2019 J.P. Morgan Global Payment Trends

2019 Global Payments Trends Report - European Overview

EUROPEAN OVERVIEW


E-commerce has created a seismic shift in the way consumers shop and pay for their purchases. Our J.P. Morgan 2019 Global Payments Trends Reports series attempts to answer some key questions: what are the influences, technological advances and consumer trends of which merchants must be aware to remain competitive? To help our clients locate, attract and keep their customers, we have tracked and assessed e-commerce developments in 34 mature and emerging markets around the globe.

Expanded reports provide deeper insights into the regional payments landscape

 

Following on from the success of last year’s series, we have expanded our reports to cover 34 countries, which allows us to provide deeper insights into the evolving e-commerce sector and the nature of the payments environment in each region.* We examine, country by country, the prospects and challenges facing the global payments market. This overview report presents some of our key European findings, but you can gain in-depth country knowledge via each of our 34 global reports.

Our findings highlight a multifaceted European e-commerce market that is developing into a mature industry, used and relied upon by the majority of the population. From Switzerland to Ireland and Germany to Poland, the payments landscape in each country is shaped by micro-trends tailored to the needs and preferences of its consumers. However, across the countries assessed, some unifying opportunities and challenges have become clear.

E-commerce growth as a whole across the European region remains strong. It is slowing slightly in more mature markets such as the United Kingdom, France and Germany. However, a number of smaller markets present compelling opportunities. Of the 18 European countries we examined, 10 are projected to enjoy double-digit e-commerce market expansion between now and 2021, with the Czech Republic (16 percent),1 Italy (14 percent)2 and Spain (13.5 percent)3 ranking highest for predicted growth.

Mobile commerce is the main driver of growth, far outstripping the overall e-commerce market. In the UK and the Czech Republic, mobile devices are now the primary way to spend online. Similarly, Ireland,4 Norway5 and Sweden6 also stand out as key adopters of smartphone-based payments.

Despite the growth of payment methods such as digital wallets, cards are still the dominant form of payment in Europe (cards were the number one payment method in 11 out of the 18 countries assessed) and will continue to be a primary way to spend online for European shoppers. Finally, regulation will continue to play a major role, with the Strong Customer Authentication element of the European revised Payment Services Directive coming into force in September 2019 with the goal of raising security and decreasing online fraud.

Offering the right payment methods to meet the needs of this competitive and fast-changing market is vital. As the number one acquirer for e-commerce transactions in Europe,7 J.P. Morgan prides itself on its in-depth market knowledge and e-commerce insights. We are here to help merchants ensure seamless payments experiences for their customers, as well as optimize the overall cost of payments and business profitability. We hope you’ll enjoy reading our J.P. Morgan 2019 Global Payments Trends Reports series and look forward to partnering with you as you grow your business.

Ray McDonnell

Managing Director, Europe

J.P. Morgan Merchant Services

 

European overview

 

The UK remains the titan of the European business to consumer e-commerce space, with a market worth €178.5 billion,8 a figure that dwarfs its next-biggest rivals, France (€81.7 billion)9 and Germany (€73 billion).10 The UK’s e-commerce market enjoyed a boost in 2018, with strong sales during the period of positive sentiment surrounding the royal wedding, a hot summer and the World Cup.11

That said, a significant trend for 2019 is an expected deceleration in e-commerce sales growth in the UK and in another highly advanced e-commerce economy, Germany. The rapid, double-digit growth witnessed over the past decade in these countries is stabilizing to a more sustainable pace. E-commerce sales growth in the UK is set to decline to a compound annual growth rate of nine percent out to 2021,12 a reflection of a mature e-commerce market and also one that is facing the implications of this year’s exit from the EU. Germany’s sales growth is also set to slow further, to 7.3 percent out to 2021.13

Instead, other countries are emerging as compelling opportunities. Of the 18 countries we surveyed, 10 are set to enjoy double-digit e-commerce market expansion between now and 2021, with the Czech Republic (16 percent),14 Italy (14 percent)15 and Spain (13.5 percent)16 ranking highest for predicted growth. All three are investing in e-commerce in different ways, representing unique opportunities and challenges for the payments industry.

Growth in the Czech Republic, for example, will likely be supported by the fact that it has one of the highest numbers of online stores per capita in Europe. In 2017 alone, the number of Czech online shops increased by 3,900 to reach 40,100.17 In Italy, meanwhile, international e-commerce merchants and payment providers are capitalizing on a willingness to make cross-border purchases. With domestic e-commerce still underdeveloped, 40 percent of Italian e-shoppers have made a purchase from overseas in the past year.18 In Spain, sales growth will be supported by investment in e-commerce from domestic players such as Inditex.19

Cards still a priority, as other payment methods gain ground

 

When it comes to online purchases, cards continue to represent the primary payment method across the majority of the European markets we surveyed: in 11 out of the 18 countries we assessed, cards are the number one payment method. Card use is particularly strong in wealthy, digitally advanced countries with high bank penetration. At present, card payments are highest in Denmark (63.4 percent of e-commerce payments),20 Ireland (60 percent)21 and the UK (53 percent).22

Given the strong brand recognition of major card payment brands like Visa® and Mastercard®, and advances in online anti-fraud technology such as 3D Secure, we expect cards to remain an essential part of the payments landscape in the near future. In almost all markets, consumers will have at least one card in their pocket and so merchants can benefit by optimizing their card payment processes.

