06/08/2014

By Tobias Schreyer, Co-founder and Chief Commercial Officer, PPRO Financial Ltd


Supporting local payment methods is a simple and effective way to increase e-commerce conversion rates and reach. So why have few traders embraced the opportunity to internationalise their business?

Imagine you run a shop on London’s Oxford Street. Lines of locals and tourists with armfuls of merchandise wait their turn to pay. But before they come to the cash desk, they see a small sign: “We only accept payment by credit card”. In other words, customers from overseas can forget about paying in cash, cheque, EC card or voucher. So the tourists put away their American Express or UnionPay credit cards and you lose a sale.

By excluding certain payment options you are limiting your sale opportunities, because some customers will have no choice but to leave without purchasing what they wanted. They will simply go elsewhere. You wouldn’t expect merchants to damage their own business in this way, but most online traders do exactly that.

Proven correlation between conversion rate and payment method

Recent studies have shown a clear link between conversion rates, customer reach and the right mix of electronic payment methods. 83% of online shoppers have said that choosing between different ways to pay is important to them, while 42% declared that a wider range of payment schemes would result in them spending more[1]. Credit card fraud was the number one online shopping concern for 81% of the respondents, with 83% of this group saying that they would shop online more often and spend more if they could use secure payment methods[2].

Merchants need to offer a wider range of online payment methods that meet customers’ expectations and needs if they want to increase site traffic and revenue. For international online stores in particular, a variety of payment methods is a key success factor.

Globally, credit cards are still the most common way to pay for goods and services online, but they are not equally favoured in all countries. Alternative payment methods — i.e. payments that are not made by credit or debit card — are becoming more and more popular around the world. In 2013 alone, transactions using alternative methods increased by 21% compared with 2012, with a further prediction of alternative payments accounting for 59% of all transaction methods by 2017[3].

But does this mean that you can simply offer 20 or more online payment methods at checkout to be on the safe side? Unfortunately, it’s not that simple. E-Commerce merchants have to take a number of payment factors into account to ensure the success of their online shop:

Offer each market its preferred payment methods

Online traders must research the most common and popular payment methods in their target markets and offer these to customers.

Know and support the payment preferences of your target group

A mature consumer from France purchasing a designer sofa online will naturally prefer a more secure method of payment than a Brazilian teenager downloading an online game. Aside from regional trends, merchants should consider target group preferences and the suitability of various methods for product categories.

Merchants can consult studies and surveys to establish payment preferences across countries, target groups and product categories. Competitor research is also worthwhile. Look for a shop with a similar portfolio and comparable target group and see what payment methods they are offering each country.

Ensure your checkout page is clearly structured

Another critical success factor in e-commerce is the design of the checkout page. It is important that e-tailers offer their customers a wide choice of payment methods, but equally important that the checkout page is designed for ease of use and transparency.

The ideal choice would be four to six of the most popular payment methods for that country, target group and product type. The available options could be filtered through technical parameters (e.g. the shopper’s country of origin) or by asking the shopper to select their country from a drop-down list.

As the world’s leading online retailer, Amazon adopted a clear-cut approach form day one. Amazon is very selective, generally offering customers only three to four pre-selected payment options, depending on the country, the customer’s purchase history and sometimes the contents of their basket, which has proven to be a success internationally.

Ultimately, it is not about offering vast amounts of payment methods - the key is to find the right mix for each market and target group. In the ideal checkout, the choice of payment methods offered will vary — based on the user’s country at the very least.

Selecting the right payment partner

Discovering the best payment methods for particular markets and target groups is costly, time-consuming and requires a certain level of experience. That is why online retailers usually turn to payment solution providers (PSPs). PSPs should not only provide a wide-ranging portfolio of payment methods, but also offer valuable experience of international markets.

Beyond technical onboarding and transaction performance, factors such as experience, a large selection of payment methods and a comprehensive portfolio of value add services generally outweigh even attractive fee structures. E-tailers who want to expand their business internationally would be well advised to look closely at the payment issue. Ultimately, this is a defining factor when it comes to increasing reach and conversion rates.


{1}Worldpay alternative payments report 2013
[2]FirstData, Consumer Online Shopping Fears 2008
[3]Worldpay alternative payments 2nd edition report 2013