digital wallet / 51%

Lithuania / BankLink / 66%

Netherlands / iDeal / 84%

Poland / Bank transfer / 52%

Portugal / Digital wallet / 62%

Romania / Cash-on-delivery / 69%

Slovakia / Cash-on-delivery / 72%

Slovenia / Cash-on-delivery / 53%

Spain / Digital wallet / 57%

Switzerland / Visa/Mastercard / 55%

UK / Digital wallet / 46% [4]

Digital Invoicing

In Europe, electronic invoicing is regulated by Council Directive 2010/45/EU, which affects all EU member states. The EU directives broadly set forth 3 methods for sending electronic invoices that also ensure the authenticity and integrity of the generated document, as well as the electronic sending and reception of said documents:

- Through an electronic data interchange (EDI) that guarantees the traceability of business documents.

- By applying advanced electronic signatures to the invoice using electronic certificates and secure signature methods. .

- Alternative mechanisms (audit trails).[5]

Customer Experience

With the continuous evolution and increasing adoption of digitized living (i.e. a lifestyle in which internet-connected devices allow people to work, shop, play, create, share, inform, communicate, and transact in an integrated manner, on their own terms, 24/7, across the globe), consumers expect greater speed and convenience. And not only in their payments experience, but also in the way they interact and consume other financial services. Consumer preferences are changing, driven by the convenience of contactless cards, as well as online and mobile payments. New retail payment services emerging from changing consumer behaviour are expected not to impact 'incumbents' profits from payments directly, but to primarily accelerate the shift from cash to non-cash payments. The uptake of digital payments enables much more data (e.g. location, behavioural, search, preferences) to be captured across sales channels with each payment. The amount, as well as the value of data collected on individual consumers, is increasing, thanks to advancements in processing capability, data analytics, and data mining to identify payment patterns.

Using (and sharing) this data can be intrusive from a consumer’s privacy point of view, but the benefits (e.g. better budgeting and forecasting, better credit and risk profile, and use of relevant offers and discounts during the shopping journey) might outweigh the perceived risk of using (and sharing) this data with incumbent or new (payment) service providers. Consumers’ expectations regarding a richer, more personalized and seamless customer journey will continue to evolve in the future. Industry players who are not capable of capturing the fundamental importance of the customer experience will struggle to survive.[6]

Almost seven e-buyers out of ten reported that they did not encounter any problem when buying or ordering goods or services in the previous 12 months. The problems encountered most often by EU online shoppers were related to slower delivery than had been indicated at the time of making the purchase (17 %). Some 13 % had problems in the form of technical failure of a website while ordering or paying, 9 % had received wrong or damaged goods/services, 5 % had difficulties in finding information on guarantees and other legal rights and 4 % were confronted with final costs higher than indicated or found it difficult to make complaints and seek redress after a complaint. About 3 % of online shoppers in each case were confronted with foreign retailers not selling to customers in their country and problems with fraud (e.g. no goods/services received at all, misuse of credit card details).[7]

Payments Regulation

Two years after the European Commission’s original legislative proposal in July 2013, the Payment Services Directive II (PSD II) has now completed its legislative journey, having been approved by the EU Council on November 16, 2015 and published in the Official Journal on December 23, 2015. Member States must now start the process of implementing PSD II into national law. Such national laws must be effective no later than January 13, 2018. PSD II is meant to update the first Payment Services Directive (PSD I), which currently governs the regulatory regime for payment services in the EU. It brings into scope payment service providers (PSPs) that were previously unregulated and raises conduct of business standards in certain key areas, including security requirements.[8]

Local entities

Adyen, the Amsterdam-based global payments company, has launched Adyen Global Acquiring in three more countries — Brazil, Hong Kong and Australia. It had already operated as an acquirer in Europe and the U.S. For merchants in those countries, this means they can process their payments locally through Adyen rather than deal with multiple third party acquirers in each region. When the company began 10 years ago, it was more of a tech gateway, said Kamran Zaki, president of Adyen in North American. Now it has become a full fledged acquirer for Visa, Mastercard, Alipay and bank funding in Germany. The company processes payments predominantly for large enterprise merchants including Uber, KLM, Airbnb, Netflix, Evernote, Crocs and easyJet among them. The company has strong appeal to companies operating internationally because it provides a local way of accepting payments in so many countries.[9]

Mobile payments

Overall, shoppers in Western Europe have shown little interest in mobile payments to date. In France, for example, more than half of smartphone users polled by Ifop in December 2016 said they were not willing to use mobile payments, even for purchases less than €20 ($22). But mobile payments are finally poised for takeoff, according to Forrester Research. It expects the value of mobile transactions in the EU-7—France, Germany, Italy, the Netherlands, Spain, Sweden and the UK—to jump almost threefold during the next five years, from $52 billion at the end of 2015 to $148 billion by 2021, spurred by increasing consumer awareness and growing retailer interest in mobile payment options. Forrester defines mobile payments as including in-person mobile payments, such as proximity (contactless) payments; remote mobile payments (made via an app or mobile website when the buyer is not physically in a store); and peer-to-peer payments. All of these behaviors will become more widespread, with growth due to several factors:

- Proliferation of smartphones and other mobile devices capable of in-person mobile payments.

