The evolution in online payments

Published on 25 april 2024

Online payments at web shops have undergone rapid evolution, especially with recent technological developments and changing consumer preferences. Here is an overview of this evolution, starting with the most recent developments.

1. Rise of Cryptocurrency and Blockchain Technology (2020-present)
The latest innovation in online payment systems is the integration of cryptocurrencies such as Bitcoin and Ethereum into e-commerce platforms. These technologies offer a new level of security and decentralization using blockchain. Transactions are not only more secure, but also offer opportunities for consumers to remain anonymous.

2. Rise of 'Buy Now, Pay Later' Services (2018-2020)
'Buy Now, Pay Later' (BNPL) services such as Afterpay and Klarna have exploded. These services allow consumers to make purchases immediately and split the payment into installments, often without interest. This model has gained popularity, especially among younger consumers, because it offers extra flexibility without an immediate financial burden.

3. Mobile Payments and Digital Wallets (2015-2018)
The shift to mobile payments, with services like Apple Pay, Google Wallet and Samsung Pay, has made it easier for consumers to pay quickly and securely with their smartphones. These wallets store payment information in a secure manner and use technologies such as NFC (Near Field Communication) for contactless payments.

4. Widespread Adoption of PayPal and Similar Services (2000-2015)
PayPal and other online payment services such as Skrill and Neteller have revolutionized the way consumers transact online. These platforms act as intermediaries that facilitate payments without revealing banking information to the seller. This has significantly increased confidence in online shopping.

5. Introduction of SSL encryption (1994-2000)
The implementation of SSL (Secure Sockets Layer) encryption in the 1990s was a turning point for online payments, as it provided a secure way to transmit data over the Internet. This led to an increase in consumer confidence in online shopping and was essential for the growth of e-commerce.

The evolution of online payments in web shops is a clear example of how technology can be used to improve the user experience and increase security. These developments have not only impacted the way consumers shop, but have also created new business models and opportunities within the retail sector.

The distribution of payment preferences among online shoppers shows how diverse payment options have evolved and what percentage of shoppers prefer immediate payment, purchasing on credit or deferred payment plans such as 'Buy Now, Pay Later' (BNPL).

1. Instant Pay with Credit or Debit Cards: While specific instant pay rates are difficult to determine, traditional credit and debit cards remain a dominant payment method for online purchases. Credit cards are often used for the security, convenience and rewards they offer.

2. Buy Now, Pay Later (BNPL): This option is quickly gaining popularity, especially among younger consumers. About 20% of consumers plan to use BNPL during the holiday season, indicating significant adoption of this payment method. BNPL services such as Afterpay, Klarna and others make it possible to make purchases immediately and split the payment into installments, often without interest, which is especially attractive to younger demographics who seek flexibility in their payment options​ (experian)​.

3. Buying on credit via credit cards: Credit cards are still widely used, mainly because of the convenience and protection they offer, but also because of the high interest costs that are sometimes associated with them. For example, the average credit card balance in mid-2023 was $6,365, indicating substantial use of credit among consumers (capitalone shopping).

These figures indicate that while traditional payment methods such as direct payment via debit and credit cards still prevail, alternative payment methods such as BNPL are seeing a significant rise and are starting to form a significant part of the market, especially among specific age groups and in certain seasons such as the holidays. These trends suggest an ongoing shift in how consumers access and use different payment options depending on their financial needs and purchasing habits.