UK e-commerce market projected to exceed £260 billion by 2025

By Gaia Lamperti

The UK’s e-commerce market, already the world’s third-largest, is forecast to grow by nearly 26% through 2025 to reach over £260 billion in transaction value, according to a new report released today from financial technology leader FIS.

The company’s 2022 Global Payments Report by Worldpay offers a snapshot of the payments landscape globally, examining current and future payments trends across 41 countries in 5 regions. The report tracks consumer payments when shopping online and at the point of sale, identifies key payment trends including B2B and C2B real-time payments, and projects future scenarios for payment method shares as well as market size.

Regarding 2021, the report found the shift to online continued with 13.9% growth in global e-commerce, while the 13.4% growth in point-of-sale (POS) transaction value reflects the steady recovery from the impacts of the Covid-19 pandemic. The report’s data was collected using a survey of 46,000 consumers, secondary research, and extensive validation by payments experts from each region; the complete research methodology is published as an appendix to the report.

The rise of BNPL

The FIS report found that the e-commerce market in the UK is driven by digital wallets, which accounted for the largest share of UK e-commerce transaction value in 2021 (32.3%), followed by credit/charge cards (26.9%) and debit cards (23.9%). Looking ahead, digital wallets are projected to maintain their crown as the most popular online payment method, accounting for 34.5% of e-commerce transaction value by 2025.

One of the major trends identified by the report is “Buy Now, Pay Later” as a checkout preferred payment option which accounted for nearly £13 billion of UK e-commerce spend in 2021 and is projected to exceed £16 billion in 2022. BNPL is also the UK’s fastest growing online payment method and is projected to double in value by 2025 to account for 12.1% (nearly £32 billion) of UK e-commerce spend.

“The study shows that the UK is now entering a new phase of adoption of BNPL and digital wallets. While instalment payments are not a new concept, both banks and merchants can no longer ignore the fact that consumers are seeking out BNPL as a more affordable and convenient alternative to credit cards,” commented Pete Wickes, EMEA General Manager, Worldpay Merchant Solutions, FIS.

POS payment trends

When it comes to the UK’s POS market, the study expects it to increase by 23.3% between 2021 and 2025 when it is projected to account for £1.2 trillion in transaction value. Mobile wallets and BNPL are the fastest growing payment methods at POS in the UK and are projected to account for 14.7% and 5.3% of in-store transaction value respectively by 2025.

“According to the study, much of the pandemic-driven shift to digital payments has now been normalised across the UK, making the opportunity for many e-commerce businesses larger than ever before,” Wickes added. “As more consumers see the benefits of alternative payment methods (APMs), businesses must find ways to innovate and create technology-centric strategies to meet the diverse needs of their customers.”

Key highlights

• Study shows the UK e-commerce market has grown by over £40 billion in the last four years.
• By 2025 digital wallets are projected to account for over £90 billion of the UK e-commerce market.
• Buy now, pay later (BNPL) continues to be the fastest growing online payment method and is projected to double its share of UK e-commerce spend from 6% in 2021 to 12% by 2025.
• BNPL is making inroads at the UK point of sale, whereby 2025 it is projected to account for over £64 million in transaction value.