- Greater consumer awareness of and familiarity with mobile payment options.

- Convenience of mobile payments.

- Launch of more mobile payment schemes.

- Retailer interest and investment in mobile payments solutions.

Of the three types of mobile payment, in­person payments will rise fastest, Forrester believes, soaring from an estimated $4.6 billion in 2016 to $22.8 billion in 2021. By then, in-person transactions are expected to account for more than 15% of all mobile payments across the EU-7.[10]

Logistics

Logistics make up 14% of total gross domestic product in EU countries. When looking at the top 5 European logistics countries, bases on things such as the quality of transport infrastructure, efficiency of clearance process and the timeliness of shipments, the best countries are found in Western and Northern Europe. The top 5 is as follows; Germany, The Netherlands, Belgium, The United Kingdom, and Sweden. That’s not to say Eastern Europe doesn’t play its part in the European logistics scene. There’s an increased manufacturing and spending in Eastern Europe, which will drive a need to direct goods to these locations and help drive their national logistics markets. “Low cost has had significant impact on the increased market share of Eastern European drivers over Western European”, the infographic reads.[11]

Infrastructure

More than 11 million people are employed in the European logistics sector and almost a quarter of these jobs can be found in the post and courier branche. The road is the biggest carrier of goods in terms of tonnage, with over 46 million tonnes carried daily.[12]

Import Duties

The study finds that import shipments are treated differently at customs clearance (where VAT and import duty should be applied), depending on which type of operator is carrying them. We conclude that VAT and import duties are significantly less likely to be paid when shipments are sent via postal operators (instead of express carriers). This results in a significant loss of public income due to the missing VAT and import duty payment on postal shipments. Moreover, it results in competitive distortions between express carriers and postal operators. Ultimately, this distorts also the competition between European and non-European manufacturers and e-retailers.

The incomplete levying of VAT and import duty on postal shipments inbound into the EU is estimated to cause a loss of European public sector income of up to €1.3 billion per year. There is a significant difference in customs treatment depending on whether a shipment is imported via Postal operators or Express carriers. VAT is collected on only 35 per cent of items imported via Postal operators whereas Express operators score better at 98 per cent. Import duty is collected on only 47 per cent on items imported by Postal operators whereas Express carriers score better at 99 per cent.

E-commerce imports into the EU are by law subject to customs duties and VAT taxation. More specifically, shipments are subject to VAT, if the total intrinsic value of the shipment content surpasses a de minimis threshold of € 22.2. Shipments with goods of a total intrinsic value of equal to or more than €150 are subject to import duty. With e-commerce imports into the EU on the rise, collection of VAT and import duty are likely to yield considerable revenues for the public sector at both EU and EU Member State level. This however depends on the diligence with which these shipments are processed at import by customs authorities. Against this background, this study of customs clearance of cross-border e-commerce shipments aims to understand better the reality of customs clearance processes that apply when e-commerce shipments are imported into the EU. We designed a purchase and shipment experiment which investigates customs clearance applied to goods imported into the EU via express carriers on the one hand and national postal operators on the other hand.[13]

Marketing

Besides consumer expectations regarding services, the way to reach new clients also varies significantly per country. In our most recent m-commerce study, we studied the importance of mobile and found that while 31.1% of e-commerce traffic is on mobile in the UK, this rate stood at just 8.3% for Poland. The amount retailers are choosing to spend on advertising is increasing year on year. As a percentage of total media ad spending, Western Europe is expected to increase its digital advertising spend from 31.6% in 2015 to 33.3% in 2016. A similar trend is expected in Central and Eastern Europe, where digital ad spending is expected to rise from 29.3% to 31.6%. Of the different countries in Europe, the UK has the largest digital ad spend share at 49.6%, which is expected to increase to 51.9% in 2016.

