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Smart Globalization: Payment Preferences

Ed Buturla • July 13, 2018

Digital commerce has made Europe one of the first places US-based retailers look to expand their business. The continent is full of digital-savvy consumers and serves as an attractive market for mature NA retailers. Europe represents a large portion of the web’s total global user base, making it an attractive step for expanding companies.

The Smart Globalization series looks at the many challenges faced by eCommerce professionals trying to expand their business into Europe. Earlier, we touched on order fulfillment models. In this our second installment, we focus on payment preference and options preferred by European shoppers.

In the US, payment options are pretty straightforward. Everyone accepts Visa and Mastercard, some merchants accept American Express and Discover, and beyond that, the world of “alternative payment methods” usually means offering PayPal or Apple Pay.

In contrast, European shoppers prefer different payment options, and these preferences differ from country to country. Limiting European customers to the same payment methods as your US shoppers will limit conversion and sales and drive shoppers away from your site, damaging your brand abroad.


European Payment Preferences

When it comes to paying for online orders, more than 40% of European shoppers prefer to use digital wallets such as PayPal, Alipay, and others. 35% of shoppers use Visa or Mastercard, with 24% and 21% preferring domestic bankcards and bank transfers.

To make matters difficult, these payment preferences differ from country to country. For example, if you were to offer major credit cards and PayPal to customers in Germany, you’d only be addressing the preferences of 23% of the online population. At the same time, Belgian customers might be extremely happy, as over 50% prefer using Visa or Mastercard to complete purchases[1].

Making matters even more complex, the alternative payment methods that Europeans prefer can require modifications to workflow logic between order capture and order fulfillment processes.

We’ve covered digital wallets in depth previously, so here we’ll take a look at additional payment methods preferred by Europeans: offline bank transfers, online bank transfers, direct debit orders, and cash-on-delivery.


Offline Bank Transfer

When a shopper opts to pay via offline bank transfer – as 21% of Europeans prefer – the customer does not submit payment during checkout. Instead, they receive their order number and a bank reference number. The consumer then physically goes to their local bank and advises the teller they wish to make a payment to the reference number.

The bank then transfers the funds from the consumer’s account to the merchant account of the online retailer.

At the warehouse, the order is not fulfilled until payment is received. If the consumer doesn’t pay within a specified timeframe (say 10-14 days), then the order is canceled.

In this case, the eCommerce platform will not pass the order to the warehouse until payment is received, enabling the warehouse to focus on fulfilling orders that have been paid in full (and avoid engaging in “if-then” logic between payment methods). The eCommerce platform will then reduce the “available to sell” inventory corresponding to the order to avoid overselling the ordered-but-not-paid-for merchandise.

The downside of this payment preference is that if consumers forget to pay or decide they don’t want the item, the inventory is tied up and thus opportunities are missed to sell that inventory to somebody else. To reduce this risk, automated emails can remind consumers to pay if payment is not received. The good thing about offline bank transfers for e-retailers is that the risks of chargebacks due to fraud claims are very low since the consumer has to give their bank permission to make payment.


Online Bank Transfers

Online bank transfers are just like offline bank transfers, except the consumer logs into their bank online to submit payment instead of physically going to the bank. Because the consumer sends money from their account, both types of bank transfers are referred to as “push payments.”


Direct Debit

On the other hand, there are direct debits. Unlike bank transfers, these are considered “pull payments,” where a consumer supplies their bank account information to the merchant and authorizes them to “pull” funds from their account to pay for the order.

Payment is received when the order is placed, so fulfillment begins right away. Although it is very popular with European consumers, your business will need to approach direct debits with caution due to its elevated fraud risk.

Fraudsters will steal bank account information from consumers just like stealing a credit card number. If they use this information to shop on your site, your business is liable for these orders. It is imperative to employ sound fraud mitigation practices and tools for direct debit processing. This may require additional headcount to support.


Cash-On-Delivery (COD)

Overseas, specifically in Eastern Europe, cash-on-delivery is still extremely popular. With COD, payment is actually made on delivery rather than when the order is placed. If the customer does not pay for the product, then it is returned to the retailer.

European shoppers have an affinity for COD because it does not require them to provide personal banking data over the Internet. Furthermore, shoppers only have to pay when they have received the product and ensure it matches their order and preferences.


As you can see, European payment preferences can differ wildly depending on location and demographic. Retailers looking to expand across the Atlantic need to do their homework to understand where their customers live and how they want to pay for their goods. Ensuring that digital technologies and solutions are in place to enable these payment methods is a smart move before expansion.




Ed Buturla

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Ed Buturla

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