Most popular payment methods in Europe

Image 1, a courtecy of BI taken from a study done by ECB

Over the past decade, digital revolution led to a growing internet and mobile penetration, as well as an increased acceptability of online payments; those factors, combined with favorable demographics have spurred massive growth in the e-commerce sector on a global scale. Digital disruption, driven by strong demand for e-commerce and more sophisticated consumer preferences, new distribution channels, and intensified competition have brought about a real revolution in the financial and retail landscapes with the emergence of a wide range of online payment methods.

Among the most popular methods for online payment are the bank transfers and the digital wallets.

Online Bank Transfers: Customers use their online or real-time banking to transfer money with immediate online authorization. Examples: iDEAL, eNets, Sofort Offline, etc. Other services allow users to make an offline payment by using a payment reference (or so called delayed authorization). Examples: Dineromail, SafetyPay.

E-wallets is the fastest growing payment method in the world. It is easy to use and increasingly popular across all sectors. Examples: Alipay, PayPal, Qiwi, Yandex, etc.

Credit cards, Debit cards and Prepaid cards

Close behind the e-wallet services, are Visa and MasterCard who retain their popularity, followed by domestic bank credit or debit cards. There are, of course, some differences between the various card payment options, mainly around the time at which a transaction is debited. For example, debit cards’ cardholders can make purchases and/or withdraw cash and have these transactions directly and immediately charged to their payment accounts (“pay now” model). On the other hand, credit cards enable cardholders to dispose with a line of credit that can be used to make purchases, balance transfers, and/or cash advances. The only requirement is that customers recover the loaned amount in full and sometimes with an interest rate in a fixed period in the future. In the special case of prepaid cards, the cardholder has to make a certain amount of funding available before the card can be used (“pay before” model). In terms of its usage, that is to say, for making payments or cash withdrawals, it can, however, work in a similar way to a debit card or even a credit card. In the special case of prepaid cards, cardholders need to make a certain amount of funding available before the card can be used (“pay before” model). Afterwards, it will work the same way as a debit card or a credit card - for making cashless payments or for cash withdrawals.

Going back to the big picture: research shows that the prevalent use of cashless payment instruments (compared to the more traditional cash and cheques), has a positive effect on society as a whole. In the study done by ECB (shown in image 1) on the end costs of different payment methods, it becomes clear that provision of retail payment services on average amounts to almost 1% of GDP.

Still, public’s commitment to cash remains strong, even among member states where eCommerce is widely used. It is estimated that, the share of cash transactions ranges from 42% in Finland to 92% in Malta.

Despite their preferences to either cash or cards, the aim of all economic parties is to facilitate the further development of an integrated, innovative, and competitive market for retail payment solutions in the Eurozone.