European Consumer Payment Preferences Reflect Robust, Diversified Economy
European countries are leveraging payment technology to drive innovation and growth in financial services. While consumer preferences vary in each country, they share common principles, which researchers Justus Meyer and Federica Teppa summarized as secure, easy to use, widely accepted, and cost-effective. Their report was based on findings from the European Central Bank’s Consumer Expectations Survey, which included the following key takeaways:
Digitization: Making payments and managing personal finances are integral to most consumers’ daily lives and much of these activities have become digital following the outbreak of the COVID-19 pandemic. Financial institutions and service providers must be able to meet customers where they are, across digital, mobile, online and in-person channels.
Competition: As more tech companies offer payments and banking services, traditional financial institutions find themselves competing in an increasingly crowded playing field.
Data-driven insights: Payments provide useful customer data that banks can use to improve cost efficiencies and drive financial inclusion.
Fraud prevention: Fraud has become more sophisticated and widespread, requiring banks and service providers to implement multilayered security to protect customers.
Resilience and relevance: Understanding consumer payment choices is critical to all stakeholders in the financial services ecosystem. In a 2022 survey, ECB researchers noted that consumer payment preferences are driving engaged discussions in the financial services community about cash usage, open banking, cross-border payments, central bank digital currencies, and more.
Digital/Cash Eclipse
Following an October 2023 survey of 1500 ecommerce and brick-and-mortar merchants in France, Germany, Italy, Spain, Sweden and Poland, Payments Europe characterized the Europeans’ relationship with cash as evolving.
Vicky Lloyd, Legal Director, International Regulatory Affairs, WEX, said, “Our survey population was clear: three in four prefer digital payments over cash. Cash remains the most common payment method in Europe. However, its overall share of total transactions is declining rapidly and 65% of merchants would even like to have the ability to refuse cash.”
Lloyd further noted that 85% of survey respondents believed that accepting a wide range of payment methods increases sales and 77% of merchants said that mobile payments, which have tripled in the last 3 years, have helped them scale their business. These data points reflect a competitive European payments ecosystem, she said, which the European Union is helping to foster emerging solutions such as instant payments, open banking and the Digital Euro.
Pay-by-bank
Consumers throughout Europe are embracing pay-by-bank as a simple, secure, and easy payment method. Technology providers are rapidly iterating to connect underpinning technologies and support growing demand for seamless pay-by-bank experiences.
Tamara Romanek, Head of Partnerships at Plaid, and Trevor Nies, Senior Vice President and Global Head of Digital Strategy at Adyen, discussed pay-by-bank benefits, which Nies summarized as ease of use, reliability, and cost-effectiveness, an 18 June 2024, fireside chat.
In a September 2023, study, Mastercard explored a mostly unified approach to open banking practices in the Netherlands, France, Spain, and Switzerland, “noting how a common open banking agenda paradoxically depends on an appreciation of the very differences that underlie that unity.”
Pointing out that 59% of Swiss consumers prefer to initiate payments from their bank accounts “without having to input credentials, versus 61%, 65% and 74% in France, the Netherlands and Spain,” Mastercard researchers predicted that open banking practices will double between 2022 and 2027, driven by digitization, consumer preferences, technological progress, and regulators seeking to increase competition.
Debit, Credit
In the first half of 2023, non-cash payments in Europe totaled $67 billion, and 54% of all transactions were made by credit and debit cards, according to the European Central Bank’s semiannual report, issued 31 January 2024.
“In the first half of 2023 the number of card-based payments within the euro area increased by 15.6% to 36.5 billion compared with the first half of 2022,” ECB researchers wrote, adding that the total value of card-based payments rose by 14.1% to €1.5 trillion, reflecting an average value of around €40 per transaction. Of all the countries surveyed, they noted that Lithuania had the largest percentage of non-cash payments in the first half of 2023, at around 78%.
Researchers found 669.5 million debit and credit cards in circulation during the first half of 2023, 4.7% more than the first half of 2022, equating to 1.9 payment cards per inhabitant across a total population of 350 million, they stated.
Digital Wallets, P2P Payments
The European Mobile Payments Report 2024: Status Quo of the Industry Landscape, Success Factors and Future Scenarios, found a diversified payments ecosystem, in which major digital wallet providers Apple Pay, Google Wallet, WeChat Pay, and PayPal are widely accepted and new players are gaining market share by appealing to consumer expectations for speed, convenience, security and ease of use.
On the domestic front, researchers saw local wallet growth in select markets and multinational expansion through partnerships and mergers and acquisitions. Overall analysis of 46 domestic European solutions found 27 solutions, similar to Swish in Sweden, BLIK in Poland, and TWINT in Switzerland, that offer P2P, ecommerce and point-of-sale (POS), which led researchers to propose that having all three factors in one solution is a key success driver.
Additional solutions were highly specialized, researchers found, stating, “Notably, some like Bluecode (Austria) and iDeal (Netherlands) specialized as business-to-consumer platforms, a decision often rooted in a commercial focus. Furthermore, many solutions incorporate additional functionalities, including voucher redemption, bill splitting, and social features like chat or sharing videos and pictures in a social media-like environments.”
In conclusion, researchers characterized the European payment landscape as diversified and fast growing, with numerous digital wallet and P2P use cases achieving both high adoption and high usage in their respective markets.
The Future of European Payments
European Central Bank Board Member Piero Cipollone unveiled the Digital Euro Project, a complementary enhancement to the Single Euro Payments Area (SEPA) initiative aiming to unify fragmented European payments. His keynote address, delivered at a 24 April 2024, board meeting, positioned both projects as effective strategies for removing barriers to competition and restoring balance of power between non-European and native technology providers.
“As we transition into the digital age, it is imperative that we preserve the same level of integration and ensure that our currency remains future-proof,” Cipollone said. “There is no reason why public money should not go digital in keeping with all the other forms of payment. We need to adapt to evolving consumer preferences, which are increasingly digital.”
Consumers could use digital Euros for basic transactions and at no charge, Cipollone noted, while maintaining a level of privacy that is similar to cash. This effort would strengthen the “classic SEPA” framework, he said, and provide the backbone for innovative European payments, furthering pan-European reach and resilience.
From Rivero’s unique vantage point in Zurich, Switzerland, we are fortunate to participate in Europe’s vibrant financial ecosystem. As we stay attuned to unique payment preferences of citizens throughout the region, we can collectively build a more innovative, inclusive future.
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