16 June 2025
by Payments Intelligence
What is this article about?
A survey of 125 UK retail merchants exploring how payment innovation, customer behaviour, and emerging technologies are shaping retail competitiveness.
Why is it important?
It shows that forward-thinking merchants using diverse, strategic payment solutions gain clear advantages in cost control, fraud prevention, and customer experience.
What’s next?
Merchants must prioritise security, intelligence, and flexibility in payments to stay competitive as digital expectations and global commerce accelerate.
In June 2025, The Payments Association partnered with Opinium to conduct a survey of 125 UK retail businesses across all regions and business sizes, examining how merchants navigate the evolving payment landscape.
The research examines how digital transformation and shifting customer expectations are transforming payment strategy into a key differentiator in customer experience and business growth. Findings reveal that payment innovation has become essential for sustained competitive advantage across the retail sector.
While transaction fees and fraud prevention dominate immediate merchant concerns, forward-thinking businesses are leveraging payment method diversity, cross-border capabilities, and emerging technologies to gain measurable advantages. The data demonstrates clear correlations between payment sophistication and business performance, with implications for customer acquisition and operational resilience.
For payments leaders, the findings underscore the importance of strategic thinking beyond traditional processing. Understanding current merchant priorities and implementation plans becomes essential for informing business strategy, technology investment, and market positioning decisions as the UK retail sector continues its digital evolution.
The 2025 survey captures perspectives from across the UK retail spectrum, with particular strength in the small-to-medium enterprise segment that forms the backbone of British commerce. The sample reflects the reality of UK retail: 53% of respondents operate businesses under 50 employees, with the largest single cohort (21%) employing 6-9 people.
Geographically, the research spans all UK regions, with strong representation from England’s commercial centres (London, Birmingham, Manchester) and meaningful participation from Scotland, Wales, and Northern Ireland. Revenue distribution ranges from micro-enterprises with an annual turnover of under £20,000 to major retailers with a turnover exceeding £50 million.
The methodology combines quantitative analysis of operational metrics with qualitative assessment of strategic priorities. Questions address both immediate challenges (transaction fees, fraud prevention, cart abandonment) and forward-looking opportunities (emerging payment methods, international expansion, technology adoption).
This dual perspective—current pain points alongside future aspirations—provides unique insight into how UK merchants are balancing short-term operational pressures with long-term competitive positioning.
High transaction fees emerge as the primary concern, with 72% of businesses reporting this as either somewhat or extremely challenging, which affects cash flow and margin optimisation across all segments. The data reveals a cascading hierarchy of pressures, with compliance and regulatory challenges affecting 66% of merchants, closely followed by settlement delays that impact 64% of businesses, creating working capital constraints.
Fraud prevention concerns touch 62% of operators, whilst cart abandonment issues plague 58% of businesses, directly undermining online conversion rates and revenue generation. Transaction costs represent the universal pain point across all business sizes, with a quarter finding fees extremely challenging rather than merely problematic.
This challenge hierarchy reveals clear market positioning opportunities for payment providers. Those addressing the fee burden while simultaneously tackling compliance complexity can capture a disproportionate market share in an increasingly competitive landscape, where merchants juggle multiple operational pressures that constrain their growth potential.
Major card schemes achieve near-universal adoption, with 95% of merchants offering these services and 51% reporting frequent usage, cementing their position as the payment backbone. Mobile wallets demonstrate equally strong penetration, with 90% of businesses offering Apple Pay and Google Pay, matching card schemes in terms of frequency of usage at 51%.
The digital wallet landscape shows PayPal maintaining a robust market presence, with 91% merchant adoption, though only 35% experience frequent customer usage. Buy now pay later (BNPL) services reveal emerging market traction, with 75% of merchants offering these options and 23% seeing frequent engagement. Open banking adoption reaches 74%, with 24% of businesses reporting frequent usage as they navigate implementation.
Cash remains highly relevant across UK markets, with 96% of merchants accepting it. Frequent usage reaches 46% nationally, with regional hotspots such as Yorkshire and Humberside (79%) and the North West (69%) driving this figure. In contrast, digital alternatives show mixed adoption: direct bank transfers achieve 79% merchant acceptance but only 26% frequent usage, suggesting that businesses offer the option without placing heavy reliance on it. Cryptocurrencies remain a niche market, despite a surveyed 46% merchant availability, with 7% of merchants reporting regular usage, highlighting the gap between theoretical acceptance and practical adoption.
