How many shoppers are you losing to poor payment experiences? Learn how to boost baskets by delivering smooth and secure checkouts that keep loyal customers coming back for more.
It may be easy to overlook, but payments can be a critical differentiator within UK grocery.
A poor payment experience can cause delay, confusion and frustration – or worse.
According to research by The Retail Institute, approximately 74% of UK online shopping baskets are still abandoned prior to completion, with complicated checkout processes and a lack of payment security cited as some of the biggest reasons for shoppers’ ditching a transaction at the final step.
By contrast, a smooth, frictionless checkout can improve speed, security and convenience, driving loyalty at a time when that’s rarely been more coveted by the major grocers. So, as retailers increasingly use payments upgrades to give them a competitive edge, what steps are they taking – and with what success? What opportunities remain untapped? And amid rapid technological change, what could be the next area of innovation for forward-thinking leaders to be aware of?
Meeting demand for safe, fast and flexible payments
The impact of payments in today’s trading landscape can’t be overstated, believes Chris Jones, managing director at PSE Consulting. “Payments have a direct impact on grocery retailers’ sales, margins and ability to keep trading,” he says. “A transaction that fails at the checkout can mean a lost sale, while an online payment that is declined unnecessarily can send a customer elsewhere. At the same time, retailers need to manage the cost of accepting billions of pounds in card payments, from scheme and processing fees to fraud and chargebacks.”
Retailers’ reliance on a robust payments’ infrastructure to manage this complex ecosystem is only heightened during periods of disruption, he adds. Shopper expectations when it comes to payments go far beyond basic functionality too. A 2025 survey by the Payments System Regulator found that ease of use is their top priority, closely followed by speed, while protection and security ranks top for higher-value transactions. There’s also some notable generational differences, with 18-24-year-olds using their mobile wallets on a daily basis, a proportion that drops to less than 10% for those over 55.
Meeting this demand for safe, fast and flexible payment options should be a cornerstone of any retailer’s strategy, flags Sean Douglas, senior UK director at PayPal. “Payment is the last step of the shop, and it is where a good experience can be undone,” he warns. “Grocery runs on thin margins and high frequency, so small points of friction like a slow queue or a declined card affects a shopper’s whole impression of the shopping journey, and shoppers today have plenty of alternatives.”
Lessons from payment innovation
The major grocers already appear to be innovating with and investing in their own payment architecture. For example, in May 2025, Sainsbury’s launched a trial allowing customers to pay directly via their SmartShop handsets. The pilot was part of a broader initiative, said the retailer, to use payments technology to reduce friction in its stores. Also, in 2025, discounter Lidl added an integrated payment feature to its in-store app allowing consumers to finish transactions on their phone, as well as benefit from additional loyalty benefits.
Some innovations have been hit-and-miss, points out Markos Zachariadis, chair of financial technology at Alliance Manchester Business School. For instance, Tesco has experimented with integrating payments and loyalty but later withdrew its app’s ‘Pay in Store’ feature in 2025 admitting it ‘wasn’t well-used.’
It also closed its Clubcard Pay+ accounts in April 2026. Each of these came with learnings though, says Zachariadis, with loyalty more broadly remaining a strong feature of its overall payments strategy.
In September 2025, Amazon also confirmed it would close all 19 of its UK Amazon Fresh stores, but did say it would continue to provide its ‘Just Walk Out’ technology to third-parties. “The technology demonstrated how payments could become an almost invisible part of the shopping experience, following the steps of Uber and other digital platforms,” says Zachariadis.
Increasingly, retailers are recognising the strategic benefits of working with third party providers, rather than investing in wholly proprietary technology within payments, says Jones. “A retailer can own the app without owning the payment rails, and adding another layer of technology does not automatically improve the economics,” he says.
“The strongest approach is to retain control where it creates a competitive advantage while using specialist providers where they can deliver payment processing more efficiently and reliably.”
Unlocking value through payment networks
PayPal, for example, is collaborating with some of the UK’s leading grocers to help streamline its payment experience, making transactions faster and more relevant, says Douglas. “That covers the checkout experience, wallet and rewards options, and the data and fraud tools behind them. AI and machine learning increasingly sit behind those tools, helping to route payments, reduce unnecessary declines and spot fraud in real time without disrupting the shopper.”
Already, in 2023, PayPal’s global card authorisation rates for large grocery retailers were 3.5% higher than the market average, he says, and the launch of PayPal+ a year ago – a free rewards programme for PayPal users – has added a further dimension to the benefits it can provide.
Earlier this year, an offer ran in conjunction with one major retailer giving shoppers 20% back in PayPal+ Points when they transacted using PayPal. “They activate it in the PayPal app, then shop and pay with PayPal,” explains Douglas. “It led to an increase in basket size, and most interestingly kept bringing shoppers back with an ongoing uplift in average order value.”
Given margin pressures are “some of the highest we’ve seen,” tapping into PayPal’s vast consumer network in this way could be invaluable for retailers looking to eke out a competitive edge via payments.
Recognising untapped payment potential
Though retailers are increasingly investing in payments innovation, connecting payments more closely with apps, loyalty programmes and personalised experiences, there is still plenty of untapped opportunity that remains, believes Douglas.
Unifying payment systems and platforms is one areas where he sees unrealised value. “Multiple platforms, delivery partners and loyalty systems, plus 12–18-month technology refresh cycles, make it hard to deliver one cohesive experience. Unifying them helps cut operational drag and lets retailers use consolidated data to lift conversion and loyalty.” That in turn opens up the capacity to further reduce friction, increase choice and connect payments with reward and loyalty schemes to “give customers another reason to return.”
“Retailers need visibility of the entire payment journey, including authorisation rates, processing costs and where transactions fail,” adds Douglas. “Supporting customers’ preferred payment methods is only part of the equation: the systems behind them must also be resilient, cost-effective and able to handle high volumes. When margins are tight, payment performance is a commercial consideration that retailers cannot afford to overlook.”
Moving forward payments will be less visible, but just as crucial, sums up Douglas, with digital wallets, tap-to-pay and pay-by-bank functions, and more personalised rewards all becoming the norm, and an expectation of the same experience whether transacting online or in-store. “Retailers should keep their payment stack flexible enough to add new methods quickly and treat security and shopper trust as a competitive advantage, using machine-learning fraud tools that work quietly behind the scenes.”
In short, in the race to win shoppers, it’s clear that payments hold plenty of strategic importance for supermarkets that don’t want to risk losing out at the final hurdle.
To find out more about how PayPal can support your business click here
