Partner Voices: The Secret to Solving Your Checkout Abandonment Woes
It's a common — and regrettable — story for online retailers. You've spent marketing budget to get consumers to your website. You've optimized the experience on-site to make shopping as seamless and quick as possible. And it's worked. Consumers are coming to your site in droves, they're adding products to their shopping carts and proceeding to the checkout page. That's where the problem begins.
Consumers are abandoning carts on e-commerce sites at an alarmingly high rate — 68.63 percent, on average, according to the Baymard Institute. And more often than not, they're doing so when they get to the checkout page.
More Options = More Sales
Using analytics to identify why a shopper abandons at checkout, and then being able to rectify the problem with that knowledge can mean millions in additional revenues for retailers. There can be many reasons why a shopper decides not to go through with a purchase when they're so close to completion — surprise at high shipping costs, delivery time couldn't meet their need, concern over data security, etc. — but one of the primary drivers of checkout page abandonment is a lack of payment options. In fact, 86 percent of merchants surveyed in IBM's Payments Merchant Study agreed that accepting a larger variety of payment methods would lead to more conversions.
The merchants surveyed cited lower barriers to purchase, reduced cart abandonments, and increased expansion into new geographies (68 percent, 56 percent and 52 percent, respectively) as the top reasons why more payment options would lead to more purchases.
What’s driving this realization among merchants is growing customer demand for new payment options. Consumers want easier ways to pay for purchases. According to a recent study from MasterCard, 77 percent of consumers cited convenience as the most critical aspect of new digital payment methods. In addition to convenience, consumers want loyalty and rewards programs to be integrated within payments, as well as the acceptance of new payment methods such as contactless acceptance and mobile payment capabilities.
While retailers know the more payment options they offer the more likely shoppers are to make a purchase, surprisingly few are putting this strategy into practice — both online and in-store. Sixty-six percent of the respondents offer four or fewer payment options across all channels, and that number grows to 79 percent for strictly online purchases.
Therefore, retailers that do offer multiple payment options (e.g., more than four) have a distinct advantage over those that don't. Would you be more likely to buy from an e-commerce site that offered you six ways to pay for your purchase or a site that offered you one way to pay? There's a reason why leading retailers such as Wal-Mart, Apple, Starbucks and others are investing so heavily in payment solutions. So why then are online retailers limiting the number of payment options they offer?
Removing the Fear of Multiple Payment Options
Data security concerns and the increased complexity of settlement and reconciliation processes for multiple payment sources are the primary inhibitors to retailers offering multiple payment options. Eighty percent of respondents to IBM's survey said keeping up with security mandates and regulations prevented their organizations from offering more payment options to customers. And while 71 percent of merchants said they store customer data within internal systems, 92 percent are concerned about potential data breaches.
Data security is frequently a sticking point for retailers when evaluating payment solutions. Providing a secure transaction is paramount — both for customers and retailers — and brands are hesitant to invest in costly payments technology without knowing if it's secure. In fact, while 93 percent of retailers believe consumers want a broader choice of payment options, 54 percent are holding back on their investment in new technology because of security concerns, according to ACI Worldwide. No organization wants its name added to the list of Target, Neiman Marcus, Michaels and others that have been victimized by crippling data breaches.
The good news is merchants are taking steps to protect their data — and help prevent a potentially devastating breach. Their efforts seem to be paying off. The total number of data records lost or stolen in 2015 decreased 39 percent from 2014. However, there's more work to be done.
Currently, 70 percent of merchants said they use data protection services supplied by their gateway provider, 63 percent use internally managed protection services, and just 35 percent use third-party managed protection services.
There are significant cost-savings opportunities for retailers willing to offload customer data to a third-party gateway provider. Those savings come from the elimination of hard costs (e.g., system upgrades, system administration) and soft costs (e.g., risk reduction). Furthermore, the ability to accurately forecast potential risk scenarios, payment trends and customer payment preferences would help significantly minimize vulnerability to a data breach.
In addition to data security concerns, retailers are reluctant to increase their number of payment options due to the challenge of managing the financial settlement and reconciliation process — not to mention the operational costs of doing so. The IBM Payments Merchant Study revealed that it takes an average of 21 employees to manage and audit the financial settlement and reconciliation of consumer payments.
Due to this costly demand for human capital, 71 percent of merchants said they're forced to limit their payment options.
This challenge doesn't figure to go away any time soon, either. Consumers are transacting with retailers in more channels than ever (chat bots being the latest). Retail accounting departments are frequently tasked with manually tying those transactions back to a single source in order to manage inventory, report accurate account balances and stay ahead of fraudulent activity. Relying on spreadsheets for this type of work increases the risk of mistakes — and makes those mistakes more difficult to detect — compromising the settlement and reconciliation process.
So, do you limit payment options to maintain a manageable settlement and reconciliation process, and sacrifice sales in the process, or give more choices and increase sales, but accept the higher operational costs that come with it? Unfortunately, it's a question that doesn't have a right answer. The good news is you no longer have to choose.
A Payments Solution
Merchants have made it clear they want to increase the number of payment choices they offer to customers, but they're restricted because of security, resource and cost concerns. Consider that 60 percent of merchants use multiple payment gateways for e-commerce, or a combination of payment gateway and individual connections with credit card providers to offer a minimum number of payment options for consumers to choose from. That's both inefficient and costly, a true lose-lose scenario!
The IBM Payments Gateway, a cloud-based consumer payments acceptance solution, gives merchants what they're looking for — the opportunity to increase payment options, but not at the expense of support for security mandates and policies, while also minimizing the human capital needed for settlement and reconciliation. The solution provides access to over 330 different payment methods on any connected device, while connecting to over 255 banks and processors globally with IBM localized support and market expertise in over 95 countries.
IBM Payments Gateway is a scalable, bank-agnostic solution that decouples the banking relationship from payments processing, enabling users flexibility with their banking relationships at all times. Furthermore, it secures customer payment credentials with a PCI-compliant data vault and tokenized transactions, and automates reconciliation and settlement to corporate systems. Vulnerability to data breaches and fraud are therefore minimized, and overall cost of ownership is decreased. That's a true win-win scenario!