Part 2 of the global payment methods guide created by Adyen to help businesses expand globally.
Europe continues to pursue the goal of a single digital market. This includes the decentralization of financial services and heightened security regulations that come with the Revised Payment Services Directive (PSD2).
Online retail in Europe is growing exponentially, especially in Southern Europe, where growth is fueled by mcommerce thanks to its young population. But there are still many nuances when it comes to connectivity and openness to cross-border shopping.
According to the Ecommerce Foundation 2017 European Ecommerce Report, connectivity is growing steadily, with 13% growth in the last 5 years. Northern Europe leads the way with 93% online, followed by Western Europe at 89%, Central Europe at 86%, Southern Europe at 71%, and Eastern Europe at 66%.
When it comes to cross-border purchases, Luxembourg is in the lead, with 74% buying from overseas retailers. Russia is also emerging as a market open to buying from international sites. And, according to Adyen data, Swiss, Belgian, Irish, Dutch and German shoppers are open to making orders across borders. Spanish shoppers still prefer to shop domestically.
Yet despite the openness of shoppers in countries such as Germany and the Netherlands to shop from international websites, local payment methods dominate. A local entity is not required to accept local payment methods in each market, but you’ll need an entity in at least one EU country to accept cards across all markets.
Unlike credit cards, not all local payment methods support recurring payments.
Adyen has implemented a unique approach to recurring payments in for several methods in Europe. Its solution for iDEAL and Giropay combines e-banking with SEPA Direct Debit, Bancontact and SOFORT for future payments.
Belgian shoppers are relatively open to making cross-border purchases, with 25% of transactions taking place on foreign sites.
The most popular method in Belgium is Bancontact, which has more cards in circulation than there are Belgian citizens. This is a debit card that offers 100% guarantee on the payment and can be used across all channels (online, mobile and POS). It’s also possible to process recurring transactions with Bancontact via SEPA Direct Debit.
Overall, the most common payment methods mix for online payments are Bancontact, credit cards (Visa/Mastercard and Amex) and debit cards (Maestro). PayPal, SEPA and Sofort are also popular.
Today many shoppers attempting to buy with their smartphones are blocked because the mobile version of Bancontact isn’t supported. The traditional version of Bancontact requires a device from the bank (digipass / Card Reader) to generate a token for authentication.
This can be a real conversion-killer when it comes to mobile. The mobile version makes it easy for shoppers purchasing on desktop since they only need to scan a QR code to authenticate themselves.
If you support Bancontact/Maestro make sure the CVC code isn’t mandatory because there’s no CVC on Belgian Maestro cards.
France represents a great opportunity for expansion, with ecommerce sales expected to grow to $64 billion in 2018.
Cartes Bancaires (CB: the French local scheme) dominates the payments landscape, and most French cards are Cartes Bancaires co-branded with Visa or Mastercard. As a direct CB member, we can achieve the highest possible authorization rates for our customers.
No local entity is required for local acquiring in France, although (as is the case with most Eurozone countries), an EU entity is mandatory.
Germans are some of the most open cross-border shoppers in the world, with over 50% of online retail purchases taking place on an international website.
Yet despite this willingness, Germany is one of the most fragmented markets when it comes to payment methods. Non-credit card payment methods such as SEPA direct debit, SOFORT, and Giropay account for the majority of online transactions.
In retail (specifically fashion) another popular payment method is open invoice. This is where a third party pays out for products and services and then collects payment from the shopper after delivery.
If you’re planning to enter Europe you should consider Germany as one of the first markets to enter. This is because of its size and its openness to cross-border payments.
While purchasing from international websites is relatively common in the Netherlands, the most popular payment method, iDEAL, is local to the Dutch market. iDEAL is an inter-bank system covered by all major Dutch consumer banks, allowing shoppers to use their bank account for online purchases. Direct debits and open invoice payments are also popular.
Due to its ease of doing business, you should consider the Netherlands as one of the first European markets to enter. Offering iDEAL as a payment method is crucial.
Poland is the ninth largest country in Europe and has a population of over 38 million people. Online banking and cash on delivery are the most preferred payment methods. In Poland, online banking known as Pay-by-links is the most popular payment method and can represent up to 75% of the e-payment mix.
The Polish market is easy to enter, with no local entity required and like-for-like settlement supported. However, Polish issuers require cardholders to register their card first.
Ecommerce in Portugal was estimated to increase by over 12% in 2017, making total online sales worth €4.73 billion at the end of the year.
