(In Europe) Credit card increases lead over other payment methods in online retailing

Latest Pago Retail Report by Deutsche Card Services shows significant differences in payment behaviour between online retailing and e-commerce as a whole

COLOGNE, 27 February 2009 - As in overall e-commerce, credit cards are clearly the preferred payment method in European retailing. Their share rose almost 6 pp year-on-year, to now 81.57%. In other words: Consumers use credit cards to pay for more than eight out of ten purchases in European online retailing. This is one of the results explained in the Pago Retail Report 2008, which was recently published by Deutsche Card Services, a subsidiary of Deutsche Bank. 

(Editor's Note: These numbers are skewed because PIN Debit is not ubiquitous on the web.  For "across the board" numbers, visit "Debit is King, Cash Overthrone")

Offline payment methods and direct debiting lose importance in favour of credit cards

Despite the predominance of credit cards offline payment methods such as invoice purchases, COD and prepayment as well as direct debiting still play a more important role in online retailing than in overall e-commerce (payment behaviour in overall e-commerce is described in detail in the Pago Report 2008).

Just like the sector-specific Pago Retail Report 2008, the Pago Report 2008 is based on real-life transactions, not on surveys. That is what makes the Pago Reports different from other e-commerce studies. The report highlights that 5.04% of all retail transactions were paid for by offline methods and 11.97% by direct debiting.

The shares of these payment methods in overall e-commerce are only 0.77% and 8.34%, respectively. However, offline payment and direct debiting lose ground to credit cards in online retailing; in fact, the latter increased their lead, largely due to the success of Visa, whose share rose by more than 4%, whereas competing credit card brand MasterCard lost more than 2%.

Consumers from the UK and from outside Europe pay almost exclusively by credit card

The predominance of credit cards as most important payment method in retailing is even more visible among consumers from the UK and outside Europe than among German customers. Traditional payment methods such as invoice purchasing or direct debiting are almost non-existent for this consumer group. UK consumers use their credit cards even more often in retailing than in overall e-commerce. The share in overall e-commerce is already very high, at 91.50%, and it rises to 94.90% in retailing. Maestro, the leading international debit payment method, which is gaining ground in e-commerce in comparison to credit cards, is the only other payment method which seems acceptable to British consumers, with a share of 5.10%. Shops which also target customers outside Europe do well to offer credit card payment, which has a share of almost 100% among these consumers.Upward potential for new payment methods Maestro and giropay in European retailingIn general, retail consumers are still reluctant to adopt newer payment methods such as Maestro and giropay (which is based on the well-established PIN/TAN electronic banking method) - at least more reluctant than e-commerce customers as a whole. giropay meets with even less approval than Maestro. Maestro has a share of 0.77%, but giropay undershoots even this low mark with a share of only 0.65%. This is probably due to the fact that, using this new payment method, it is still difficult to process retail good returns and the crediting procedure for returned purchases is complicated.

Visa increases its lead over MasterCard as top credit card brand

Visa, which is the leading credit card brand in overall e-commerce, was able to confirm and even improve its leadership position in retailing, too. While the gap between Visa and MasterCard was just above 19pp in the preceding year, it is now more than 25pp. Visa has increased its lead again at the expense of the other credit card brands, whose share dropped from 7.35% to 5.48%. In the meantime Visa has overtaken its rival MasterCard in retailing with German consumers, too: While MasterCard was ahead of Visa in the preceding year with a share of 41.69% (vs 33.95%), Visa is now in front of MasterCard (44.40% vs 35.40%). In other consumer countries such as the UK, where the lead is an impressive 36.20 pp, Visa is even more predominant than in Germany.

Source: Press Release