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Three reasons you must diversify your checkout now
Card payments remain popular online, but the payments landscape is changing. Here are three reasons online businesses should seriously consider adding more payment methods to their checkouts.
Consumers prefer digital wallets
Whilst credit and debit card payments remain a popular online payment method, alternative payments are growing in popularity with consumers.
Top of the list of alternative payments methods that are gaining traction with consumers is digital wallets. In 2018 we asked consumers in the US, the UK, Canada, Germany and Austria to tell us which payments methods they used habitually online; 50% of consumers said that they had made at least one online payment using a digital wallet such as Skrill or NETELLER in the past month, rising to 61% in the UK.
There are several factors that contribute to the popularity of digital wallets online. These include the convenience of single tap payments for mCommerce, the ability to make cross-border payments in multiple currencies more efficiently, and the fact that consumers can make online payments without having to share their financial details with merchants.
When surveyed by Paysafe in 2018, 74% of consumers stated that they would rather use a payment method that they already signed up for than enter their payment details into an unfamiliar website.
Another payment method with a growing adoption rate is direct bank transfer such as Paysafe’s Rapid Transfer, which appeals to consumers that have greater familiarity with and trust in the security of online banking over card payments. Bank transfer payments are also instant and convenient, as consumers are not redirected away from a merchant’s website and only have to remember their online banking password rather than entering cards details.
Regional payment preferences mean more diversity is required at the checkout
In addition to the specific benefits offered by alternative payment methods such as digital wallets and direct bank transfer, the growth of regional payment preferences as an identifiable trend should also be on merchants’ radars.
An obvious example of a regional payment preference making a significant impact on eCommerce is the explosion in popularity of Alipay in China, but there are less well-known examples of this phenomena in Europe. For example, direct bank transfer is the most common form of online payment in The Netherlands, whereas payment by invoice has achieved particularly high adoption rates in the DACH region. In our 2018 survey 29% of consumers in Germany told us that they had made an online purchase through a pay-by-invoice scheme in the past month, more than had made an online payment with a credit (25%) or debit (20%) card. And in Austria this figure was even higher, at 38%.
For businesses, particularly those that already or have a desire to expand their customer base internationally, adapting to this growing trend will be key to any futureproofing. As additional factors such as PSD2, Strong Customer Authentication and 3DS2.0 continue to reshape consumer attitudes to online payments, the landscape is going to fragment further, rather than reconsolidate around a small number of payment methods. The eCommerce merchants that survive this shift will be those that understand changing consumer expectations when it comes to the checkout, and act accordingly.
Merchants are buying into a fragmented landscape
And what is clear is that most online merchants understand that increasing the number of payment options available in their checkout will play a critical role in futureproofing their businesses. For our latest research report, Lost in Transaction: The future of payments for SMBs, we asked small and medium businesses (SMBs) in the UK, the US, Canada, Germany, and Austria about this issue; 75% of the businesses surveyed stated that increasing the number of payment methods they accept is essential to future success and 83% expected to introduce at least one new payment method within the next two years.
Currently, online businesses offer four payment options at the checkout, but predict that this will rise to six within two years.
After credit and debit cards, the most commonly accepted payment method is digital wallets. 43% of online SMBs currently accept digital wallets; this is predicted to rise to 60% by 2020.
Other payment methods that are predicted to be more widely accepted within two years include direct bank transfer and cash replacement systems, adoption of which is predicted to rise by 37% and 50% respectively.
With competitors likely committing to this trend, businesses that do not begin taking steps on the path to more varied payment method acceptance today will struggle to close the product gap as the pace of adoption accelerates, and quickly make themselves uncompetitive in the process.