Merchants are actively planning payment technology upgrades, with clear priorities emerging for the next 12 months. AI-driven fraud detection leads implementation intentions, with 39% having concrete plans and another 30% considering adoption, despite only 10% currently using the technology. This represents nearly 70% of merchants recognising automated security as a strategic priority.
Contactless-only payments demonstrate the strongest overall momentum, with 69% either already implemented (33%) or actively planning deployment (36%), reflecting the accelerated adoption of digital payments. Click & Collect services demonstrate balanced growth, with 30% operational and 33% planning implementation, making it the most widely adopted innovation.
Open banking payments reveal growing but cautious interest, with 26% already operational and 23% planning implementation, though 32% remain in the evaluation phase. Multi-currency capabilities exhibit similar patterns, with 11% currently adopted and 26% planning implementation, while 32% are considering options for potential international expansion.
Mobile point-of-sale solutions show steady adoption at 28%, with 26% planning deployment. BNPL adoption remains limited, with only 13% planning to implement it, while 52% indicate they probably won’t adopt this technology.
The data reveals a distribution of 25% of merchants achieving optimal abandonment rates below 10%, representing best practice territory. The largest segment experiences abandonment rates of 11-20%, affecting 26% of businesses and representing industry-average performance levels.
Moreover, 22% of merchants report abandonment rates of 21-30%, indicating systemic issues with the checkout experience. An intervention position emerges, with 22% of businesses experiencing abandonment rates above 30%. Specifically, 14% face losses of 31-40%, 6% lose 41-50% of potential transactions, and 2% experience catastrophic abandonment rates of 51-60%.
This distribution suggests differences in the implementation of payment strategies and the design of customer experiences. The substantial variation between best-performing merchants and those experiencing higher abandonment levels indicates that significant optimisation opportunities exist across the sector. With nearly half of all merchants experiencing abandonment rates above 20%, improving the payment experience represents a substantial revenue recovery opportunity for most businesses surveyed.
Technical reliability emerges as the primary concern, with slow or failed transactions cited by 47% of merchants as a major driver of abandonment. Transaction fees create substantial friction, affecting 41% of businesses as customers pause at unexpected costs during checkout.
Payment method limitations prove equally problematic, with 40% of merchants recognising that a lack of preferred payment options drives customer departure. Security concerns remain significant, affecting 37% of businesses as customers hesitate over data protection and transaction safety. Process complexity concludes the primary factors, with 30% identifying complicated payment procedures as a trigger for abandonment.
The consolidation of these factors suggests that interconnected solutions are needed. Technical reliability, cost transparency, payment choice, security assurance, and process simplification represent the core areas for improvement. Notably, customer error accounts for only 2% of abandonment cases, confirming that systematic payment experience issues, rather than user mistakes, drive the majority of revenue loss.
Merchant investment priorities reveal where the industry is heading and what capabilities will drive future success. Security emerges as the paramount concern, with 45% of merchants prioritising better fraud prevention and security features as their primary investment focus for the next 12 months. This reflects the growing sophistication of threats and regulatory pressure across the sector.
Cost optimisation represents an equally critical priority, with 41% actively pursuing lower transaction costs, matched precisely by those expanding payment options for customers at 41%. This dual focus suggests merchants balance operational efficiency with customer experience enhancement. Cash flow improvements through faster settlements attract 34% of businesses, highlighting working capital pressures across the market.
Data-driven capabilities are gaining traction, with 31% of organisations investing in improved payment analytics and reporting systems. Operational flexibility through improved contract terms and integrations appeals to 30% of merchants, whilst 29% prioritise stronger customer support capabilities. This priority hierarchy illustrates that merchants must simultaneously address security threats, cost pressures, and customer experience demands while developing analytical capabilities for informed decision-making.
Cross-border transaction analysis reveals significant expansion opportunities for UK retailers, with most merchants already engaged in international commerce. Only 14% operate purely domestically, whilst 27% maintain modest international exposure, with 1-10% of transactions crossing borders. The largest segment operates with 11-20% international activity, representing 31% of merchants and indicating established but measured global reach.
More substantial international operations characterise 16% of merchants, who handle 21-30% of cross-border transactions, while 10% demonstrate a significant global presence, with over 30% of their activity being international. This distribution suggests most UK merchants recognise international growth potential, with 86% already engaged in cross-border commerce at some level.
The progression from domestic-only through varying international exposure levels indicates clear expansion pathways. With nearly half of merchants operating above 11% international transactions, cross-border commerce represents an established rather than an emerging opportunity. However, the concentration of businesses in lower international percentages suggests that substantial growth potential exists for merchants ready to scale their global operations and navigate the associated payment complexities.