According to Twenga’s Q1 online advertising study, SEM is the biggest online advertising channel with a 57% share. What’s more, the average basket size for SEM retailers is 20% higher than the overall average and 35% higher when compared with retailers using Display. This trend is reflected in the rise of e-commerce solutions for Google Shopping and services to optimise Google AdWords campaigns, both of which are significant platforms for e-commerce digital advertising. Their rise in popularity is also apparent in terms of consumer usage: the latest Digital Advertising Report from Adobe shows that although CPCs declined by 3% on Google between Q4 2014 and Q4 2015, CTR increased by 15% YoY, indicating that consumers are responding to the ads they are seeing.[14]

Shoppers

Overall, the share of e-shoppers in internet users is growing, with the highest proportions being found in the 16-24 and 25-54 age groups (68 % and 69 % respectively). Those aged 25-54 had the highest share of online shoppers among internet users in 2007-2016. In 2015 the youngest age group (16-24) overtook the EU average level to almost reach the level of 25-54 year olds. E-commerce picked up over the 2007-2016 period among all age groups, with individuals aged 16-24 showing the biggest increase (24 percentage points).

Over eight in ten internet users in the United Kingdom (87 %), Denmark (84 %) and Germany (82 %) had bought or ordered goods or services over the internet in the previous 12 months. On the other hand, fewer than 40 % had shopped online in Cyprus (38 %), Bulgaria (27 %) and Romania (18 %). The largest (more than 10 percentage points) increases between 2012 and 2016 were recorded in Lithuania, the Czech Republic, Ireland, Hungary, Spain, Italy and Slovakia (Figure 2).

Gender, age, level of education and employment situation all affect e-commerce activity (Figure 3). For men, the share of online shoppers among internet users was slightly higher than for women (67 % and 65 %, respectively), while individuals aged 25-34 are more active e-shoppers (75 % of internet users) than other age groups. Among the internet users with higher level of education, eight in 10 bought goods or services online. Employees and self-employed internet users are more likely to buy or order goods or services over the internet (71 %) than unemployed internet users (50 %).[15]

Social Media

Europe posted slightly slower digital growth than other parts of the world in 2016, but the region is building off a well-established base, so that’s perhaps unsurprising. Internet users were still up 21 million to a new total of 637 million though, representing 3% year-on-year growth. Social media use in Europe grew by 5% to pass 400 million total users across the continent, while mobile social media was up 11% versus our 2016 report, with 340 million people across the region using social media via mobile devices each month.[16]

Major shopping categories

It is estimated that nearly two thirds made purchases over the Internet in 2015, with clothes and sports-related products being the most popular type of goods and services. Due to their strong tradition of being sold by mail order, clothing and footwear is generally the most popular product category, followed by home electronics and books. The Italian market is the only exception, where home electronics are on the top of the list.[17]

Most purchases, by a third or more of e-shoppers, involved clothes and sports goods (61 %), travel and holiday accommodation (52 %), household goods (44 %), tickets for events (38 %) and books, magazines and newspapers (33 %). Fewer than one in five internet users bought telecommunication services (18 %), computer hardware (17 %), medicines (13 %) and e-learning material (6 %).[18]

Major retail holidays

Country / Biggest day

The United Kingdom / Black Friday (November 25)

Germany / November 27

France / Black Friday (November 25)

The Netherlands / December 12

Belgium / December 12

Sweden / Black Friday (November 25)

Austria / December 12

Denmark / Black Friday (November 25)

Finland / Black Friday (November 25)

Norway / Black Friday (November 25)[19]

Legal / Regulatory

The e-Commerce Directive 2000/31/EC has created the basic legal framework for online services, including electronic commerce in the Internal Market. The purpose of the Directive is to remove obstacles to cross-border online services in the European Union and provide legal certainty to business and citizens in cross-border online transactions. The Electronic Commerce Directive (e-Commerce Directive 2000/31/EC), adopted in 2000, sets up an Internal Market framework for electronic commerce, which provides legal certainty for business and consumers alike. The Directive establishes harmonised rules on issues such as the transparency and information requirements for online service providers, commercial communications, electronic contracts and limitations of liability of intermediary service providers. It also enhances administrative cooperation between the Member States and the role of self-regulation.

