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  1. Analysis
May 22, 2015

A European view of consumer payment behaviour

In recent years, there has been an increase in the variety of cashless payment methods encompassing card transactions, mobile payments, online systems and even virtual currencies.

By Verdict Staff

In recent years, there has been an increase in the variety of cashless payment methods encompassing card transactions, mobile payments, online systems and even virtual currencies.

Consequently, consumers across Europe now have more choice than ever when it comes to how they make cashless payments and the favoured solutions vary from country to country. Despite continental economic integration and – with a few exceptions – a shared currency, customers continue to have very different dispositions when it comes to making payments.

In some cases this is related to national legislation but, more often it is simply a matter of consumer or retailer preference. The dominant payment mechanisms are whatever people feel most comfortable with. Knowing how customers like to pay is key for retailers who wish to expand in these markets.

Established cultural behaviours have an important influence on payment practices. With the exception of large purchases such as property or motor vehicles, Germans have traditionally been reluctant to taking on credit and buying things with money that they are perceived as not currently having. In Germany, cash continues to be the most common method of payment for everyday purchases.

It is rare for consumers to offer card payment for a transaction of less than five euros due to worries that they may be seen as not ‘having the money’ – or to avoid discussions around a surcharge for card use that occasionally retailers ask for.

However, attitudes are changing thanks to cashless payment methods being adapted to mirror traditional consumer behaviour. One example of this would be credit cards that are actually deferred debit – where the balance is repaid in full at regular intervals.

German retailers, especially high frequency businesses, are keen to introduce new technology but acceptance among consumers is slow. However, trust in payment technology has increased with the rise of e-commerce and security concerns have eased. Online banking has become more prevalent, although Germany still lags slightly behind the UK. Germans are becoming enthusiastic online shoppers, taking advantage of discounts, price comparison sites and the ease of buying from home.

In Italy, in the majority of cases, cash remains the preferred method of payment although there has been a gradual increase in the number of card payments – between 2009 and 2013, the number of cards in circulation rose by 6.96% to 116 million.

The Italian Post Office has put significant resources into promoting prepaid cards and the response has been positive, particularly amongst lower income consumers who can now make internet payments. Between 2013 and 2018, prepaid card ownership is predicted to increase by approximately 17 per cent and register a compound annual growth rate (CAGR) of more than 13 per cent in terms of transactions.

Credit card use in Italy has remained stagnant in recent years but a growth effect comes from a government imposed cap on cash payments, all purchases of over €1,000 must be made by card or bank transfer.

In stark contrast to its southern neighbour, card payments are well established in Switzerland. This has facilitated strong growth in online shopping and as Switzerland is not part of the Eurozone and has an appreciating currency, items from outside the country are cheaper for Swiss consumers.

It’s a similar story in Luxembourg and Lichtenstein. In all three countries, debit cards are the preferred non-cash payment method with credit cards less popular. As a result, there is still room for these markets to grow and evolve.

In Austria, the number of card transactions has grown steadily, but cash still remains the most commonly used method of payment. With a card population of 8 million, debit cards are the most popular alternative. Yet credit and charge cards have increased in number, and so has card usage.

As in every maturing market, the increase in card usages and the evolution into a commodity results in lower average transaction volumes. This development calls for efficiency at check-outs. There has been increased investment in payment infrastructure as terminals with contactless capability replacing many older style point-of-sale systems. New terminals allow payments of €25 or less to be made more quickly and efficiently than before and are expected to drive greater card use in low-value transactions in the coming years.

For historical reasons, Eastern European countries have the advantage of a less entrenched payments infrastructure, unburdened by legacy processes and technology. As a result, they have been able to push forward onto the latest technologies and systems as easily – and in many cases more easily – than their more commercially established western European counterparts.

Poland is a good example, having a good POS infrastructure in place, and in Warsaw, contactless payments are probably as natural a thing as they are in the UK. However, despite the potential benefit of being able to adopt new payment practices quickly, the majority of the Polish population remains heavily attached to cash. Poland has the highest cash payments proportion in Europe at around 90 per cent. There are many card holders but frequency of use remains relatively low. This can be attributed to the risk adverse nature of both banks and consumers – the banks are reluctant to extend credit and consumers are wary of taking it on.As with many areas of life, people are naturally suspicious of new things unless they see a clear and tangible benefit and are comfortable using it. The same applies to payment methods.

There is a growing acceptance of cash alternatives and the benefits that they offer. For retailers, there are lower costs due to less administration being needed and the relative security of cashless transactions as well as customer insight based on data and loyalty programmes. For the consumer, going cashless offers greater flexibility, security and efficiency. Alternative payments through mobile phones are on the rise as well, reflecting the worldwide trend to have everything on a smartphone.

Currently, the cashless payment method of choice varies across Europe. It is likely that new technologies will increase the diversity of payment preferences over the next few years. Over time however, cashless payment methods will permeate further and become an integral part of society.

Luc Holper, Head Market Development Financial Industry Services at SIX Payment Services

  1. Analysis
May 22, 2015updated 04 Apr 2017 4:02pm

A European view of consumer payment behaviour

In recent years, there has been an increase in the variety of cashless payment methods encompassing card transactions, mobile payments, online systems and even virtual currencies.

By Verdict Staff

In recent years, there has been an increase in the variety of cashless payment methods encompassing card transactions, mobile payments, online systems and even virtual currencies.

