With an appealing e-commerce website, you should have no problem getting customers to fill their shopping carts. But getting them to complete the checkout process? That’s a different story.
Your e-commerce business has to make it as easy as possible for customers to pay for the goods they want. That means offering simple, secure and diverse digital payment options, so there’s no last-minute barrier to conversion.
In this post, we’ll show you how the right e-commerce payment methods can improve checkout conversion rates for your business.
Understanding customer preferences in payment methods
In 2023, customers are becoming more tech-savvy, with almost nine in 10 consumers now using some form of digital payment. They’re increasingly exposed to a wide variety of online payment methods, and they expect to be able to use their preferred options around the web.
However, these preferences tend to differ according to various factors, such as age and location. It’s important you develop an understanding of customer behaviors, habits and trends to help you decide which methods to use for your e-commerce store.
For example, international customers may be expecting to see options that are popular in their countries. Higher-income customers might prefer using American Express, while those on a tight budget will appreciate the option to split or defer payment.
The buy now pay later (BNPL) model is a particular favorite, giving shoppers the option to split costs into manageable chunks with all the credit risk assumed by the provider. This is not just handy for expensive goods—it also allows consumers to order multiple items and only pay for those they wish to keep.
Remember, too, that convenience is everything to online buyers, and digital wallets like PayPal, Shop Pay and Google Pay allow them to purchase from various sites without having to key in their information each time. Meanwhile, the popularity of e-commerce means you should consider mobile payments as well—as many stores see a large amount of traffic from mobile devices.
Image sourced from worldpayglobal.com
The impact of payment methods on checkout conversion rates
Now, let’s find out why the right payment type is so important.
Options for varying customer preferencesAs we mentioned, different customers have different preferences when it comes to electronic payments. While you can’t offer every possible option, it’s important to provide enough choice that even if their preferred payment method isn’t listed, they’ll still find your options acceptable.
Most e-commerce companies accept payments via credit card or debit card, alongside payment gateways and digital wallets. Some offer a wire transfer option for B2B customers, while tech companies may use cryptocurrencies such as Bitcoin and Ethereum.
Those who include BNPL options (like Klarna, Affirm, or Afterpay) can expect to see an increase of around 45% in average order value. It’s also worth adding QR code payments so mobile customers can pay more easily.
Improves checkout process convenience and speed
Customer convenience has a big impact on conversions, and checkout is the critical moment. Shoppers quickly get frustrated if it takes too long or there are too many obstacles. By eliminating friction from the process, you’re increasing the chance of a sale.
As well as offering several online payment options, you need speedy payment processing software. This means payments are processed and received in real time, so your accounts and inventory are consistently up-to-date. It also prevents customers from getting frustrated by complicated or slow checkout process.
This is especially important as according to one survey, increasing checkout load speeds can help retail brands combat as much as 30% of lost revenue at checkout.
Digital wallets also speed things up, as account holders already have their payment details saved with Google or Amazon, so there’s no need to reproduce them at checkout. Offering a guest checkout option saves users from having to register, which will also boost conversions.
Reduces cart abandonment rate
Cart abandonment is a real problem for online businesses. While hidden costs and complex checkout pages are among the most common reasons for abandoned purchases, a lack of payment options is also off-putting.
Apart from giving people a choice, it makes sense to offer several payment methods in case one service has a glitch. With a variety of payment options, customers can complete their purchase rather than having to try again later (by which time they’ll probably have gone elsewhere).
Increases customer trust rate
Some customers are still wary of online transactions due to security concerns. If you can offer a choice of payment options from well-known providers, they’ll be reassured—and are more likely to convert. Plus, you’re demonstrating you’re a trustworthy business with legitimate connections.
Payment efficiency can also impact trust. If the website says “processing payment” for minutes on end, the customer might think something fishy is going on and abandon their transaction.
How to choose the right e-commerce payment method for your business
If you’re selling through a major e-commerce platform like Shopify, it will have a payment processor built in. For a personal website, you’ll have to choose your own.
Size of business
It’s important to select a method of payment that suits your particular business. For instance, if you’re just starting out and selling on a single channel, you might only require basic payment options, but customers will expect a large enterprise to offer more choices.
Think about what your business needs right now but also plan for future expansion. If you have a brick-and-mortar store or a portable outlet alongside your e-commerce website, consider a solution with a POS system so you can accept multiple forms of payment from your phone.
You also need to think about the preferences of your target market. There may be a generational divide, with older shoppers preferring common payment methods like Visa and Mastercard while younger ones are happy to use the latest technology.
Get to know your customers, drawing knowledge from previous transactions and information recorded in your CRM. You could also send out surveys or ask for feedback. This way, you can ensure there’s a suitable option for every customer.
Security and trust measures
You need to choose payment methods that guarantee security for your customers’ information and your revenue. Make sure the processing company is compliant with the Payment Card Industry Data Security Standard (PCI DSS).
Secure payments are especially important if customers are saving their information for repeat purchases or recurring billing. It’s best to pick a payment processor that uses tokenization. This means that when it captures card details, it converts the account numbers into a token that’s used to identify the specific customer.
Fees and costs
Payment fees are another essential consideration. Some popular payment gateways charge a percentage and a fixed fee per transaction, while others offer subscriptions instead of transaction fees. You might also have to pay for chargebacks, disputes and international payments.
It’s easier to estimate these costs and make the right choice if you know how many transactions you handle each month. For instance, you could choose a subscription that covers a high number of transactions for a set monthly cost, or set up a merchant account instead of using multiple gateways.
Conversions depend on a smooth customer experience throughout your e-commerce site, from navigation and page load speed to the checkout process. Payment is a vital element, so which option is simplest to use? Can users autofill their card details? Does it work well for mobile users?
It should also be easy for your business to take payments from customers. Look for a processing company that offers seamless integration with your other systems, such as accounting and bank reconciliation software. This will give you real-time visibility into your finances and save you valuable time that could be spent elsewhere.
If you have international customers, or you’re thinking of expanding to different countries in the near future, you may need to add extra modes of payment. Research the most popular payment methods in the areas you’re targeting, such as AliPay in China and Boleto in Brazil.
Image sourced from storehippo.com
Pick a provider that can handle international transactions. Not every online payment service gives you this option, while certain payment providers (like PayPal) are unavailable in some countries.
With so many payment types available, your e-commerce site can’t provide them all. But it’s not about offering every possible option—it’s about offering the ones that appeal to your particular customer base and suit your business model.
Apart from choosing a provider with affordable fees and top security, the main aim is customer satisfaction. Make sure you track the performance of payment methods and encourage feedback to find which brings the most conversions.