The Future is Here: The methodologies behind Visa’s economic scenarios of the future

Background & Considerations
Between March and June 2024, Visa worked with its global research partner, Morning Consult, to deliver two complementary pieces of work:

– Europe-wide consumer polling to understand the societal hopes, ambitions and barriers to adopting new payments technologies in the near future. The study was conducted in March and April 2024 among 8,000 consumers across France, Italy, Spain, Poland, Germany, Sweden and the UK. In addition, 516 UK business decision makers were polled. Gen Pop data was weighted to approximate the adult population based on gender, educational attainment, age, race, and region. Some of this research is referenced below within the methodologies of certain statements.

– Low level economic forecasting to understand the hypothetical economic impact of these innovations.

This document delivers clarity and transparency about how Morning Consult arrived at the forecasting statements – providing both the original source and outlining the assumptions made by Morning Consult. While the themes reflected in the hypotheses relate to areas covered in the consumer polling, the attitudes, behaviours, and opinions probed in surveys do not always translate easily to aggregate-level impact.

This impact exercise helps put the consumer polling insights in context by drawing a line from the primary themes to larger-scale or longer-term effects by using a different lens, usually with public data from Visa or other public sources. For purposes of illustration and context-setting appropriate to collateral of this nature, illustrations are typically broad, directional, illustrative, and based on a synthesis of available data, with some assumptions made and conducted in a time-boxed fashion as is done here.

Each of the scenarios in this document represent the potential positive benefit to European individuals, merchants and economies of new payments technologies should these hypothetical scenarios come to pass. In no circumstances does this represent estimated performance, revenues or expectations of or by Visa or its subsidiaries.

Visa neither makes any warranty nor representation as to the completeness or accuracy of the information within this document, nor assumes any liability or responsibility that may result from reliance on such information. This document contains illustrative scenarios that relate to, among other things, the possible socio-economic impact for individuals, merchants and economies of new payment technologies in the future. Illustrative scenarios are generally identified by words such as "believes," "estimates," "expects," "intends," "may," "projects," “could," "should," "will," "continue" and other similar expressions. They are subject to certain risks, uncertainties and other factors, many of which are beyond our control and are difficult to predict.

1. Approx. 67% of European small businesses accept debit or credit payments¹, with research showing that by accepting digital payments, by card or mobile phone, businesses can positively impact their balance sheet. The digitisation of all SMBs across Europe could increase revenues by more than €200bn annually in real terms once fully adopted.
Market estimates for selected country breakdowns of increased revenues: UK (approx. 30%); France (approx.15%); Germany (approx. 13%); Spain (approx. 9%); Italy (approx. 5%); Poland (approx. 3%); and Sweden (approx. 3%).

Link to original Visa article, ‘Unlocking the potential of Europe’s small and medium businesses’, is here, alongside a second article around Visa’s ambition to digitally enable millions of SMBs globally.

More information on the Morning Consult methodology:

SMBs (249 or less employees) represent approximately a 50% share of non-financial firm revenues across the UK plus EU². SMBs generated revenues of around 19 trillion Euros in 2022, around half of all EU business revenue³. Also in 2022, UK SMBs generated approximately 2.2 Trillion GBP⁴  (approximately 2.5 Trillion Euros as of 12/31/22). Thus, EU plus UK SMBs comprised around 21.5 Trillion Euro revenue at the end of 2022.

As per the above Visa article, two-thirds (67%) of SMBs accepted card payments in Europe by the start of 2023. 41% surveyed in Visa research (also in 2023, details within the same article) indicated that turnover rose by 6 to 15% when they began accepting card payments⁵. This implies a range of 185 billion Euros (at 6%) to 456 billion Euros (at 15%) in SMB revenues as digital payments are fully adopted⁶.

These market estimates⁷  are based on observation of past results as businesses adopted digital payments; some of those gains may have been share-shift to businesses adopting digital payments from those who had not yet adopted. To the extent this share-shift is a major source of observed improvements, the results of those adopting in the future may be lower, as there are fewer and fewer non-digitised players to draw from. Broadly speaking, ‘digitising’ an SMB primarily focuses on the acceptance of digital payments and building online businesses.

2. According to European VisaNet data, Click to Pay may allow a 4.5% uplift in merchant sales⁸, meaning a possible annual increase of €51 bn in SMB eCommerce sales in the UK and EU.