One of the 16 initiatives of the Digital Single Market strategy, adopted on 6 May 2015, aims to define an appropriate e-commerce framework and preventing unfair discrimination against consumers and businesses when they try to access content or buy goods and services online within the EU. Examples of services covered by the Directive include online information services, online selling of products and services, online advertising, professional services, entertainment services and basic intermediary services. These services include also services provided free of charge to the recipient and funded, for example, by advertising or sponsorship.[20]

FX Policies

The Eurosystem conducts foreign exchange operations in accordance with Articles 127 and 219 of the Treaty on the Functioning of the European Union. Foreign exchange operations include foreign exchange interventions, and operations such as the sale of interest income derived from foreign reserve assets and "commercial transactions".[21]

Technology

A large majority of Europeans used the internet in 2016. It has become important for daily life, education, work and participation in society as it enables people to access information and services at any time from any place. However, internet habits of different countries and age groups vary significantly and 14 % of the EU population have never used the internet. In 2016, 85 % of European households had access to the internet from home. This share has been gradually increasing since 2007, when only 55 % of households had access to the internet. Broadband connection is the most common technology for accessing the internet in the EU: in 2016, 83 % of the households (97 % of the households with internet access) had a fixed and/or mobile broadband connection. Over the last ten years, the percentage of households connecting to the internet with broadband almost doubled. Furthermore, in 2016 it increased by an additional two percentage points compared with 2015.

At EU-Member State level, the largest shares of households with access to the internet in 2016 were registered in Luxembourg and the Netherlands (97 % each). Five other Member States presented shares of connected households above 90 %: Denmark and Sweden (94 % each), the United Kingdom (93 %), Germany and Finland (92% each). At the other end of the ranking scale, the lowest proportions were registered in Bulgaria (64 %) and Greece (69 %) followed by Romania and Lithuania (72 % each).[22]

High shares of households' broadband connections were recorded in the EU in 2016 with significant differences across Member States.Within Europe, we find that Internet use and purchases online vary significantly amongst the different countries. The United Kingdom leads the way with 81% of individuals buying online in 2015, followed by Denmark and Luxembourg with 79% and 78% respectively.[23]

Security

The European Commission is drafting new cybersecurity requirements to beef up security around so-called Internet of Things (IoT) devices such as Web-connected security cameras, routers and digital video recorders (DVRs). News of the expected proposal comes as security firms are warning that a great many IoT devices are equipped with little or no security protections.[24]

Mobile appetite

Some 54% of European consumers are using a mobile device to make payments for a range of activities in-store, in-app and online, compared to 18% at this time last year, Visa’s 2016 Digital Payments Study has revealed. Only 12% of respondents have never used these methods of purchasing and have no plans to do so, a drop from 38% in 2015. Contactless card carriers are more interested in using a mobile device as a payment method in-store compared to non-contactless users (52% vs 32%). They are also keener to shop via a retailer’s own app (49% vs 31%) and using their mobile to pay for a meal (50% vs 30%). Turkey has the highest proportion of mobile payment adopters with 91%, followed by Denmark (89%), Norway and Israel (87%), Sweden (86%), Poland and Romania (79%), Ireland (78%), Finland (77%) and Belgium with 75%. In the UK, 74% of those surveyed make mobile purchases, with more than half using their device to transfer money to friends and family (59%) and just under half paying for takeaway meals (45%). 43% buy high value items such as holidays and electronics on a mobile device, 42% make regular transactions such as paying household bills and 41% acquire bus or train tickets.[25]

References

  1. Ecommerce News Europe "Online Payment Methods in Europe"
  2. Ecommerce News Europe "Online Payment Methods in Europe"
  3. Ecommerce News Europe "Online Payment Methods in Europe"
  4. Ecommerce News Europe "Online Payment Methods in Europe"
  5. Edicom "E-invoicing Europe"
  6. The Paypers "Ecommerce Payment Methods Report 2016"
  7. Eurostat "E-commerce statistics for individuals"
  8. Sidley "EU Payment Services Directive II Introduces Broader, More Stringent Regulation of Payment Services"
  9. Forbes "Global Commerce Needs Global Payments in Local Geographies"
  10. eMarketer "Personal Mobile Payments on the Rise in Europe"
  11. Ecommerce News Europe "The future of logistics in Europe"
  12. Ecommerce News Europe "The future of logistics in Europe"
  13. politico.eu "Europe Shipments Study"
  14. Twenga Solutions "E-commerce in Europe 2016: Facts & Figures"
  15. Eurostat "E-commerce statistics for individuals"
  16. We Are Social "Digital in 2017: Global Overview"
  17. Twenga Solutions "E-commerce in Europe 2016: Facts & Figures"
  18. Eurostat "E-commerce statistics for individuals"
  19. Ecommerce News Europe "Biggest Days Online Shopping Europe"
  20. European Commission "Digital Single Market"
  21. European Central Bank "Foreign Exchange Operations"
  22. Eurostat "Internet access and use statistics"
  23. Twenga Solutions "E-commerce in Europe 2016: Facts & Figures"
  24. Krebs on Security "Europe to Push New Security Rules Amid IoT Mess"
  25. NFC World "Study shows growing European appetite for mobile payments"