9 ecommerce payment predictions that could define 2024

2023 was a tough year for the UK economy. It shrank between July and September, and in February 2024 we slipped into a mild recession. The rising cost of living means consumers globally are choosing to make fewer purchases and spend less. 73% of consumers have changed their spending habits — most are cutting back on all but the most essential items. This cautious spending behaviour intensifies competition in an already competitive ecommerce sector.

But, as we enter 2024, the tough environment actually presents an opportunity for ecommerce merchants. 

Consumers are now more open to trying new brands for products they regularly buy, and the brands that can adapt to customer expectations and emerging technology will be best placed to win these potential new customers. 

So what ecommerce payment trends should you be aware of in 2024 and beyond?

We've tapped into the payment expertise of the TrueLayer team to bring you nine payment predictions for the year ahead, six where you should take action in 2024 and three more where we’ll see the beginnings of long-term trends for 2024 and beyond.

Six trends to explore in 2024

1. The cost of chargebacks and first-party fraud will continue to spiral

Recent years have seen a steady increase in chargebacks, and this unfortunate growth isn’t slowing any sign of slowing down. According to a 2023 survey by JUSTT, 77% of UK consumers filed a chargeback in the last year, up by 32% compared with 2022. Worryingly, 28% said they filed six or more, and some may be filing chargebacks incorrectly (some innocently and some with fraudulent intent). 

The chargeback system was set up in a post and telephone era, where initiating a chargeback took time and effort on the part of the consumer. The ease of mobile banking, along with growing consumer awareness, has likely led to more proactive use of chargebacks. 

Chargebacks — legitimate and fraudulent — will be compounded by the growth in buy now pay later (BNPL) offerings. According to JUSTT, 42% of merchants in the UK and US now have BNPL offerings, which are especially vulnerable to chargebacks, and another 14% plan to add BNPL over the next 12 months. 

In 2024, it’s time to make sure that your checkout experience is set up in a way that it minimises chargebacks on card payments, while also exploring what alternative payment options could eliminate chargebacks entirely. 

2. Merchants will need to experiment with different ways of dealing with refunds and returns

The surge in online shopping, especially post-pandemic, has significantly increased the volume of returns that ecommerce merchants need to manage. We believe merchants will increasingly experiment with different approaches to refunds and returns. 

2023 saw multiple retailers such as Zara, H&M, THG, and Mountain Warehouse introduce returns fees to discourage customers from returning items and recoup costs when they do. Looking ahead, cost pressures are unlikely to subside. Additionally, the environmental impact of returns means retailers face pressure to adopt more sustainable practices. 

Danni Hewson, financial analyst at AJ Bell, explained in a LinkedIn post that, for years, customers have become accustomed to buying multiple sizes of products and sending back the ones that don’t fit. However, “this is costing a lot of money, and the only way to discourage this activity is to start charging customers to return products.” But will the tradeoff mean losing hard-won customer loyalty?

In 2024, whatever you decide to do to future proof your refund strategy, explore what payment methods can improve your refund experience. Instant bank payments — when combined with additional functionality, like TrueLayer Payouts — can make refunds automatically happen in real-time, reducing the operational costs that come with manual refunds, along with the days of waiting that often come with card payments.

3. Consumer demand for seamless payments will cross the online/in-store barrier

Last year, we discovered 87% of consumers find online payments frustrating, signalling a clear demand for smoother and more seamless experiences. We expect this trend will only get bigger in 2024. But truthfully, a seamless online payment experience is now table stakes. While it’s been on the horizon for a while, 2024 will see the further merging of online and in-store payment experiences. This idea of accepting multiple payment options, integrated into a single, consistent experience for the customer is known as omnichannel payment processing. 

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The concept of omnichannel payments will become even more important. Only thinking through one channel, be it online or offline, is becoming harder and harder. 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.

— Max Emilson, Chief Commercial Officer, TrueLayer

In 2024, if your brand has a cross-channel payment experience, you need to think more about your omnichannel payment strategy. Apple’s concession that it will open its NFC technology to competitors (see prediction #8) could pave the way for better omnichannel journeys.

4. Companies will respond to consumer demands and cost pressures by building a diverse payments operation

Given these increasing cost pressures on merchants, we predict forward-thinking ecommerce companies will respond by building a more diverse — and therefore resilient — payment operation. Resilience is about reducing the likelihood that a single payment method, whether through fee hikes or prolonged downtime, can significantly impact your ability to convert customers and collect payments.

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I think the online paying experience is going to get a lot more diverse.

— Megan Bramlette Director of North America & EU Payment Acceptance, Amazon (speaking at Money2020)

For most merchants, that single payment method is cards. A report released by the Payment Systems Regulator (the payment watchdog in the UK) argued that card networks have raised cross-border exchange fees to an “unduly high level.” They noted that increases cost UK businesses an extra £150–200 million in 2022. 

The cost of cards isn’t the only issue for merchants. Cards were originally designed for physical transactions — they’re not fit for purpose in a digital-first world. Manual data input and a complex chain of payment gateways and payment processors make for a less-than-ideal customer experience that is prone to failure and vulnerable to fraud. 

In 2024, ecommerce merchants should look to alternative payment methods to become less reliant on cards and offer customers more choice. We imagine that a best-in-class checkout will look like a blend of traditional card payments, instant bank payments and other alternative payment options.

5. Social commerce will expand further than ever before

Social commerce — where customers browse and buy items directly on social media platforms — is growing rapidly. It’s most popular among younger age groups, which suggests that social shopping will become the norm for future generations. 

