2019 J.P. Morgan Global Payment Trends
2019 Global Payments Trends Report - United Kingdom Country Insights
UNITED KINGDOM INSIGHTS REPORT
With its advanced infrastructure and dynamic payments market, the UK is without a doubt an e-commerce market that cannot be ignored, and one that continues to set trends for others to follow. Despite the uncertain political environment, the UK remains the most important e-commerce market in Europe – accounting for a third of sales in the region1 – with growth being driven by its thriving mobile commerce sector. 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.
Introduction
The UK e-commerce story continues to be one characterized by high growth, innovation and dynamism. However, an uncertain economic environment is undoubtedly holding back the sector from even greater success. UK economic growth resumed a two percent pace during the second half of 2018, following a slowdown in the first half of 2018, driven by household spending and exports.2 Brexit will undoubtedly have a major impact on UK consumer confidence throughout 2019 and the following years thereafter.3 Beyond Brexit, there are some positive indicators that will support consumer spending going forward. Job growth has slowed but vacancies remain high with limited staff availability to meet the demand for the existing workforce.4 Wage growth should sustain its shift upwards.5 The subsequent rise in real income is set to help consumption growth sustain a near two percent pace.6
In 2018, UK e-commerce was especially sensitive to seasons, major public events and holidays. In the second half of 2018, consumers had a lower desire to shop following a high-spending period due to the positive sentiment during the UK’s prolonged heatwave, a royal wedding and the World Cup.7 Despite a brief uplift around the August bank holiday, September sales experienced their lowest growth since 2014,8 and Christmas was marked by e-commerce merchants attempting to entice shoppers by starting their discounting well before the traditional Boxing Day sales.
This document is based on projected figures and is subject to change at any time.
Opportunities emerge from older shoppers
While the UK government spent most of 2018 negotiating the terms of its future relationship with the European Union, its citizens continued to retain the country’s position as the leading European e-commerce market out of those surveyed by J.P. Morgan.* The UK business to consumer e-commerce market is worth €178.5 billion, representing 33.4 percent of total European e-commerce.19
Although there exists a widespread acceptance and appetite for online shopping in the UK, it is worth noting that growth is beginning to slow.20 However, the business to consumer e-commerce market is forecast to expand at a more modest compound annual growth rate of nine percent to 2021,21 reflecting the uncertainty that surrounds the potential ramifications of Brexit and the nation’s long-term economic and political status. One concern for international merchants is that greater tariffs on overseas goods might be introduced. British consumers are currently willing and accustomed to making cross-border purchases, with 32 percent22 of online shoppers buying from abroad. China, the US and Germany comprise the top three markets for UK consumers.23
The gray pound goes digital
Despite wider market uncertainty, UK online shoppers are still spending more than their European neighbors. The average overall per capita spend is €3,344, well above the European average of €2,186.24 Across age groups, women’s fashion is a key UK shopping category, with women far more likely than men to go online to purchase clothes.25 Online purchasing growth in the UK has been driven by widening internet penetration, particularly among older demographics. The average age in the UK is 40.5 years,26 and retailers would do well to ensure they cater to the 35 to 44-year-old age bracket, as this group spends on average the highest amount online.27 Meanwhile, recent internet usage in older age groups has increased sharply, 28 closing the gap on younger generations and creating an opportunity for e-commerce merchants to benefit from the gray pound. This demographic accounts for almost half of all household spending in the UK and is growing rapidly as the population ages.
Mobile commerce and in-app shopping become the new norm
The UK mobile commerce market is worth €91 billion,29 accounting for 51 percent of the total business to consumer e-commerce market.30 In terms of scale, the UK mobile commerce market dwarfs all others in Europe.* The pace of mobile commerce growth also makes this segment impossible to ignore: it is expected to outstrip overall UK e-commerce growth and expand at a compound annual growth rate of 20 percent over the next three years, to become a €188.8 billion market by 2021.31
Widespread and increasing consumer adoption of technology and smart devices is driving this growth. Smartphones are now owned and used by the majority of the UK population, with 70.8 percent penetration in 2017, compared with 67.5 percent in 2015.32
Making in-app shopping experiences enjoyable, secure and simple will be critical for any brand looking to gain traction in this market as 43.5 percent33 of mobile commerce users shop via this method. At present, the most popular online shopping app on iOS in the UK is eBay, followed by Amazon and Groupon.34 Direct-to-consumer brands,35 which market and sell their products through apps like Instagram, Pinterest and Facebook, are growing in prominence. Merchants who use these channels should look at solutions such as easy-to-use payment platforms that integrate seamlessly with apps and social media channels and offer cast-iron security measures.
