2016 saw a major shift whereby payment methods such as e-wallet, bank transfer, direct debit, invoice, cash on delivery and others overtook traditional online payments by credit cards, according to research by yStats, an e-commerce research firm.

Emerging markets prefer alternative payments

The report, Global Alternative Online Payment Methods: Second Half 2016, found that credit cards are no longer dominating global e-commerce, partly due to the influence of emerging markets with different retail preferences and also due to changing preferences among online consumers in advanced markets. Alternative payments are expected to increase in volume until 2020, while credit and debit cards will lose several percentage points.

According to yStats, e-wallet is the most popular alternative to bank cards, with almost a third of global e-commerce sales. Wallets are also the second most used payment method in cross-border online shopping. The yStats report states: “Digital wallet providers such as PayPal and Alipay are preferred by a high double-digit share of online shoppers in countries such as China, Italy, and Mexico. Other prominent alternative payment methods include bank transfer, direct debit, cash on delivery, payment by invoice and in-store payment.”

Advanced markets still rely on plastic

However, payment by credit or debit card is still the leading online payment method in some advanced markets, including the US, Canada, Japan, Australia, the UK and France. In some emerging markets, such as Russia, use of bank card payments is even increasing. The report also notes that online retailers are responding to this diversified payments market by offering at least three types of online payment options for customers.

Paypal dominates in Italy

The infographic below shows how online shoppers pay in one of the markets covered in yStats's 2016 survey. Italy is one of the countries – along with China and Mexico – where e-wallets, such as Paypal or Alipay, are the preferred payment channel for online customers. A significant portion of online shoppers in Italy are using prepaid cards (Postepay) and cash on delivery is still occasionally used by 4 per cent of shoppers.

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CTMfile take: There are high levels of mistrust regarding bank credit or debit cards among the Italian population, which could explain the preference for Paypal. In countries such as the UK, there is greater consumer confidence in bank cards and usage is higher. In any case, this study emphasises the need for retailers to provide at least three payment choices for online customers.