Card penetration is quite high in Portugal, but the most popular payment method is MultiBanco, which represented almost 86% of total sales in 2016 (29% in terms of annual monetary value).
This is a post-pay option where a reference is generated at the checkout and then paid via an ATM with a debit card or via online banking.
Ecommerce in Russia was worth €7.2 billion in the first half of 2017, an increase of 22% year-on-year.
Russia is a prime example of a major market in which credit cards are not dominant. In fact, cards represent only a small share of the online transactions. Instead, the most popular local payment methods are cash on delivery, online banking and ewallets, including:
Yandex.Money - the most popular digital wallet with top-up options including prepaid scratch cards, plastic cards, online banking, and cash.
QIWI Wallet - is a digital wallet that can be topped up at one of 150,000+ payment terminals, as well as with credit/debit cards, on a phone. Sberbank is the biggest bank with 40 million users. As debit cards are by far preferred, online banking is the best solution to approach these shoppers.
Sberbank - The biggest bank with 40 million users. As debit cards are by far preferred, online banking is the best solution to approach these shoppers.
In Russia, payments through ATMs have been very popular for a long while, and the increasing sophistication of the terminals has resulted in a more seamless payments environment that now includes automatic top-ups and recurring payments.
No local entity is required for processing non-card payments and it’s easy to access the majority of payment options in Russia. Adyen supports the biggest wallets and online banks, as well as several cash options. In order to process cards locally, you will need a local entity and local bank account. We support recurring payments using QIWI Wallet.
In 2017, the Spanish B2C ecommerce turnover grew by 8% to €28 billion. Of the total online population, 26.1 million bought something online in 2015 and the average spend was €1,089.
Cash is still the most popular method of payment in Spain, and the number of ATMs per million inhabitants is among the highest in Europe. Cards are also popular, with over 85% of the population carrying at least one debit or credit card. All cards are co-branded with Visa or Mastercard. Prepaid virtual cards for online purchases are also growing in popularity while it's still early days for alternative payment methods like paying in installments.
Although all the cards issued in Spain are compatible with 3D Secure, using it for all transactions can lower your conversion rates by up to 20%. For this reason, more businesses are using dynamic rules to trigger 3D Secure only when necessary. But the limitations of legacy processing systems can make this challenging.
For optimal authorization rates, we recommend processing via a local acquirer (Adyen can provide local domestic acquiring in the market).
Dynamic 3D Secure (part of Adyen’s risk system RevenueProtect) will help you balance security and conversion for your Spanish shoppers.
The largest country in the Nordics, ecommerce in Sweden was worth €11.5 billion in 2017, a 9% increase year on year. The total in the Nordics in 2016 was €21.9 billion.
While cards remain the most popular way to pay online, Sweden is at the forefront of open invoice payments (supported by Klarna). This payment method is expanding internationally and is now the second most popular method after cards, and the most popular in retail. Online banking through major banks such as Handelsbanken, SEB and Nordea, is the third most popular payment method.
This can be done either via online banking payment services or via the popular direct bank transfer app Swish. Apple Pay was recently released in Sweden together with Denmark and Finland. Some Swedish issuers demand 3D Secure for all card transactions, or that the shopper makes ecommerce purchases within a limited time period.
Adyen offers full support for open invoice payment methods. This applies to retail, rather than digital goods. Dynamic 3D Secure (part of Adyen’s risk system RevenueProtect) lets you control when to apply 3D Secure. This is particularly useful for cards issued by banks that demand 3D Secure.
The UK is one of the leading economies in the western world. While the fallout from Brexit is still unclear, it has already had an impact on ecommerce. A weaker pound has made the UK attractive to international shoppers, and British shoppers are less likely to shop from overseas.
UK shoppers are world leaders in terms of mobile shopping and debit cards are popular, with the average shopper holding between 2-3 cards per person. Cards account for approximately 90% of all online payments, PayPal is another popular option, and online banking is virtually non-existent.
Currently the UK is the only European country where Address Verification Service (AVS) is supported. And there is strong issuer support for 3D Secure. As a result, it's one of the few countries where enabling 3D Secure actually improves overall conversion. This is thanks to Risk Based Authentication (RBA) where the issuing bank chooses to forgo the full authentication process if they deem the transaction to be low risk. Visa and Mastercard Account Updater services are also available in the UK - so you can be sure your cards on file are always up-to-date.