How financial habits determine the development of the global payment industry

    imageIn such a large country as Russia, the payment habits of buyers depend mainly on the size of the settlement and geography. In other countries, the leaders of the "audience sympathy" became payment instruments, which we have not heard. We at the processing company PayOnline have prepared a material that allows us to learn more about the payment habits of European and Asian users.

    As the European e-commerce market continues its rapid growth, more and more interest is being shown in differences in the payment habits of Europeans. Having studied the European market, we can distinguish three trends.


    1. In most developed countries of Europe, “alternative” payment methods are more popular than bank cards, although there are no restrictions on the operation of international payment systems.
    2. Europe is characterized by a high concentration of diverse payment instruments. There is a danger of wasting time on connecting all possible payment instruments, which at the same time ensure low coverage.
    3. The organization of receiving all payment instruments is technically quite complex, and the number of payment instruments differs noticeably in the scheme of work from the usual bank cards of all types and e-wallets.

    Consumer preferences and "alternative" payment tools

    In 2015, more than two thirds of online payments in Germany (the second largest market for e-commerce in Europe) were made without using a bank card. Only 11% of payments on the Internet in this country are made using cards, and their share is gradually decreasing.

    Consumers in Germany prefer to actively use bank transfers and direct debit for online purchases. This is not due to restricted access to the cards. On the contrary, payments in stores using credit cards grow by 3% annually (in the UK, the same figure falls by 1% per year), 38 million cards have already been issued on the German market. A similar pattern is observed in other North European markets. For example, the Dutch payment operator iDeal, in response to consumer inquiries, allowed customers to make payments directly from their bank account, and as a result, it took up almost 58% of the market.

    Despite the fact that, in general, in Europe, cards are still the dominant payment instrument, in some national markets “alternative” instruments have acquired the status of “preferred”. These preferences are rational and very stable, which means that it is unlikely that the inhabitants of Northern Europe are ready to switch exclusively to maps. Probably, soon we will see standardization of requirements for processing additional payment methods to achieve their compliance with the functionality of the card.

    The financial habits of Indian taxi passengers

    But in India, with the development of taxi applications, such as Uber and Ola, mobile payments became popular. But since most customers pay either through a Uber wallet, or through Ola-money (which in Russia corresponds to the concept of "binding cards"), sometimes drivers at the end of the day are left without any cash - they have nothing to refill the car with. Taxi drivers avoid orders to the airport - for them such trips are not profitable. Today, taxi aggregators in India are faced with a stream of complaints from drivers.

    The taxi driver, working through one of the online taxi booking services, said:
    “On Friday, all my passengers paid in cards. I had to ask the last passenger to pay in cash, since I did not even have money for gas. Many drivers from among my friends refuse the passenger if he indicated a bank card as a method of payment. We avoid trips to the airport, as the cost of gasoline is initially charged to us, and only then is reimbursed by the company. But at the gas station need cash. "Thanks to" online payments, we have to wait a whole week to get the money earned in our hands. "

    Indian passengers, by contrast, prefer to pay with cards instead of cash, so as not to keep large amounts with them. One of the users of the application, living in the suburbs, says:
    “Online payments solve the surrender problem - instead of looking for a change, you simply pay with a card. In addition, applications with automatic online payment help us save time. ”

    Passengers are regularly faced with the fact that drivers know in advance how payment will be made, and only then decide whether to take the order or not.

    In response to these comments, Uber states:
    “We have not encountered such complaints. It can be only isolated cases. But online payments in Uber are, above all, reliability. We transfer money to drivers within seven working days. ”

    What matters is not so much diversity as the concentration of payment instruments in the market.

    Even if 200+ different ways to make a payment may be available to consumers, it is better to determine their preferences, which have their own logic and boundaries.

    Top 10 payment instruments accumulate 99% of the volume of online payments (excluding cash on delivery) in Europe. No instrument added to the Top 10 will increase payments more than 0.1% at the European level, and no more than 2% at the country level. This analysis shows: if you offer the Top 10 tools, you cover 99% of the possible income and enable the consumer to make payments using the tools preferred in the country and throughout Europe.

    Cards remain Europe's favorite online payment method, generating 58% of turnover. However, as noted above, it is important to recognize the role of preferred payment schemes in specific countries. For example, if a seller wants to trade in the Netherlands, he should use the iDeal payment service because he accounts for a large share of online payments in the country. Accepting credit transfers also allows merchants to access a wider segment of the online shoppers community in markets like Germany.

    Accepting payments using local payment instruments is not the same thing as accepting Visa and MasterCard

    It can be said that the online payment market was created by international payment systems. They have reliable solutions for risk assessment of merchants, payment authorization, guarantee funds, fraud management mechanisms, dispute resolution, and most importantly (from the consumer’s point of view) proven chargeback schemes.

    The transition from card products to alternative payment instruments requires significant investments in building new operating standards and mechanisms for interaction with service providers.

    While most payment gateways simplify the process of technical integration with a variety of payment tools through standard APIs, business processes do not always adapt as easily and conveniently as you would like. Often, sellers have to adapt business processes with the connection of each new payment instrument: setting up local bank accounts in accordance with local requirements, agreeing on separate commercial contracts, managing separate settlement operations, and working out new dispute processes for disputed transactions. In addition to the high integration costs, there are significant transaction costs in customer support centers, as consumers generate new non-standard requests, and back offices increase the cost of processing such calls.

    European payment service providers recognize this problem and increasingly offer transaction processing services that simplify settlements with merchants. They do this by creating single current accounts of merchants, to which all payments are sent, pre-agreeing contracts and creating the ability to track transactions that allow front and back offices to process local payment instruments in the same way as cards.

    What is the result?

    Residents of Northern Europe prefer "local" payment instruments and do not perceive them as an alternative to bank cards, and this trend is stable and stable. Sellers are encouraged to focus on the Top 10 payment tools and not worry about handling tools that will bring a small fraction of the turnovers. Finally, sellers should take into account that technical integration is accompanied by the adaptation of business processes, which reduces the load on the front and back offices. In addition, as shown by the example of the financial habits of passengers of Indian taxis, large platforms, such as, for example, UBER, must also take into account the peculiarities of the financial relationship between customers and performers.

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