Although bank transfers are not used widely across the continent, interestingly, they are actually the primary payment method in certain countries, like Finland, Switzerland and the Netherlands.23, 24 Open invoicing, where purchases are paid for once they have been received, is still prevalent in some countries. In Germany, open invoicing and direct debit payments account for 40 percent of online sales – a drop of just one percent on the previous year.25 Looking ahead, the Europe-wide rise of subscription services could also drive direct debit payments. Merchants that take recurring payments should also consider direct debit payments, as well as cards, which can also be used. The likes of bank transfers and open invoices, however, would not be suitable for such merchants.

Digital wallets have emerged as a key payment option for e-commerce transactions and can help address consumer fears about sharing card details directly with merchants. Advanced e-commerce economies such as the UK and Germany have been fast to adopt digital wallets,26, 27 but smaller e-commerce markets are also embracing this payment method. In Italy, for example, just under one in three online purchases are carried out using digital wallets28 – in the UK, this figure is one in four.29

When considering which payment trends to watch, it is important to understand the underlying payments culture in each of the assessed countries, as well as the operational and business impact that introducing new payment methods might have. The investment in developing and maintaining a payment solution for a specific country has to be compared against the benefits it can offer. For example, the country in our review with the highest predicted compound annual growth rate, the Czech Republic, may also have some of the biggest hurdles to modernizing its payments landscape. The Czech market stands out for its high levels of cash usage. Settling payment on delivery with cash is the most popular way to pay in the Czech Republic, representing 45 percent of transactions.30 However, this causes problems for merchants who face delayed payment, as it is received on delivery, and also the additional costs associated with collection.

 

Rising smartphone use provides huge opportunity

 

Another overarching theme is the vital importance of mastering smartphone-based payments. As time spent on smartphones increases and app-based payment systems rapidly expand, paying via a mobile device has become commonplace across European markets. This is especially evident in the UK, where mobile devices have become the primary device with which to spend online.31 Denmark is another market that presents particular mobile e-commerce potential, as it has the highest smartphone penetration of all the European countries included in our report series.32

Regulations continue to shape the market

 

In the coming years, there could be more competition from additional payment methods as the impact of the revised European Payment Services Directive regulation makes itself known. In the UK, the Open Banking initiative – a UK-only extension of the EU rules – will require major banks to share their current account data in a standardized, secure format with other authorized online organizations.33 Online companies and start-ups will also be able to access the spending data and habits revealed by this initiative, allowing them to create innovative and tailored banking services. As part of the directive, third-party companies will also be able to initiate payments on behalf of customers. By creating a new way for consumers to pay for products, the revised Payment Services Directive will generate a new payments landscape. This is an exciting development but will take a number of years to come about, due to the very different banking players and processes in each country. An EU-wide payment system is therefore unlikely in the short-term, although there could be some localized or regional schemes.

The introduction of Strong Customer Authentication is also required under the EU directive, making two-factor authentication obligatory for electronic payments. As biometric security options increase on smartphones, mobile commerce could benefit by offering faster and simpler Strong Customer Authentication methods than desktop-based transactions.34

 

Price-conscious consumers are firmly embracing online discounting

 

Another key e-commerce trend that must be considered is the prevalence of price discounting. As online shopping becomes a part of everyday life, consumers have become savvier; high use of consumer price-comparison sites before choosing which site to shop with is a feature of many of the countries we have analyzed. Shoppers are also fully embracing one-off discount events. A growing public familiarity with sales events such as Black Friday and Cyber Monday is translating into one-day and seasonal spikes in spending.

To keep pace, the payments industry must be aware of, and able to cater to, specific country-by-country cultural differences and discounting events. As an example, France stands out as a nation of discerning spenders: 80 percent of shoppers compare prices before buying non-grocery items.35 French e-commerce merchants introduced a discounting event called ‘French Days’ in 2018, a version of Black Friday, adding to an occasion and promotions-led online shopping culture there.36

Overall, Europe is a dynamic e-commerce market that is being re-shaped by regulation and innovation. As one of the leading regions in the world for smartphone use, mobile commerce is expected to continue to be a very important force in the payment space in the coming years.   

 

Data may vary from historical figures, due to certain categories being re-stated as new information sources have become available.