Social media has evolved from a way to discover new products to a channel where customers can actually complete entire purchase journeys. 50% of all shoppers have bought products via social media in the past year, and that percentage has grown to 73% among 18-34 year olds. 

In 2024, social commerce revenue in the UK is expected to reach approximately £8.2 billion in 2024. If you’re in an industry like fashion, luxury retail, events and ticketing and even travel, you risk missing out if you don’t have a social commerce strategy in place. 

6. Merchants who don’t have alternative payments on their roadmap will get left behind

The figures don’t lie. 2023 saw a 102% increase in the number of open banking transactions compared to 2022. Open banking reached a milestone of 13.5 million payments in December 2023. The top use cases for open banking in 2023 were account top-ups, credit card bill payments, and — importantly — ecommerce. 

We may be biased on the future of open banking, but we have no reason to doubt that momentum will continue into 2024, as an increasing number of consumers and merchants recognise the enhanced security and simplicity that open banking offers.

Open banking is a financial service that allows third-party developers secure access to a consumer's financial data, offering enhanced services and streamlined payments through banking APIs.

In 2024, as consumers become more familiar with open banking, you need to consider when is the right time to add open banking payments to your checkout. Open banking payments are specifically designed for digital and mobile payments, meaning the payment process is less manual, has multi-factor authentication baked in, and typically has higher success rates than card payments.

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Cards aren’t going to vanish in the blink of an eye. But don’t let that lull you into complacency. Gone are the days when cards were a necessary part of online payments. More choice and a better experience are out there. And it’s only a matter of time before people realise there’s a better way forward.

— Francesco Simoneschi, CEO and Co-founder, TrueLayer

Three trends for 2024 and beyond

7. EU open banking will close the gap on the UK thanks to instant payments and SPAA

Currently, the UK is ahead of the EU in implementing instant bank payments — both in adoption and user experience, but with new initiatives set to come into action, we expect the EU to close the gap significantly in 2024. This shift is part of a broader strategy to enhance the competitiveness and efficiency of the European payment systems.

The biggest news is that the EU is aiming to reduce reliance on international networks like Mastercard and Visa by making instant payments the new normal in Europe. PSD3 also arrived mid 2023, which has set the scene for the next wave of open banking in Europe.

Another important introduction is SPAA (The SEPA Payment Account Access scheme). SPAA is a first-of-its-kind initiative to create the next generation of premium open banking services, which go beyond PSD2 requirements. Any EU bank or regulated fintech can apply to join and enable account-to-account payments and data services based on premium open banking APIs.

SPAA should complement PSD2 and PSD3, by creating a sustainable open banking ecosystem in Europe.

By introducing a remuneration model for premium features, SPAA is an opportunity for banks to monetise open banking and to help develop the next generation of digitally native, account-to-account payment services — all in partnership with fintechs and other payment service providers.

In short, it’s another reason to explore open-banking powered payments at checkout if your brand has operations in Europe.

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SPAA marks the beginning of a new phase in the rollout of open banking-based services across Europe, one defined by collaboration between banks and fintechs. Together with widespread instant credit transfers, it will help make account-to-account A2A payments the main alternative to cards in Europe.

— Andrei Cazacu, EU Public Policy Lead, TrueLayer

8. Apple must give Europe-based developers access to NFC payment technology — and that’s exciting

In a January announcement, the European Commission confirmed that Apple is willing to let third-party mobile wallet and payment providers access the iPhone’s NFC capabilities. This is in response to the Commission accusing Apple of using iOS policies to restrict competition in the mobile payments industry.

Why is this such a big story? With Apple’s stronghold over its own phones — which represent 33% of Europe’s smartphone market — competitors and other payment companies haven’t been able to use the technology to power or enhance their own payment offering. The change could lead to alternative payment methods — like open banking-powered instant bank transfers becoming a viable option at physical point of sale.

As always, the devil is in the details, and the European Commission is seeking specific commitments from Apple, and is also asking for input from its competitors to make sure the changes are acceptable.

9. We’ll witness the rise of the embedded-finance super apps

Embedded finance has become a real buzzword in recent years. If you don’t know, embedded finance is simply the integration of financial services into traditionally non-financial products. This can, of course, include payments as one of those ‘financial products’. In fact, having an online checkout experience that takes place entirely on your website is a straightforward way that most ecommerce brands first use embedded finance.

But we think that 2024 and beyond will see enterprise brands becoming much more aggressive with their approach to embedded finance, perhaps as they’ve seen the success of Chinese Super apps, like AliPay and WeChat. X — formerly known as Twitter — is a good example of a major brand seeking to become a super app (or everything app), with Elon Musk signalling his intention to have the social media platform include ecommerce, payments and banking.

But if this is just the reserve of global enterprises, what should your ecommerce brand do in regards to embedded finance?

Embedded finance can include embedded payments, embedded lending and embedded insurance at checkout. Where could you add these elements into your offering at checkout to boost revenue and increase conversion?

In simple terms, removing the need for your customer to navigate away from checkout for any part of the buying experience will increase the chance of a successful conversion.

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Brands are increasingly embedding finance straight into that business model, even though it's not core to their business. They see the advantages of being in control of the whole journey. X talks about becoming a super app, gaining their own licences slowly but surely.

— Nadja Bennett, Strategic Accounts Director, TrueLayer

What’s on your mind in 2024?

The changing payments landscape feels simultaneously like an exciting opportunity to use payments as a lever for growth, while also a technological and regulatory headache to keep on top of. If adding a new payment method or optimising your payment journey is on your roadmap for 2024 (and it probably should be), why not book a call with one of our payment experts and better understand how instant bank payments could help make your checkout best in class.