Digital wallets catch up on cards, as direct debits grow
If entering the UK, cards should be your main solution. Cards remain the primary way to pay within the UK e-commerce space, accounting for 53 percent of payments.36 Card transactions generated €94.6 billion in sales, up 12 percent on the previous year.37 The dominance of plastic can be explained by a highly active banking nation (96.4 percent of the population have a bank account,38 which will typically come with a card facility) and also a long history of card payment acceptance dating back to the 1960s.39 Familiarity is a key reason that consumers in the UK turn to cards as their preferred option for e-commerce.
That said, card penetration is relatively static for both debit and credit cards. Debit cards per capita increased slightly from 1.52 to 1.56 between 2016 and 2017, while credit cards per capita dipped slightly from 0.93 to 0.92,40 suggesting some maturity in this area and potentially offering an opportunity for additional payment methods to capitalize.
Digital wallets are catching up and they account for 25 percent of payments,41 driven heavily by e-commerce transactions. They are growing at twice the rate of cards,42 driven partly because consumers perceive that brands such as PayPal® offer strong security.43 PayPal dominates in the UK, accounting for up to 20 percent of all UK digital wallet payments, thwarting rival Apple Pay’s (one-three percent) attempts to become a more significant player.44
Direct debit (five percent) was elected for a small market share of transactions.45 But, the use of direct debit as a payment method is rising rapidly in the UK – possibly symptomatic of a highly banked population and a well-understood system that is used by nine out of 10 UK adults to pay household bills.46 Direct debits accounted for €8.9 billion in transaction value in 2017, a major jump of 30.2 percent on 2015’s transaction value.47
In the coming years, there could be more competition from additional payment methods due to the Open Banking initiative, a UK-only extension of the wider European revised Payment Services Directive (PSD2). Essentially, it forces major banks to share their current account data in a standardized, secure format between authorized online organizations.48 Online companies and start-ups, once approved, will also be able to access a rich source of spending data and habits, allowing them to create innovative payment products. One potential impact could include an increase in demand for bank transfers and direct debits, as the regulation should enable banks to authenticate purchases.49 Meanwhile, the introduction of Strong Customer Authentication is also required under the revised PSD2, which means that two-factor authentication will be required for all 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.50 At the same time, Strong Customer Authentication could drive merchants to offer more recurring payments, as two-step authentication is only required for the first payment and not for every transaction. This could support growth in direct debits, which are the primary method of recurring payments at present.
Fraud rates will further decline as customer authentication improves
The UK is a mature online shopping market and consumers largely opt to use bank-linked card payments.51 As 3D Secure 2.0 becomes mandatory for Visa® and Mastercard® clients through 2019, this should boost overall security levels further.52 Fraud, however, is relatively high in the country, with five percent of individuals experiencing it when buying online, in comparison with the European average of two percent.53 Fraud rates should continue to improve as PSD2 will require Strong Customer Authentication for all transactions from 2019.54 In order to avoid disrupting the purchasing experience, 3D Secure 2.0 will offer ‘frictionless flow’ with the possibility of no security challenges for certain transactions. It is hoped issuers will authenticate consumers through this system.
