While credit and debit cards still dominate the payments channel for online retail, with increased consciousness of payment security, both merchants and customers have begun seeking alternative payment channels. For merchants, this may make them more attractive to new customers, and it may also assist them in streamlining their receivable payments. For customers, the search for alternative payment channels could mean the security afforded by a proxy payment system, anonymity, or even the safety net offered.
Credit and debit cards are likely to be around for a long time in the future, but it is a good idea to diversify the options. The desire for alternative payment channels is not solely the province of the customer; retailers are also looking at different methods for collection of revenue.
It is a fact that credit cards dominate the eCommerce payment sphere, but there are dangers inherent in putting personal bank details online, even with all of the industry standard security measures required for web-based payment processing.
However, different communities, geolocations, demographics and markets attract the use of different payment channels. In locations where credit cards never took hold, like China, mobile payments and eWallets have become the primary method of making retail purchases. In North America and Europe, credit and debit cards are the preferred method of payment. However, in Australia and Apac countries, other than China and Japan, eWallets and “proxy” payment channels like Paypal are considered the preferred method for making online purchases.
Similar differences appear between age demographics, younger retail buyers utilise a higher number of payment channels, whereas older demographics, >45 years, prefer to stick with the tried and tested channels they know.
If you want to increase your reach across borders and demographics, appealing to your target’s preferences is a must.
While there may be a multitude of different payment processing providers available to the person willing to search for them, there are four or five major method s of making online payments.
# Credit/Debit Cards – Credit and debit cards are attached to a bank account or a credit account and facilitate pseudo-immediate transfer for payments. Also included in this section are the pre-paid cards available for minors and people who don’t want to use a payment method that has direct access to their bank account.
# Mobile Payments – In regions where credit cards are uncommon, and people are underrepresented in banks, the penetration of the smartphone is a functional and convenient alternative method of making instant payments.
# Cryptocurrency – I have to cover this putative development in eCommerce because it is happening. Irrespective of the disastrous downturn in Bitcoin values, people still own Bitcoins and other cryptocurrencies, and the cryptocurrency enthusiasts still see digital currency on a blockchain as the future of money. Maybe they are right, and if bitcoin, ether, and the rest are currency, the customer needs to be able to make purchases with that medium of exchange.
# Bank Transfers – One of the most secure methods of transferring funds for payment because of the verification protocols in place for direct bank transfer. Banks are far more stringent with their checks and measures because they have to be to comply with myriad different rules and regulations across different countries, associations and partnerships.
What makes a customer make any decision? There are different levels of online security awareness, different perceptions of convenience, and different personal circumstances that affect the way we choose to make our payments.
Some people have not had any adverse circumstances surrounding their use of credit cards and so have never had any reason to question the security measures. Others have had fraudulent card usage. Some people find it safer to use a third party like PayPal, which combines the convenience of only submitting information once, the security of only allowing one company access to their payment details, and the safety net of Buyer and Seller protection policies.
Some users want to keep strict control of their spending, so they use pre-paid cards or eWallets without any access to additional funds.
Some people want to make large purchases and prefer to make bank transfers that have superior security protocols.
Customers exist across a full spectrum of needs and wants.
This question is either complicated or incredibly simple. The simple answer is that retailers choose to offer multiple alternative payment channels to appeal to a broader spectrum of customers. On the other hand, accepting payments from a range of sources is more difficult for retailers to process, especially if that includes a variety of foreign currencies, and possibly even cryptocurrency.
While accepting multi-channel payments makes life more difficult for retailers it does increase engagement with a broader audience; it also gives alternative options when other channels experience problems (it happens).
For many retailers offering multi-channel payment options, there are platforms available to streamline them all into a single income stream, for a small fee, so the difficulty factor becomes moot.
While accepting payments from a multitude of different sources may be a bit of a headache for some retailers, offering that option is worth it regarding attracting new customers. Not only does the multi-channel option appeal to a broader audience, but it also decreases the possibilities of abandoned carts if a particular payment option is unavailable at any time.
We have to accept that online retail businesses have the potential to be global, irrespective of size (especially in niche markets), and providing different payment options that deal better with currency conversion or privacy issues is better than losing business