5 Payment challenges facing online retail in 2025

“In ecommerce — actually, in life in general — everything is on-demand… We want everything now. We want it to be simple, easy, and convenient,” says Mike Brown, Head of Ecommerce at TrueLayer.

Consumers want to make retail purchases from their phones with just a few taps, whether on the train to work, in the queue for a coffee, or from the comfort of their sofa. They don’t want to traipse into the kitchen, rummage through their handbag for their wallet, and then painstakingly type out a 16-digit card number.

But current payment experiences don't match these expectations. And while UK consumers are spending more on online retail than they did five years ago, the space is still highly competitive. Merchants strive to optimise conversion and provide an ideal experience for customers, but payment processes can hold them back. 

In this article, we’ll examine the most pressing payment challenges facing online retailers in the UK and explore potential solutions.

1. High rates of cart abandonment

As a merchant, you invest significant resources to attract customers and get them to shop with you. Too often, that effort ends in failure: on average, consumers in Great Britain end up abandoning their carts 3 in 4 times.

There are several reasons for this, many related to payment processes. Consumers list factors ranging from complex checkouts (22%) to payment failures (9%).

Implementing a sales recovery mechanism can help with the latter point. If a transaction fails, merchants can offer customers the chance to retry their payment. Customers get to complete their orders, and merchants can recover a sale that might otherwise have been lost.

Notably, insufficient payment options (17%) were also a significant motivator for cart abandonment. Adding alternative payment methods to your checkout can help you turn the tides. 

Take Pay by bank, for example. Powered by open banking, it initiates payments directly from customers’ bank accounts, creating a smooth, streamlined experience. This removes complexity from your checkout, making customers more likely to follow through on their purchases.

Pay by bank can also help you minimise payment failures. Designed specifically for digital and mobile transactions, it can offer higher success rates than card payments, converting more than 90% of the time on the first attempt.

2. Slow refunds that frustrate customers

Nothing annoys customers quite like slow, complicated refunds. Imagine you’re returning an expensive watch, or a pair of trainers. You go through pages and pages of admin just to initiate the return. Then, after you’ve gone to great lengths to send back the goods, you’re left waiting for more than a week to get your money back.

Now imagine a better way. You initiate the return in a couple of steps and your refund appears in your bank account right away. The experience is easy and worry-free, making you more likely to use your refund to buy a replacement product from them.

That’s why you need to prioritise fast, frictionless refunds for your customers. Not only will you increase customer loyalty, but you’ll get the opportunity to drive further sales.

So how can you make your refunds smoother? Techniques that help include:

• Automated refund processing: speed up the refund process by reducing the need for manual intervention on your end.

• Customer service chatbots: provide immediate assistance and support to customers, reducing their wait time and frustration.

• Real-time transaction tracking: allow customers to see the status of their refund in real time, increasing transparency and trust in the refund process.

Your payment infrastructure also plays an important role. Open banking products like Pay by bank and TrueLayer Payouts use instant payment rails to enable real-time refunds. This cuts down the operational workload linked to refund processing and eliminates the extended waiting times often associated with credit and debit card refunds. 

3. Overreliance on card payments 

Online retailers depend heavily on card payments. As a merchant, 60-70% of your payments pay-ins come via Visa or Mastercard. 

But relying heavily on card payments makes merchants vulnerable. As a merchant, 60-70% of your payments pay-ins come via Visa or Mastercard. This reliance on the two card giants leaves merchants exposed to significant risks — highlighted by the global CrowdStrike issue, which left many businesses unable to accept card payments.

Rather than relying solely on one payment method like cards, you should aim to diversify the payment options you offer at checkout. Providing multiple methods won’t just give your customers more choice — it’ll protect you against outages, help you reduce fees and ensure you can continue to maintain high conversion rates.

If you’re looking to add new payment methods to your checkout, Pay by bank should be at the top of your list. It avoids the complex web of intermediaries common to card networks, reducing feeds for merchants. And since there are fewer points of failure, Pay by bank can make your checkout more resilient, withstanding outages like the Crowdstrike incident.

4. Bridging the gap between online and in-store

Today, customers expect omnichannel cohesion when they make a purchase. Just as they want to transition seamlessly from desktop to mobile, they demand a seamless link between in-store and online shopping.

“Only thinking through one channel, be it online or offline, is becoming harder and harder,” says Max Emilson, Chief Commercial Officer at TrueLayer. “Customers frequently buy online and return in-store or buy in-store and initiate the refund online. Ecommerce merchants need a solution for that complexity.”

To meet this expectation, you must ensure consistency across all channels. This includes maintaining uniform branding and user experience whether customers browse your website or visit your shop. 

Synchronisation across channels is also crucial. If a customer starts a purchase online, they should be able to complete it through any other digital channel or in store without hassle.

You should prioritise your omnichannel payment strategy to integrate payment data across all sales channels. This approach ensures customers enjoy a smooth and consistent payment experience, no matter how they shop. 

5. The persistent threat of fraud

Fraud is a frightening reality for all merchants, and it’s not going away. Whether it involves using card details stolen during a third-party data breach or “friendly fraud” like false chargebacks, this malicious activity can have a huge impact on both your bottom line and your reputation amongst consumers. In 2023 alone, UK internet and ecommerce card fraud losses totaled £260 million. 

Unfortunately, many common payment processes expose you to an increased risk of fraud. For example, handling and storing customer card details can make you a target for data theft. And when you suffer a breach, or when a fraudster uses a customer’s stolen data on your site, it can destroy trust in your brand and drive customers away.

One solution is to provide more secure payment methods. Once again, Pay by bank can help. Unlike cards, it doesn’t require merchants to handle or store sensitive data, mitigating the risk of data breaches or theft. Plus, there’s no chargeback mechanism, which helps to prevent friendly fraud.

Pay by bank also benefits from bank-grade security. Unlike card payments, it has strong customer authentication (SCA) built in natively, allowing customers to safely make a purchase without having to navigate extra screens. The result: a secure, speedy checkout for your shoppers.

It’s time to upgrade your checkout

Ready to meet the needs of your online shoppers? Explore how open banking solutions like Pay by bank can help accelerate your growth at checkout.