More information on the Morning Consult methodology:

VisaNet data shows that Click to Pay could benefit online shopping, resulting in a 4.5% uplift in merchant sales through increased authorisation rates (see footnote 8). Click to Pay is currently in the early stages, but what does a 4.5% uplift in sales mean for European GDP levels if it is ubiquitous?

Our primary goal is to quantify the implications of Visa’s own estimates, so we applied this 4.5% to the most plausible base for improvements, namely EU and UK eCommerce sales.

Based on our analysis of EU and other data⁹, Morning Consult estimated UK plus EU eCommerce sales in 2023 to be approximately 1,939 billion Euros in total, with 1,144 billion to SMBs. An uplift of 4.5% implies 51 billion Euros annually to UK and EU businesses.

3. According to a European pilot, Click to Pay could reduce time spent at the checkout by up to 40%¹⁰. Given the number of abandoned carts in ecommerce, and the significance of checkout time and concerns over entering credit data at checkout, a retailer adopting Click to Pay could increase its revenues by up to 30%.

More information on the Morning Consult methodology:

Visa data shows that Click to Pay could see a 40% reduction in time spent at checkout while online shopping. The average checkout time in Europe was 3.3 mins in 2022 and that 62% of consumers give up on a purchase after two minutes¹¹. Visa asks, what would a 40% time reduction mean for retailers?

Sources generally indicate that 70% of carts are abandoned¹², with higher percentages from certain referral channels like social media. To the extent that abandoned carts look like completed transactions, this means that there are around three abandoned carts for every completed transaction, an enormous loss, at least at first glance. Indeed, research indicates that 25-26% of abandons go on to purchase through another site or means, indicating that these were truly lost sales, rather than more casual shoppers or those actively comparing offers across retailers¹³.

Of abandoned carts, 15-20% of abandons are cited as being based on (each) too much time or not wanting to enter card details, both issues that Click to Pay addresses. So, there are at least 25% of abandoned carts that represent real deals, and a fair portion are lost due to time at checkout or payment issues. Elsewhere, in collateral, Shopify cites the ability to use one-click ordering as potentially improving lower funnel conversion rates by 50% over guest checkout¹⁴. This is consistent with the importance of reduced time and safety of transaction details¹⁵.

Synthesis:
70% abandons implies that for every cart that leads to a final checkout, there are three that do not. So, a merchant could potentially increase sales with three added sales for every one it is already making. However, any consumer doing comparison shopping who shops to the point of final costs (price, delivery, other terms) on two sites for comparison will generally have at least a 50% abandon rate. Someone shopping on four sites will automatically have a 75% abandonment rate. This may be truer with higher-value transactions¹⁶.

Our summary of the funnel opportunity is (using rough numbers consistent across most sources, plus further assumptions):

70-75% of carts are abandoned; of these, some may be phantom shoppers looking at multiple sites for comparison. Of these, around 26% go on to buy elsewhere, so they are real, and could have been converted (but there is no GDP effect, as the transaction take place with another merchant); of these, perhaps 30% abandoned a vendor due to close time or other payment issues.

The remaining abandons may not have been ready to buy; Morning Consult didn’t know this number, so at best, they can use a placeholder of perhaps 20% being ready-to-buy (to be conservative); of these, again, perhaps 30% failed to close due to payment issues.

(26% x 30% + 74% x 20% x 30%) implies that around 12% of the abandoned carts might be saved with Click to Pay and similar means which make the final transaction easier and safer. Since there were around three abandoned carts for every closed cart, this implies a potential increase in transactions of around 36% (3 x 12%) relative to the retailer’s current base¹⁷. Since best estimates indicate nearly three abandoned carts for each closed sale (implied by 70-75% abandonment rates), saving 8% to 12% of abandoned carts implies an opportunity of 24 to 36% improvement at the level of an individual retailer¹⁸. We use 30% to represent the midpoint of this range.

4. European consumers could save up to €250 billion more every year if they embraced digital management tools like AI to help manage their finances. Within the UK alone the impact could be £15-30bn annually.

More information on the Morning Consult methodology:

Visa’s research¹⁹ showed consumers already show interest in financial planning tools, including savings pots and similar devices. 31% of UK consumers are aware of savings management (e.g. setting up and managing savings pots) tools and would like to use them. 38% of Brits agree they would like to learn more about managing their finances and how they can optimise them²⁰.

