19 October 2012

Boost conversion rate by offering alternative payment methods

Online commerce is a huge market and is expected to rapidly grow in the next few years. Latest research shows that it was worth  $727bn in 2011, with the US the largest single country and is expected to grow by around 90% to become a $1.4tn market in 2014.

From a payment industry perspective, this highlights the need to understand business and consumer needs for online payments as the key to future growth of the business.

The demand for more consumer payment method choices, and also the decline in popularity of credit cards as the primary payment method in many countries increases the natural competition between businesses. It’s therefore important for merchants to engage a payment processor who is well familiar with the alternatives payment market and understands its specifics and is able to advise them on the most appropriate strategy. This has produced a generation of new payment methods such as e-wallets, real time bank transfers, prepaid cards, offline credit transfers, mobile payments, etc – research shows that there are currently more than 230 alternative payment methods . These payment methods are rapidly becoming popular in the e-commerce industry and offer to the consumers on one hand safe, secure additional ways to shop online and on the other hand offer to the merchant the opportunity to reach a consumer base that may otherwise not be able target.

Having in mind the rapidly growing ecommerce market lets check what is happening with the alternative payments – this market represents EUR 165B of the total global ecommerce transactions which is 22% of the total transaction value.

The growth of the Alternative Payment market is estimated to reach 13% in the next few years. However, the respective rates vary for the different payment types – the leaders in the industry are the e-wallets (36% of the market) followed by real time bank transfers (12% of the market) , whereas both of these alternative payment methods are expected to grow with approximately 6-7 % in the next few years. Recently consumers are becoming more interested in alternative payments because of security concerns with traditional methods (it is reported that 28 % of Internet users won’t shop online due to safety reasons) and frustration with credit cards.  Although due to its convenience the credit card does still remain a preferred payment method for online purchases, there are still security fears which the card industry faces. According to a survey, it is more likely the online shoppers to choose better security by accepting alternatives in the online payment process. With eMerchantPay merchants are offered security throughout the whole payment process and their customers can choose among different payment options to complete their purchases. From the Merchant perspective, it’s more beneficial to offer as wide a selection of payment methods as possible which will give your potential customer different options for completing their purchases. It is important that a merchant chooses the right payment provider as by doing this he can successfully boost customers conversion rate  by 20% or more.  Latest analyses show that every additional payment method which is offered by a Merchant can help increase conversions with 14%. Adding three or four payment methods can increase  conversion rates by  more than 20 %. When a web site has more payment options available on the check out page, it generally accumulates more sales. Research which was conducted recently shows that shoppers are four times as likely to buy from a shop that communicates to them in their native language – imagine what will happen if this same web shop offers locally used and recognized alternatives to the credit cards? With eMerchantPay its easy and effortless to offer  payment pages in multiple languages as well as a wide range of payment options that offer security and protection and can attract new shoppers previously denied a payment option on a site.

Best practices show that a merchant would really benefit by offering this customers their usually preferred payment options and by doing this it’s more likely for the merchant to realize a solid increase in his online sales. At the very least, your chosen payment provider is expected  to be able to offer all of the major internationally used credit cards popular in the regions that you want to sell in, including Visa, MasterCard, American Express, Discover (for USA) and JCB (for Japan/Asia). Its also recommended to adopt a best practice of adding  popular alternative payment methods, like Sofortbanking / Sofortüberweisung for example, to German online shoppers because often the consumer prefers to make online payments via a direct debit from their bank account versus using a credit card. Some alternative payment methods can also guarantee payments with no fraud, no chargebacks, and deliver a higher average order value.

Offering your customers the option of paying with other payment methods that they use locally in the countries they reside (e-wallets, locally used debit cards, gift cards and prepaid cards, e-vouchers and coupons, mobile payments, etc) increases the chance of converting their visit into a sale and there is also one other important benefit – The variety of payment methods being offered on your web site makes you stand out from the competition.