A closer look at
payment systems in
online shops
When it comes to making purchases in online shops, credit cards are the preferred method of choice at the moment.
Electronic payment systems are catching up, their usage paced with the increasing popularity of shopping per smartphone and tablet. Regardless, the use of local payment methods is still trending strongly. A recent analysis undertaken by the eCommerce Competence Center of Arvato Supply Chain Solutions offers these central conclusions. The experts examined the payment methods of the most important online shops in ten selected countries – from A for Amazon, to Z for Zara.
"In this study we not only dealt with the established E-Commerce markets, but also the emerging markets in Eastern and Southeastern Europe", explains Dennis Schmitz, Vice President Financial Services at Arvato Supply Chain Solutions. Take Russia for example: payment by credit card dominates, particularly Visa, Mastercard and the national variation Mir. Payment on delivery is also extremely popular; which means the customer pays the carrier at package receipt. “What sounds unusual for us is completely normal for Russians. Some shops even use their own courier personnel: the drivers are instructed to wait for 15 minutes while the customer tries on the ordered goods and determines if they wish to keep them and make payment, or return them immediately. Often this is because of the cumbersome nature of the returns process."
Of the countries examined by Arvato Supply Chain Solutions, Russia shows the highest growth rate for mobile payments in Europe. Every second resident of Moscow already has an electronic wallet – a so-called E-Wallet – installed on their smartphone. Russians clearly prefer national systems such as Yandex Money, QIWI and WebMoney over global solutions like PayPal or Apple Pay. "Retailers who wish to successfully expand into the Russian market cannot avoid integrating the most important local payment service providers into their web shops," says Dennis Schmitz.
Online shops in Turkey offer a comparable mix of different payment solutions. Here too, credit cards are the method of choice. The most popular systems are Visa and Mastercard, each with 93% coverage. Forty percent of the online shops studied offer Troy, the only domestic credit card which is also accepted internationally. A notable characteristic of the Turkish market is the large number of national banks who offer their own credit card systems with repayment in installments – these make up 55% of all card transactions. Use of mobile payment methods is on the rise. "National providers and solutions like BKM Express, GarantiPay and Masterpass are clearly in the lead here," states Dennis Schmitz.
The preferred method of payment in Poland is bank transfer. Approximately every second customer chooses this method to complete their online order. The market is dominated by the global fintech PayU, and the two local providers Dotpay and Przelewy24. "Cash on delivery, still quite popular in Poland and offered by 60% of online shops analyzed, will lose ground to mobile payment solutions," argues Dennis Schmitz. The BLIK system in particular, which is supported by all major Polish banks as a national alternative to Apple Pay or Google Pay, is becoming increasingly important. Eight million users were responsible for 218 million transactions last year, and this number is rising.
In Sweden on the other hand, purchasing on account is one of the most popular payment methods next to the credit card. "Look first, then buy. This is of course extremely convenient for the end customer, but increases the risk of default for the retailer," explains Dennis Schmitz. As a result, more than 50% of the online shops examined who offer payment on account do so via Klarna. This fintech, headquartered in Stockholm, assumes the merchant’s payment claim and guarantees settlement, regardless of when or if the end customer pays their invoice.
"The success of an online shop depends largely on which payment methods the retailer offers its customers," emphasizes Schmitz. If preferred methods are not available, the danger of an abandoned cart increases. "The challenge is therefore to reconcile the interests of the retailer with payment preferences of the customer, while taking country specific particularities into account," says Dennis Schmitz. Arvato Supply Chain Solutions, via their own Financial Services division, offer end-to-end financial services with scalable international solutions in the areas of risk management, payment processing, fraud management, and accounts receivable. "We have a central payment system infrastructure which is able to connect with the most common payment systems, as well as the providers of local solutions," explains Schmitz.
National or international – the payment market is constantly changing. Scandinavians in particular like to experiment with new payment methods. "But you should resist the temptation of jumping on the bandwagon with every innovation," cautions Dennis Schmitz. "We monitor the profitability of online shops and analyze what influence a particular payment method has on the conversion rate – but weight this against what default risks come with it. Based on this, we are able to optimally adjust our risk and fraud management. Using the right mix of different payment systems always pays off."
The complete analysis, which also include three case studies, is available for download here: arva.to/e-commerce-payment-trends-worldwide