Long-term trend analysis helps inform strategic planning and technology investment decisions across the evolving payments landscape. The rising importance of fraud prevention and security measures dominates merchant expectations, with 40% anticipating a significant impact, reflecting the escalating sophistication of threats and increasing regulatory pressure. AI- and machine learning-driven, personalised payment experiences capture 32% of merchant attention, indicating priorities for automation and customisation.
BNPL growth expectations reach 30% among merchants, while increased demand for alternative payment methods and a shift towards fully cashless payments both register 28% anticipation. The mainstream adoption of cryptocurrency attracts 26% of merchants, suggesting cautious yet growing recognition of the potential of digital currency.
The expansion of open banking and increased demand for multi-currency payment solutions both achieve a 25% merchant interest rate, highlighting opportunities for international commerce and banking integration. Notably, only 8% of merchants selected ‘none of these trends,’ indicating a widespread expectation of significant payment evolution.
This trend hierarchy reveals merchants preparing for a technology-driven, security-focused future, emphasising payment choice, personalisation, and operational efficiency. The concentration around fraud prevention, AI integration, and payment diversification suggests coordinated rather than isolated transformation across the industry.
Current adoption patterns reveal distinct strategic opportunities across payment channels. Cryptocurrencies demonstrate the highest opportunity score at 53% despite 46% adoption, with minimal competitive intensity at 16%, indicating significant untapped growth potential for early movers.
BNPL and open banking both register strong opportunity scores (42% and 41% respectively) with high baseline adoption (75% and 74% respectively) and moderate competitive intensity (40% and 38%), suggesting accessible expansion markets as regulatory frameworks mature.
Local card schemes emerge as a notable opportunity with 32% opportunity score, 56% adoption, and low competitive intensity (18%), representing an underexplored niche for differentiation.
Established methods present contrasting dynamics: cash (96% adoption) and major card schemes (95% adoption) maintain moderate opportunity scores (26% and 24%) but face intense competition (60% and 67% respectively), reflecting market saturation challenges.
Mobile wallets retain 27% opportunity despite 90% adoption, whilst PayPal digital wallets show limited growth at 13% opportunity score. Direct bank transfers occupy constrained positions with 19% opportunity prospects.
This matrix reveals innovation potential concentrating around emerging technologies, whilst traditional methods face saturation. Merchants should prioritise cryptocurrency capabilities and alternative payment integration to capitalise on high-opportunity, low-competition segments.
Strategic positioning analysis reveals four distinct market segments across payment channels, with clear investment implications. The competitive landscape is divided along two axes: market attractiveness (median 48%) and competitive intensity (median 42%), creating actionable strategic quadrants.
High-attractiveness, low-competition segments present compelling investment opportunities. Cryptocurrencies dominate this quadrant with 78% market attractiveness and minimal 16% competitive intensity, delivering the highest opportunity score (53%). BNPL (62% attractiveness, 40% competition) and open banking (61% attractiveness, 38% competition) occupy the accessible expansion zone, combining strong market potential with manageable competitive pressure.
Local card schemes emerge as underexplored opportunity with 69% market attractiveness and low 18% competitive intensity, representing significant white space despite 56% adoption.
Traditional payment methods cluster in the challenging, high-competition, low-attractiveness quadrant. Major card schemes, cash, and mobile wallets face market saturation despite near-universal adoption rates.
Strategic imperative: prioritise cryptocurrency capabilities and alternative payment integration whilst maintaining competitive positions in traditional channels.
Strategic analysis reveals that established channels dominate adoption, while emerging technologies offer the most significant growth potential. Traditional methods achieve near-universal penetration: cash (96%), major card schemes (95%), and paypal digital wallets (91%), yet competitive intensity reaches 60-67%, limiting differentiation opportunities.
Four strategic implications emerge: cryptocurrency presents compelling growth opportunity with 28% opportunity score, 46% adoption, and minimal competitive intensity (16%), positioning early adopters for significant market capture; buy now pay later and open banking demonstrate strong potential (25% opportunity scores) with high baseline adoption and moderate competition; market saturation challenges traditional methods where high adoption correlates with intense competition; payment diversification becomes critical as opportunity concentration in emerging technologies indicates shifting merchant priorities.
Rather than competing on operational efficiency within established methods, forward-thinking organisations should position themselves as innovation enablers, capturing high-opportunity segments before competitors establish dominance. This leverages significant gaps in emerging payment technologies whilst avoiding intense competitive pressure characterising traditional channels.
A 2025 survey of UK retailers reveals how payment challenges and innovation priorities are shaping merchant strategies across the sector.
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