Chargeback rates of 0.08 percent are among the highest out of the countries surveyed, but have declined over the past two years.55 These high rates are likely due to the massive size of the e-commerce market, as well as the dominance of cards as a payment method. One feature of the market is that chargebacks are not enshrined in UK law. It is a voluntary agreement between card issuers and payment networks like Mastercard, Visa and American Express. The main requirement for successfully using chargebacks in the UK is evidence of a breach of contract, such as receiving damaged goods, or goods that differ from the item description. The UK time limit on chargeback claims is typically 120 days from the transaction processing date.56
Key takeaways
- The UK business to consumer e-commerce market is worth €178.5 billion57
- This represents 33.4 percent of total European e-commerce58
- Mobile commerce is expected to expand at a compound annual growth rate of 20 percent over the next three years, to become a €188.8 billion market by 202159
- Cards remain the primary way to pay within the UK e-commerce space, accounting for 53 percent of payments60
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 includes the following European countries: Austria, Belgium, Czech Republic, Denmark, Finland, France, Germany, Ireland, Italy, Luxembourg, Norway, Portugal, Poland, Spain, Sweden, Switzerland, The Netherlands, the UK.
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 (U.S.), 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 Western Europe Economic Research, JPMorgan Chase Bank, September 2018.
3 Western Europe Economic Research, JPMorgan Chase Bank, September 2018.
4 Western Europe Economic Research, JPMorgan Chase Bank, September 2018.
5 Western Europe Economic Research, JPMorgan Chase Bank, September 2018.
6 Western Europe Economic Research, JPMorgan Chase Bank, September 2018.
7 IMRG.org, October 2018. ‘September 2018: Online retail sales slump to lowest level this year’. Accessed October 2018.
8 IMRG.org, October 2018. ‘September 2018: Online retail sales slump to lowest level this year’. Accessed October 2018.
9 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 World Bank, 2017.
10 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 CIA, 2017.
11 World Bank Open Data. ‘United Kingdom.’ Accessed December 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 via IMRG, 2017.
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 via Criteo, Global Commerce Review, United Kingdom, Q1, 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 via Internet World Stats (2017).
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 via Newzoo, 2018.
17 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 World Bank, 2017.
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 ECB Statistical Data Warehouse, 2018.
19 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.
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 via IMRG, 2017.
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 via Eurostat, 2017.
23 IPC, Cross-Border E-Commerce Shopper Survey 2017, 2018.
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 Mintel.com, September 2017. ‘Brits hung up on online fashion: Online sales of clothing, fashion accessories and footwear grow by 17% in 2017.’ Accessed January 2019.
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 via CIA, 2017.
27 E-Commerce Foundation, UK 2018 ecommerce report, 2018.
28 Office for National Statistics, Internet Users in the UK, 19 May 2017.
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 Criteo, Global Commerce Review, United Kingdom, Q1, 2018.
31 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.
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 Newzoo, 2018.
33 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.
34 Statista.com, 2017. ‘Market reach of the most popular Apple iOS retail apps in the United Kingdom (UK) as of June 2017.’ Accessed March 2019.
35 Raconteur.net, November 2017. ‘Why direct to consumer brands are dominating in retail’. Accessed October 2018.
36 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.
37 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.
38 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 World Bank, 2017.
39 TheUKCardAssociation.org, 2019. ‘History of cards.’ Accessed March 2019.
40 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services Data provided by Edgar, Dunn and Company via ECB Statistical Data Warehouse, 2018.
41 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.
42 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.
43 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.
44 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company.
45 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.
46 GoCardless.com, July 2017. ‘Is there room to improve Direct Debit?’. Accessed October 2018.
47 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.
48 Wired.co.uk, April 2018. ‘What is Open Banking and PSD2? Wired explains’. Accessed October 2018.
49 Wired.co.uk, April 2018. ‘What is Open Banking and PSD2? Wired explains’. Accessed October 2018.
50 GDPR.report, December 2017. ‘PSD2: Are you ready for strong customer authentication (SCA)?’ Accessed October 2018.
51 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.
52 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 Visa, Verified by Visa upgraded to enhance and simplify, 30 May 2017.
53 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.
54 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 EBA, 2018.
55 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Kount, 2018.
56 Which.co.uk. ‘How do I use chargeback?’ Accessed October 2018.
57 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 IMRG, 2018.
58 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.
59 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.
60 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.