* J.P. Morgan 2019 Payments Trends – Global Insights Report series includes the following European countries: Australia, Austria, Belgium, Brazil, Canada, China, Czech Republic, Denmark, Finland, France, Germany, Hong Kong, India, Indonesia, Ireland, Italy, Japan, Luxembourg, Malaysia, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Singapore, Spain, Sweden, Switzerland, Thailand, Turkey, UK, US, Vietnam.

 

Visit our Global Payment Trends Reports for more in-depth knowledge on each of the 34 countries

 

Global Payments Trends Reports

International e-commerce success can hinge upon understanding the needs, nuances and growth patterns of individual nations. J.P. Morgan’s Global Payments Trends Reports aims to offer merchants the knowledge they need for global success through in-depth, country-by-country analysis.

About J.P. Morgan

 

J.P. Morgan offers a full suite of payments services to enable a seamless connection across the payments continuum for clients. We bring our consultative expertise, data-driven insights, and local service around the globe to provide a more unified view of payables, receivables and cash management. Merchant Services is the payment acceptance and merchant acquiring business of JPMorgan Chase & Co. (NYSE: JPM) – a global financial services firm with assets of $2.6 trillion and operations worldwide.i According to The Nilson Report, it is also the top merchant acquirer of e-commerce transactions in Europe.ii

 

i JPMorgan Chase & Co. Q4 2018 Earnings Report 2018.

ii The Nilson Report, #1132 May 2018.

For more information, please contact:

 

Your J.P. Morgan Relationship Manager or visit: https://www.jpmorgan.com/europe/merchant-services/payment-insights

 

Information contained in this document has been prepared by third parties or obtained from sources which are believed to be reliable; but neither Chase Paymentech Europe Limited nor any of its affiliates warrant the completeness or accuracy of the information contained herein. Chase Paymentech Europe Limited and any of its affiliates shall have no liability to the user or to third parties, for the quality, accuracy, timeliness, or for any special, indirect, incidental or consequential damages which may be experienced because of the use of or reliance on the data or statements made available herein. Third party trademarks, brand names, products and services are only referential and Chase Paymentech Europe Limited and its affiliates disclaims any sponsorship, affiliation or endorsement of or by any such third party.

 

Chase Paymentech Europe Limited, trading as J.P. Morgan, is regulated by the Central Bank of Ireland. Registered Office: J.P. Morgan, 200 Capital Dock, 79 Sir John Rogerson’s Quay, Dublin 2 D02 RK57, Ireland. Registered in Ireland with the CRO under the Registration No. 474128.

Directors: Catherine Moore (UK), Carin Bryans, Dara Quinn, Steven Beasty (US), Eilish Finan

Copyright© 2019.

1 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

2 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

3 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

4 EcommerceNews.eu, February 2018. ‘Ecommerce websites in Ireland see revenue grow 45%.’ Accessed April 2019.

5 Postnord.com, 2018. ‘E-Commerce in the Nordics 2018.’ Accessed February 2019.

6 Postnord.com, 2018. ‘E-Commerce in the Nordics 2018.’ Accessed February 2019.

7 The Nilson Report, March 2018.

8 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018 and IMRG.com, January 2017. ‘UK online sales exceed £130 billion in 2016, fuelled by sales growth on smartphones.’ Accessed November 2018.

9 FEVAD, E-Commerce in France Key Figures, 2018.

10 BEVH, Interaktiver Handel in Deutschland B2C - 2017, 2018.

11 IMRG.org, October 2018. ‘September 2018: Online retail sales slump to lowest level this year.’ Accessed October 2018.

12 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

13 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

14 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

15 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

16 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

17 Radio.cz, April 2018. ‘Czech Republic takes top spot in Europe in internet sales.’ Accessed November 2018.

18 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Eurostat, 2017.

19 Bloomberg.com, March 2018. ‘Zara Owner’s Online Sales Surge Helps Plug Gap as Stores Slow.’ Accessed November 2018.

20 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

21 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

22 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

23 Postnord.com, 2018. ‘E-Commerce in the Nordics 2018.’ Accessed February 2019.

24 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

25 EHI Retail Institute, EHI-Studie Online Payment 2017, 2017.

26 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

27 EHI Retail Institute, EHI-Studie Online Payment 2017, 2017.

28 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

29 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

30 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

31 Criteo, Global Commerce Review, United Kingdom, Q1, 2018.

32 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Statista, 2018.

33 Wired.co.uk, April 2018. ‘What is Open Banking and PSD2? Wired explains.’ Accessed October 2018.

34 GDPR.report, December 2017. ‘PSD2: Are you ready for strong customer authentication (SCA)?’ Accessed October 2018.

35 Euromonitor.com, 2018. ‘Top Five Retailing Industry Trends: France.’ Accessed October 2018.

36 LesNumeriques.com, September 2018. ‘French Days: nouvelle offensive avant le Black Friday.’ Accessed October 2018. 

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