Transatlantic ties: Comparing the payments landscapes of the US and the UK

There is a famous phrase, which has been attributed to both Winston Churchill and George Bernard Shaw, that states the UK and the US are “two nations divided by a common language”. This refers to the fact both countries use the same language, but style, spellings, and meanings are often quite different.

This analogy can easily be extended to payments.

Whilst both countries offer most of the same payment methods, local preferences - and the way in which payment options are perceived or used - are often rather different.

Our data shows, for now, cards remain the most prominent payment method in both countries, used in 50% of e-commerce transactions in the US 46% in the UK. But the data suggests this is set to change in the coming years.

In both markets, cash-on-delivery is used in just 1% of transactions as rapid digitalisation and more sophisticated payment technology powers a growing range of payment methods. In the UK, 35% of transactions are now made via a digital wallet, with the figure a little lower in the US (32%). 

The US is progressing rapidly towards digital payment methods

The US has generally been slower when it comes to adopting new payment methods.

Digital payment methods like wallets and Buy Now, Pay Later (BNPL) options have only been widely used more recently. Interestingly, in April 2024, Klarna announced it will be launching a card proposition for all US consumers to complement its app, in a clear move to build up its market share.

This shift towards newer payment methods has been led by Gen Z. The first generation to be truly digitally native, a recent EY survey has revealed how ‘Zoomers’ are now flexing their collective spending power – and adopting payment methods that provide a simple, seamless experience.

The survey shows 39% of Gen Z respondents consider entering a PIN to be a pain point when using a debit card compared with just 29% of other generations. They are also twice as likely to delay their purchase if their preferred payment method isn’t available.

Overall, Gen Z is racing ahead of the other generations, and is up to three times more likely to use a digital payment method, whether that’s Klarna, Afterpay, Zip, or even in-game currencies. In line with this, the likes of PayPal and Venmo are also seeing huge growth in peer-to-peer mobile payments across the US.

The UK uses digital payment methods for more than 50% of all online transactions – so what’s the breakdown?

It’s fair to say the UK is more often a first mover - or an early starter - when it comes to new payment methods.

This is partly due to London’s position as one of the world’s prominent fintech hubs, as well as the population’s appetite for frictionless online shopping. Consumers in the UK spend more online than almost any other European country: approximately $4,700 per online shopper in 2023, which is set to rise to around $6,000 by 2027.

In terms of preferred payment methods, Brits also widely use PayPal and Klarna – but another area to watch closely is open banking.

The UK was at the forefront of the European PSD2 regulation and has developed its own legal framework for implementation. In June 2023 it was reported open banking payments hit a record high, with 9.7 million payments made – an increase of 88% on the same month in 2022. This explosive growth is making open banking-powered payment methods, like Trustly, an increasingly popular choice in the UK.

It remains to be seen exactly how the US market integrates open banking at the wider level, but as regulators consider their next move some promising use cases are starting to emerge for account-to-account (A2A) payments. 

Adapting the checkout experience for each market

The US and the UK are two giants astride the global payments landscape. Whilst there are commonalities in their approach, there are also differences – which sometimes may appear subtle.

Global businesses and merchants operating in these two markets must understand each country’s approach to instant payments, open banking, BNPL, and other digital payment methods. Businesses and merchants can then adapt their checkouts to meet regional differences and ensure they are offering trusted payment methods to consumers in each market.

This will help them reach more consumers, improve user and checkout experiences, and boost both conversion rates and revenue.  It’s the key to unlocking further growth.