How do we pay online?
What payment methods do Hungarian customers prefer? We explore the criteria they use to make decisions and their attitudes towards increasingly popular virtual card payments.
Online Shopping & Delivery — Part 1
Research into the Hungarian market
In recent years, we have all experienced how online shopping has changed our lives. The exponential growth in online purchases and the widespread use of online platforms have created new opportunities for businesses, while giving consumers convenient, fast access to a wide range of products and services.
Based on our research into online order delivery, this series of articles presents users’ expectations and experiences of paying for online orders, delivery and communication throughout the process.
This article was preceded by a non-representative online questionnaire, in-depth interviews and desk research. Our questionnaire survey included participants aged between 16 and 75.
Online Shopping & Delivery Series
#1 — How do we pay online?
We introduce customers’ preferred payment methods. We explore the criteria they use to make decisions and their attitudes towards increasingly popular virtual card payments.
#2 — The economic effects of COVID-19
We discuss the economic impact on online shopping. We look at whether changes in shopping habits during the COVID period have continued, and outline how rising inflation may influence users’ decisions about payment and delivery methods.
In this article, we look at customer feedback and preferences regarding different delivery methods. We also discuss how delivery options by product category influence customers, as well as what they think about environmentally friendly delivery methods.
From the moment an order is placed, the status of ordered products and collection-related communication are crucial. In this article, we focus on the messages and notifications customers consider important.
In this article, we discuss customers’ perceptions of the safety of online shopping, the items they return, and their concerns and expectations when shopping on international websites.
What payment methods are available to users?
In the early 2010s, cash on delivery and bank transfer were the typical payment methods for online shopping. However, by the end of the decade, the availability of card payments for online orders had increased rapidly with the emergence of online payment providers such as Barion and Simple. This was followed by contactless payment providers such as Apple Pay, Google Pay and PayPal, which allow us to make payments without using cash or a physical bank card. As a result, we can now choose from a variety of payment methods when placing online orders, including cash on delivery, prepayment, online card payments and payment options offered by electronic wallets.
According to the Hungarian National Bank's Payment System Report, the number of internet-based merchants accepting electronic payments increased by 24% last year, giving us access to 42,000 acceptance points for online orders. Electronic wallets also saw significant growth, with the number of cards registered in mobile wallets reaching 1.7 million, representing almost 18% of all bank cards registered in such services. (source 1)
How do people prefer to pay for online purchases?
The payment method chosen for online orders is often determined by individual preferences and age differences. Where customers trust a merchant’s website, online card payment comes out on top. The availability of well-known payment systems on the merchant’s site, such as Barion or Simple Pay, can further increase confidence. This method is quick and convenient, allowing customers to make purchases online easily and securely. Another advantage is that online card payments remove the need to pay on delivery, so anyone can receive the parcel.
Regardless of age group, most respondents pay for their orders when they place them. While 69% of respondents use a card to pay online, cash on delivery still plays an important role. Bank transfer is the least preferred payment method. This may be because modern payment methods have removed the need for bank transfers, with people choosing easier, faster online card payments over this outdated option. However, preferred payment methods vary across age groups.
Among 15–25-year-olds, contactless payment is more popular than in other age groups, driven by technological advances and the widespread use of smartphones among young people. This generation turns to digital payment solutions primarily for their simplicity, speed and convenience.
Among 26–35-year-olds, online card payments remain dominant, while cash on delivery also plays an important role. The use of electronic wallets is somewhat popular, reflecting this age group’s preference for convenience and positive attitude towards technological developments.
For the 36–45 age group, online card payment remains the most common choice, with cash on delivery also important. The use of electronic wallets is notable, but less prevalent than among younger age groups.
Among those aged 46+, cash on delivery is more popular than in other age groups. For this generation, security and convenience are more important, and they prefer to pay when the product is delivered.
Offering a wide range of payment methods can be a significant cost for online retailers. On the other hand, customers are more likely to choose another merchant if the available payment methods do not meet their preferences. (source 2)
71% of respondents have encountered a situation where an online shop did not offer the payment method they were looking for, forcing them to shop elsewhere because their expectations were not met.
This shows that the distribution of payment method preferences can vary across age groups, and businesses should take this into account to meet customers’ needs and support a successful online shopping experience.
What influences customers’ choice of payment method?
Customers’ choice of payment method can depend on several factors. According to the data, the most important factors are the additional costs associated with payment, security and simplicity.
The cost of using cash
25% of respondents specifically consider the additional costs associated with a payment method. In particular, they look for the cheapest delivery methods and avoid those with higher costs. Where possible, they choose options with no or low delivery and payment fees.
Security and simplicity
Security is also an important consideration, cited by 21% of respondents. Customers want to use reliable payment methods that protect their personal and financial information.
Simplicity is also important, cited by 16% of respondents. People want to make purchases easily and quickly, so they choose payment methods that are less complicated and easier to use.
The choice of payment method can also be influenced by other factors, such as the delivery method selected or the total order value. Product type may also influence the payment method, although this is less important overall.
What drives payment choices across age groups?
According to the age group analysis, security is the most important factor for people aged 15–25 and 46+. For these two generations, protecting personal and financial data when shopping online is of paramount importance.
For the 26–35 and 36–45 age groups, the additional costs associated with payment methods play an important role. Customers in these age groups try to minimise these extra costs.
The world of virtual cards
A virtual card, also known as a web card or internet card, is a digital bank card designed exclusively for online purchases. It cannot be used to withdraw cash or pay at POS terminals. Like a traditional bank card, it is linked to a bank account and contains the essential card details for online purchases, such as the card number, expiry date and CVV2 code.
Many people choose virtual cards because they can load only the amount they need for online purchases, removing the need to provide their primary bank card details on online payment platforms. This minimises the risk of potential fraud or overspending. It is also possible to create disposable or short-lived virtual cards, where the card details expire immediately after payment is made. (source 3) (source 4)
Nowadays, virtual cards are increasingly available from multiple banks, helping to protect people from scams. In Hungary, virtual cards are offered by Gránit Bank, CIB Bank, Erste Bank, OTP Bank, Revolut and Wise. (source 5)
According to the data, 37% of respondents have heard of virtual cards, and 39% of them have already used them. On the other hand, 24% of respondents have not yet heard of single-use virtual cards.
Among respondents, security was the main reason for using virtual cards. The data shows that 80% of respondents chose this payment method for security reasons. This significant proportion suggests that virtual cards offer customers a higher level of protection, helping to reduce the risk of fraud or phishing.
A smaller proportion of respondents, 12%, said they wanted to try using virtual cards. Simplicity, meanwhile, was the reason only 8% of respondents chose virtual cards.
The data clearly shows that virtual cards are mainly popular for security reasons. This payment method allows customers to protect themselves against potential fraud and shop safely online. As such, disposable virtual cards are an effective and reliable tool for customers making digital transactions.
In the next part of the series, we will discuss the economic impact on online shopping. We will look at whether changes in shopping habits during the COVID period have been sustained, and how rising inflation may affect users’ decisions about payment and delivery methods.