Raising Conversion Rates With the Right Payments Mix
Every e-commerce merchant should recognize the importance of a high checkout conversion rate. It signifies the final link in a chain that includes product development, marketing and sales. Tools such as embeddable payment forms, sophisticated fraud prevention and advanced analytics can create a frictionless payment journey, but as the final link in the chain, the payment setup deserves particular attention. One of the most efficient ways to optimize the payment setup is to offer the right payment method mix.
Credit cards were the traditional payment method champion of e-commerce, but today alternative payment methods (APMs) are growing in popularity and functionality. APMs, defined as any non-card payment method, are now used in more than 50 percent of global e-commerce transactions and are expected to reach 55 percent by 2019, continuing to chip away at cards’ market share. The over 200 global APMs include bank transfers, cash on delivery, digital currencies, digital wallets, direct debit, e-invoices and a number of local payment options. One of the key drivers of this growth is mobile, where entering card details is challenging. Convenience is king, and even where card payments are still used, they're increasingly “dematerialized” and hidden behind a digital wallet, app or APM.
Merchants need to keep in mind that each country, and sometimes each industry, has its own unique payment method characteristics. Failing to offer the entrenched local method, extremely popular in the country but often virtually unknown elsewhere, could doom a merchant to low conversion rates. Common examples include iDeal's 56 percent market share in the Netherlands, invoice’s preponderance in Germany and Alipay’s 90 percent brand recognition in China. This makes each of these payment methods must-haves for their respective markets.
For example, if a merchant doesn't offer Alipay to Chinese shoppers, the reality is that many will simply abandon their cart and shop somewhere else. Many countries feature a local payment method champion as important as Alipay is for China.
Catering the payment mix for each market is vital, yet the growing number of APMs makes success more challenging than ever. To identify the correct payment methods, a merchant must first look closely at the country, industry and typical device type shoppers in that market use. Second, merchants need to ascertain the most popular payment methods in the market and offer the top three at minimum. Most shoppers will use at least one of them, and it's been shown that providing the top three methods, rather than only the most popular, can increase conversions by up to 30 percent.
Furthermore, in many markets, offering the right APMs can convey a sense of legitimacy, which is important to building trust with shoppers. Third, merchants must never take their eye off their conversion rate and the usage for each payment method, employing A/B testing to identify the payment methods most in demand. Each of these steps is simpler through a payment provider that offers an extensive global payment network, enables rapid payment method switches and facilitates advanced data analytics.
The correct payment mix is essential for a high conversion rate because it's an important part of a seamless and frictionless customer journey. Although the growth of diverse APMs and the decreasing market share of cards have complicated the situation for merchants, high conversion rates are possible by using the resources offered by comprehensive payment providers.
Markus Rinderer is senior vice president, product line manager, at ACI Worldwide, a provider of electronic banking and payments solutions for financial institutions, merchants, billers and processors.
Related story: Local Payment Options Key to Global E-Commerce Success