THE BLOG
11/11/2013 09:37 GMT | Updated 23/01/2014 10:53 GMT

Cash, Card or Click? How Online Retail Is Driving a Change in the Way We Pay

In my last blog on the growth of social retail, I explained how social media is having a huge impact on how people now make purchase decisions. But the increasing popularity of online shopping is having another interesting effect on how we buy things: it is leading to changes in the way we pay.

As consumers, we now demand more choice in payment than ever - both offline AND online. Online retailers need to meet this demand or see their customers go elsewhere. And businesses not currently offering online payment are missing out on our custom.

Cash, Card or Click? How are you going to pay?

The way we pay for goods and services has changed substantially in the last ten to fifteen years. So much so, that paper money and cheques feel a little outdated.

The UK Payments Council states that between 2001 and 2011, the value of cash based retail sales decreased from around 45 per cent of total sales to 30 per cent, with card payments doubling in the same period. The payments industry continues to evolve, not only with physical payment methods like contactless cards but also the growth in alternative payments schemes, ewallets and mobile commerce where the ability to pay is just a click away.

The changes are driven by an increase in customers moving away from the high street and shopping online instead. Shoppers now spend more than twice the amount online than they spent ten years ago, with one in ten people making an online purchase at least once a day, according to a recent survey by comparison website Broadband Choices. This is due to us being able to easily compare and review products and services, quickly.

WorldPay's Optimising your Alternative Payments report from last year expects the alternative payments market to grow by 13 per cent by 2015, which correlates with the growth in online retail. Shoppers are turning to online multi-seller sites like Amazon and Apple to buy their goods and entertainment. All the major supermarkets no offer an ecommerce option for customers who want to avoid the checkout queues.

Less than 40 per cent of online businesses can take online payments

We are also seeing an increase in smaller retailers building an online presence. According to epayments comparison site ElectronicPayments.co.uk, 70 per cent of UK businesses now have a website - but less that 40 per cent can take an online payment.

There are also numerous alternative payment schemes, with WorldPay's report stating that there are more than 230 in operation globally. Some schemes use credit or debit card information already registered on your customer's account, allowing you to transact without handing over your card details.

Which are the most popular online payment systems?

The most well-known payment system is Paypal, which has been around for over fifteen years and now processes around eight million payments daily. Its popularity is down to its simplicity and security for buyers - allowing anyone with any email address to make and receive payments.

Amazon has since made a bid for market share, with the launch of Amazon Payments. To save time on account set up, it uses information from an existing Amazon account - although you do still need to register, which often puts some people off.

There are alternative systems that take your card details without requiring you to set an account up. Authorize.net, WorldPay and SagePay offer this type of payment and are similar in their methods. Simplicity and choice are important - but a lack of security is the biggest turn off for us as customers, so websites that offer the most well known payment systems often win our business.

Contactless technology driving a rise in mobile payments

The immediate future of payments is mobile. Contactless technology has not just enabled us to pay for their goods with a quick tap of our card, but it has changed mobile phones into a payment device, courtesy of Barclaycard's PayTag contactless sticker, that launched in early 2012.

There are even further developments in mobile devices being used for payment with ewallets and near field communication (NFC) where chips are built into your phone and quick payments are made through Wi-Fi. Critics of this technology say that it hasn't really taken off and it will be superseded by cloud technology. Adoption of NFC payment methods have also been hindered by its limited take up by major retailers.

A new secure mobile payment system

It's not just about using your mobile phone as a payment device. The Payments Council is introducing new secure mobile payment system for 2014, which they claim will be as 'easy as texting'. 90% of UK current accounts will be able to use the service which uses a mobile phone number as a proxy for payment. That initiative plus the success of smart phone apps such as Barclay's Pingit (now estimated to have almost 2 million downloads since its launch in February 2012) could be encouraging for the rest of the banking sector.

What does all of this it mean for they way we buy goods and services?

Well, we now have more consumer choice AND the ability to transact on the move. This means that we increasingly expect any business selling goods or services to have a website, and we expect their online shop to be accessible from our mobile phone and tablet too.

So much shopping is done on a whim - a recommendation from a friend, a sign in a shop window, an article in a magazine we're reading. If we can't find that item online and pay for it there and then, using a payment system we know we can trust - that moment is lost.

More information on safe shopping is available on the Trading Standards website.