The Top Payment Methods in the United Kingdom 2022

Merchants must understand that the UK payments market is in a state of flux – and learn how to leverage this for eCommerce sales.

This blog covers trends up to 2022. Looking for the most recent data? Read our latest report.

Between Brexit and the coronavirus pandemic, the United Kingdom has experienced massive economic upheaval in recent years. Over the last two years, consumers across the UK have been turning toward eCommerce like never before and now over 85% of UK residents are shopping online (Hootsuite).

So the question remains: has your business adapted to this nationwide shift toward online payment preferences? Or could you fall behind in the United Kingdom eCommerce race?

The Top Payment Methods in the United Kingdom

UK eCommerce Payment Processing 

The B2C ecommerce market in the UK is valued at US$233 billion- nearly double that of powerhouse Germany valued at $133 billion (Statista).

Diving deeper, mobile ecommerce is a major driver of this trend, particularly among Gen Z and Millennial shoppers (MerchantSaavy). 55% of ecommerce spend is performed on mobile which, according to JP Morgan, “dwarfs all other [markets] in Europe.” (Internet Retailing). With smartphone penetration at 83%, in-app purchasing has, in turn, seen a rise. Already, 70% of UK residents report regularly using apps to shop (Hootsuite).

Therefore, connecting with UK consumers to grow your sales means understanding shopping habits and their preferred payment options.

Top Payment Methods in the United Kingdom

Merchants be advised: the independent-minded United Kingdom does things differently, whether it’s leaving the European Union or how they shop and pay. The United Kingdom of England, Scotland, Wales and Northern Ireland (UK) is the second-largest economy in Europe and the third-largest eCommerce market in the world, with a value of $239 billion (€213 billion), behind only China and the US. eWallet use is growing in the UK, with some estimating they could account for almost a third of payments by 2023. (JP Morgan)

Our data shows that nearly nine in ten (89%) of UK consumers make a mobile purchase at least monthly and 43% do so weekly. With mobile commerce in the UK expected to grow at more than twice the rate of the overall eCommerce sector, a mobile-first mentality is a must for doing business in the UK. (JP Morgan)

THE TOP ONLINE PAYMENT METHODS USED IN THE UK

75% of UK respondents reported recently using a debit card online, followed by 70% who used PayPal. Recent Apple Pay use was also the highest observed in Europe, at 29%. When it comes to their most preferred payment method, 36% of UK consumers choose debit cards, and 27% choose PayPal.

TOP IN-STORE/POS PAYMENT METHODS IN THE US

Debit cards are also the most utilized payment method for in-store purchases, with nearly three-quarters (73%) of UK consumers recently using them. Over half of respondents also used cash, although only 12% consider it their first choice of payment method. Apple Pay is also preferred over cash, and 1 in every 6 consumers chooses it as their favorite form of in-store payment.

Debit and Credit Cards

Debit is particularly important in the UK, with the Bank of England reporting that the popularity of debit cards has overtaken cash in recent years.

Since the 1990s the well-known payment service provider, PayZone, helped make card payment the default option throughout the country. Much of this success was due to leasing and selling payments terminals and other equipment to vendors. More recently, PayZone has helped provide digitised credit card solutions, such as mobile payment for car parking. Recently other in-store and online payment competitors have entered the market, offering more robust payment and payout solutions for online and point-of-sale payment and payouts. 

A growing percentage of transactions are gravitating toward contactless payments. The majority of these consumers use tap cards and mobile. Two of the most popular contactless payment methods are Google Pay and Apple Pay.  

Digital Wallets

As far as online payment methods, United Kingdom retailers must be able to accept the ever-more popular digital wallets. Digital wallets have become one of the most widely-used payment methods in the UK with the PayPal leading the fray. Since 2018, the UK’s Open Banking initiative has made it easier for fintechs to develop competing payment system products.

Cash

In 2020, just 17% of eCommerce transactions were completed using cash (UK Finance). Amid the Covid-19 pandemic, even cash in storefront retail saw its usage drop. In 2022, only 54% of consumers surveyed by Rapyd reported using cash for an in-store transaction in the past 30 days. However, only 12% of those consumers rated cash as their preferred payment method.

Bank Transfer

Although bank transfers only make up 6% of ecommerce payments right now, this could be one of the most popular online payment methods in the UK in the future (Statista). We expect to see bank transfers make some notable gains in the years to come, especially with the concurrent decline of cash.

The UK has had the framework for peer-to-peer bank transfers through its Faster Payment Network since 2008. And in September 2021, Faster Payments processed 879 million transfer payments; the most it had ever processed in a single month (Pay.uk). Much of this success is due to the highly secure nature of bank account regulatory standards in the UK.

As real-time payments technology cuts processing lags down to almost zero, bank transfers have surged in popularity with consumers and merchants.

The UK bank transfer system also facilitates direct debit payments for regular payments to the same company. Therefore, this payment method is also commonly seen among recurring payment plans such as the mobile phone industry.

Buy Now, Pay Later

The UK’s e-commerce industry (particularly in the clothing sector) has seen a surge in adopting of Buy Now, Pay Later (BNPL) as a preferred payment method.

The Buy Now Pay Later service provider pays the entire bill, and offers an interest-free installment-based plan to the customer. Thus, the customer does not have to input their credit card details or rely on a potentially detrimental credit card payment.

The most popular service for Buy Now, Pay Later service in the UK is Klarna. Approved by the financial conduct authority in 2014, the payment service now works with over 5,000 UK merchants. In 2021, the company reported year-on-year growth of over 200% in the UK market (Airnow). 

Building a Digital-Forward, Inclusive Payments Framework

The UK’s payments landscape will be in a major state of flux for some time to come, but one thing is for certain: mobile shopping and payments for local and cross-border purchases are on an upward trajectory.

Having a card-first, digital-friendly approach to payments is important, but merchants need a flexible and inclusive solution to capture all customers.

Learn More about Rapyd’s All-in-One Payments Solution in the United Kingdom.

Sources Cited:

Airnow. Market share of Revolut bank app downloads through IOS and Android worldwide as of October 2021, by country. Accessed via https://www.statista.com/statistics/1122372/global-share-of-app-downloads-revolut-bank-worldwide/

Bank of England. Is Cash in Decline? https://www.bankofengland.co.uk/knowledgebank/will-cash-die-out 

Business of Apps. Revolut Statistics.  https://www.businessofapps.com/data/revolut-statistics/

Hootsuite, We Are Social. Digital 2021. https://datareportal.com/reports/digital-2021-global-overview-report 

Internet Retailing. UK ecommerce accounts for 19% of total retail, making it worth $233bn. https://internetretailing.net/industry/uk-ecommerce-accounts-for-19-of-total-retail-making-it-worth-233bn-20971

Merchant Saavy. Amazing Stats Demonstrating The Unstoppable Rise of Mobile Payments Globally. https://www.merchantsavvy.co.uk/mobile-payment-stats-trends/ 

Pay.uk Faster Payment System statistics. https://newseventsinsights.wearepay.uk/data-and-insights/faster-payment-system-statistics/

Skrill. https://www.skrill.com/en/business/b2b-news-june-2021/ 

Statista. ECOMMERCE REPORT 2021 – Statista Digital Market Outlook

https://www.statista.com/outlook/dmo/ecommerce/germany 

U.K. Finance https://www.ukfinance.org.uk/sites/default/files/uploads/SUMMARY-UK-Payment-Markets-2021-FINAL.pdf