Free Report
img

Prepare for changes in the Payments market

 The Payments market has seen drastic changes in the past few years, with this only expected to continue. What does your company need to do to prepare for what’s to come? GlobalData’s Payment Trends for 2022 report explores the key trends in technology, consumer habits, and regulations shaping the market. We also identify the leading companies in this changing market, giving you a competitive market outlook. This report covers the impact of:
  • ESG
  • E-commerce
  • Mobile payments
  • Alternative payment rails (Real-Time Payments, Blockchain, BNPL)
  • Fraud & Cybersecurity
  • Regulations
Download the report now to learn essential strategies to maximize your growth in the face of rapid change.
by GlobalData
Enter your details here to receive your free Report.

Consequently, consumers across Europe now have more choice than ever when it comes to how they make cashless payments and the favoured solutions vary from country to country. Despite continental economic integration and – with a few exceptions – a shared currency, customers continue to have very different dispositions when it comes to making payments.

In some cases this is related to national legislation but, more often it is simply a matter of consumer or retailer preference. The dominant payment mechanisms are whatever people feel most comfortable with. Knowing how customers like to pay is key for retailers who wish to expand in these markets.

Established cultural behaviours have an important influence on payment practices. With the exception of large purchases such as property or motor vehicles, Germans have traditionally been reluctant to taking on credit and buying things with money that they are perceived as not currently having. In Germany, cash continues to be the most common method of payment for everyday purchases.

It is rare for consumers to offer card payment for a transaction of less than five euros due to worries that they may be seen as not ‘having the money’ – or to avoid discussions around a surcharge for card use that occasionally retailers ask for.

However, attitudes are changing thanks to cashless payment methods being adapted to mirror traditional consumer behaviour. One example of this would be credit cards that are actually deferred debit – where the balance is repaid in full at regular intervals.

German retailers, especially high frequency businesses, are keen to introduce new technology but acceptance among consumers is slow. However, trust in payment technology has increased with the rise of e-commerce and security concerns have eased. Online banking has become more prevalent, although Germany still lags slightly behind the UK. Germans are becoming enthusiastic online shoppers, taking advantage of discounts, price comparison sites and the ease of buying from home.

In Italy, in the majority of cases, cash remains the preferred method of payment although there has been a gradual increase in the number of card payments – between 2009 and 2013, the number of cards in circulation rose by 6.96% to 116 million.

The Italian Post Office has put significant resources into promoting prepaid cards and the response has been positive, particularly amongst lower income consumers who can now make internet payments. Between 2013 and 2018, prepaid card ownership is predicted to increase by approximately 17 per cent and register a compound annual growth rate (CAGR) of more than 13 per cent in terms of transactions.

Credit card use in Italy has remained stagnant in recent years but a growth effect comes from a government imposed cap on cash payments, all purchases of over €1,000 must be made by card or bank transfer.

In stark contrast to its southern neighbour, card payments are well established in Switzerland. This has facilitated strong growth in online shopping and as Switzerland is not part of the Eurozone and has an appreciating currency, items from outside the country are cheaper for Swiss consumers.

It’s a similar story in Luxembourg and Lichtenstein. In all three countries, debit cards are the preferred non-cash payment method with credit cards less popular. As a result, there is still room for these markets to grow and evolve.

In Austria, the number of card transactions has grown steadily, but cash still remains the most commonly used method of payment. With a card population of 8 million, debit cards are the most popular alternative. Yet credit and charge cards have increased in number, and so has card usage.

As in every maturing market, the increase in card usages and the evolution into a commodity results in lower average transaction volumes. This development calls for efficiency at check-outs. There has been increased investment in payment infrastructure as terminals with contactless capability replacing many older style point-of-sale systems. New terminals allow payments of €25 or less to be made more quickly and efficiently than before and are expected to drive greater card use in low-value transactions in the coming years.

For historical reasons, Eastern European countries have the advantage of a less entrenched payments infrastructure, unburdened by legacy processes and technology. As a result, they have been able to push forward onto the latest technologies and systems as easily – and in many cases more easily – than their more commercially established western European counterparts.

Poland is a good example, having a good POS infrastructure in place, and in Warsaw, contactless payments are probably as natural a thing as they are in the UK. However, despite the potential benefit of being able to adopt new payment practices quickly, the majority of the Polish population remains heavily attached to cash. Poland has the highest cash payments proportion in Europe at around 90 per cent. There are many card holders but frequency of use remains relatively low. This can be attributed to the risk adverse nature of both banks and consumers – the banks are reluctant to extend credit and consumers are wary of taking it on.As with many areas of life, people are naturally suspicious of new things unless they see a clear and tangible benefit and are comfortable using it. The same applies to payment methods.

There is a growing acceptance of cash alternatives and the benefits that they offer. For retailers, there are lower costs due to less administration being needed and the relative security of cashless transactions as well as customer insight based on data and loyalty programmes. For the consumer, going cashless offers greater flexibility, security and efficiency. Alternative payments through mobile phones are on the rise as well, reflecting the worldwide trend to have everything on a smartphone.

Currently, the cashless payment method of choice varies across Europe. It is likely that new technologies will increase the diversity of payment preferences over the next few years. Over time however, cashless payment methods will permeate further and become an integral part of society.

Luc Holper, Head Market Development Financial Industry Services at SIX Payment Services

Free Report
img

Prepare for changes in the Payments market

 The Payments market has seen drastic changes in the past few years, with this only expected to continue. What does your company need to do to prepare for what’s to come? GlobalData’s Payment Trends for 2022 report explores the key trends in technology, consumer habits, and regulations shaping the market. We also identify the leading companies in this changing market, giving you a competitive market outlook. This report covers the impact of:
  • ESG
  • E-commerce
  • Mobile payments
  • Alternative payment rails (Real-Time Payments, Blockchain, BNPL)
  • Fraud & Cybersecurity
  • Regulations
Download the report now to learn essential strategies to maximize your growth in the face of rapid change.
by GlobalData
Enter your details here to receive your free Report.

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