Every merchant engaged in ecommerce wants a high checkout conversion rate because it signifies additional revenue without increased investment in areas such as product development, marketing and sales. There are many ways to achieve a high conversion rate, such as utilising embeddable payment forms, offering online shops in local languages and currencies, leveraging advanced analytics, etc. But perhaps the most important is offering the right mix of payment methods.
Today there are hundreds of payment methods available to shoppers in ecommerce. Credit cards were originally the most common and they do still dominate the large US and UK markets. Still, the growing popularity and functionality of alternative payment methods (APMs) has changed the global picture. APMs, defined as any non-card payment method, overtook cards as the most common global payment method in 2015 and are expected to comprise nearly 55% of global ecommerce payments by 2019 There are more than 200 APMs globally, including bank transfers, direct debit, digital wallets, cash on delivery, e-invoices, digital currencies, and a variety of locally-preferred payment options.
There are several reasons for the shift from cards to APMs. First, cards’ ecommerce stranglehold was based more upon availability than usability. As ecommerce gathered momentum, cards enabled shoppers to move online with a familiar payment method even if it lacked convenience and security. Now, as the number of APMs has grown and shoppers have gained an appreciation of their benefits, the switch is on. Second, mobile commerce, where APMs are easier to use than cards, has exploded as a proportion of overall ecommerce. Finally, even when cards are used in ecommerce they often become “dematerialised,” which means they are used within the confines of a digital wallet, an app or another APM. As a result, cards are increasingly acting less like cards and more like APMs, from a shopper’s perspective at least.
When considering the proper payment method mix to achieve high checkout conversion, merchants must keep in mind that every country, and often each industry, has unique preferences, often featuring entrenched local providers. Commonly cited examples include iDEAL, a bank transfer method used for 55% of all online purchases in the Netherlands, e-invoice, a postpay option common in Germany, or Alipay, the dominant digital wallet in China.
Merchants must know their target market and offer the relevant payment methods. Most shoppers have a preferred method, plus others they will use, while the rest are useless to them. A globally uniform strategy simply will not work. Without payment options tailored for specific needs, conversion rates are doomed to be low. Getting the right mix of payment methods is crucial: it has been shown that offering the top three payment methods in a country, rather than only the top one, improves conversion rates by 30%. Yet the growing diversity of APMs means getting the mix correct is more challenging than ever. Fortunately, there are a number of steps merchants can take to identify and implement the correct payment method mix.
First, a merchant needs to look closely at the country, industry and typical device used for purchases and cater their offering accordingly. A merchant’s payment provider, if suitably experienced, should be able to provide valuable guidance. Second, merchants should always offer at least the top three payment methods. Most shoppers will use at least one of them. Third, merchants must continually analyse the conversion rate and usage of each payment method and be ready to adjust. These steps are more easily implemented through a payment provider that offers an extensive global payment network, enables rapid payment method switches and provides access to comprehensive payment data for advanced analytics.
An option that allows for a dynamic payment method mix is Active Payment Method Selection, a tool that uses a shopper’s shipping address, device information and other data to automatically determine and offer the payment methods most appropriate for the shopper as they reach the payment page. The result is higher conversion rates because the appropriate payment methods are offered, plus better security, because high risk shoppers are only offered robust payment methods.
The correct payment mix is essential for a high conversion rate because it is an important part of a seamless and frictionless customer journey. Although the growth of diverse alternative payment methods and the decreasing market share of cards have complicated the situation for merchants, high conversion rates are possible by utilising the resources offered by comprehensive payment providers.
About Markus Rinderer
Markus Rinderer serves as Senior Vice President at ACI Worldwide, driving the development of the company's omnichannel merchant retail strategy. Previously, he served as CEO and founder of PAY.ON, an ecommerce payment gateway services provider acquired by ACI in 2015.
About ACI Worldwide
ACI Worldwide powers electronic payments for more than 5,100 organizations globally. More than 1,000 of the largest financial institutions and intermediaries plus thousands of global merchants execute USD 14 trillion each day in payments through ACI. Through a comprehensive suite of software and SaaSbased solutions, ACI delivers real-time, any-to-any payments capabilities.
This article is part of the exclusive Ecommerce Payment Methods Report 2016, an educational overview of the global payments industry. For more insights into the latest trends in ecommerce and e payment methods developments please download a free copy here.
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