Tools like these could move consumers closer to recommended savings levels. Experts suggest that individuals save in a ratio of 50/30/20 of their disposable income allocated between must-have needs, wants, and savings. Currently, the savings rate in the UK is closer to 10% rather than 20%, with a non-trivial portion of households with limited or no savings. The EU is similar at 12.7% in 2022, close to its pre-pandemic average²¹.

Tools like savings pots and new banking models are unlikely to close the gap completely. However, if these devices can help increase consumer savings by an additional 1% of consumer disposable income (one-tenth to one-eight of the current gap), total consumer savings over the EU plus UK could increase by approximately 130-250 billion Euros annually²². This is a conservative estimate from Morning Consult, as the full gap is 7% or more.

5. Once biometrics become ubiquitous, European SMBs could capture up to €43bn in additional sales annually, reducing the friction of passwords. Additionally, fraud could be reduced by €483 million annually through biometrics across the region.
Market estimates for selected country breakdowns of increased revenues: UK (approx. 30%); France (approx.15%); Germany (approx. 13%); Spain (approx. 9%); Italy (approx. 5%); Poland (approx. 3%); and Sweden (approx. 3%).

More information on the Morning Consult methodology:

Revenue impact: Basic Morning Consult estimates believe that eCommerce activities provide the best starting point for the impact of biometrics with respect to payments. Using the same data that underpins Morning Consult’s estimates on Click to Pay, Morning Consult estimated UK plus EU eCommerce sales in 2023 to be approximately 1,939 billion Euros in total, with 1,144 billion to SMBs²³.

What improvement might be made to this by the use of biometrics? In Morning Consult’s 2024 research for Visa²⁴, UK and EU consumers indicated that for every 10 attempted eCommerce transactions, they abandoned just over two attempts. Of these, consumers indicated that around 15% (9% to 19%, depending on the country) abandoned the transactions due to problems with passwords or having to enter a password. On this basis, for every eight completed transactions, another 2 x 15%, or .3 transactions, could have been completed but for a password problem.

If biometrics were ubiquitous, making authentication easier, this suggests that these eight sales could have become 8.3 sales, an increase of 3.75%. Applying this to the 1,144 billion Euros in Morning Consult’s estimated SMB eCommerce sales suggests an improvement of approximately 43 billion Euros in total across the UK and EU. Note that this represents the upside (if) biometric authentication were ubiquitous, which may take some time; the same survey showed that right now, around 34% of consumers remained sceptical of or hesitant to adopt biometrics, so this 3.75% increase should be viewed as a long-run number, as adoption takes hold²⁵.

Fraud reduction: According to the office of National Statistics, there are currently 67.1 million people in the UK²⁶. Among them, the BBC reports that approximately 1 in 15 people fall victim to fraud²⁷, which means approximately (67.1mm x 1/15) 4.4 million people have been impacted by fraud in this market and is valued at £395.7 million (3) or approximately £90 per person (4.4mm/395.7mm)²⁸.

We know that biometrics can help reduce fraud and among UK respondents that are not currently using biometrics for payment or authentication, 28% say they are somewhat or extremely likely to consider using biometrics for payment solutions in the next five years29. Among the market estimated 4.4 million people impacted by fraud, if 28% were to adopt biometrics payment solutions, this could result in (4.4mm x 28%) 1.2 million fewer people being impacted and the equivalent of approximately £110.9 million (1.2 million x £90) in fraud reduction in the next five years.

When Morning Consult applied similar logic to the EU, we have: EU population is approximately 448 million people³⁰. 8% of consumers experienced online banking or payment fraud in the past five years³¹. This implies 448mm x 8% = 35.9mm people impacted. Card-not-present fraud was reported to be €1.28 billion. €1.28B / 35.9mm = 36€ per person in fraud. On average 27% are likely to adopt biometric payment solutions within the next 5 years. 35.9mm impacted x 27% = 9.7mm people likely to adopt, which equates to 9.7 mm x €36= €349.2mm or £294.9mm in potential fraud reduction within the next 5 years³².

When Morning Consult combined the UK + EU numbers, the collective impact could mean that biometrics has the potential to help reduce fraud by (£110.9 million + £294.9mm) £405.8mm, or €483mm, and approximately (1.2mm + 9.7mm) 10.9 million fewer people will be impacted in the next five years.