Viewpoint: Debunking E-Commerce Payment Myths
The e-commerce industry has experienced tremendous growth over the past few years and shows no signs of slowing down. Online retail sales in the U.S. are expected to reach $523 billion by 2020, a 56 percent increase from 2015, according to Forester research. With this rapid growth come new online buying habits and consumer preferences. Retailers (or their technology providers) that subscribe to a static set of assumptions regarding consumer behavior face the risk of creating a less-than-ideal shopping experience that could negatively impact online sales. By keeping these four common e-commerce payments myths in mind, retailers can cater more closely to the ever-changing needs and preferences of online shoppers.
Myth #1: Offering too many payment options overwhelms shoppers and reduces conversions.
Consumers have embraced options in multiple areas of omnichannel retail, including the payments realm. In fact, three out of four shoppers prefer that retailers accept as many different types of payment options as possible, according to the Electronics Payments Coalition. Costco’s recent transition from American Express to Citibank Visa is a prime example of what can go wrong when only limited forms of payment are accepted.
According to a UBS survey of 25 Costco warehouses across the U.S., 40 percent of stores reported that “a lot” of members had not received their new Costco Visa credit cards two days after the switch was finalized. This rocky transition generated more than 1.5 million customer service calls to Citigroup. This initiative then alienated a lot of their loyal customers, who also pay a monthly membership fee to shop there. Not only that, but Costco was delayed on even getting the new cards to their customers, allowing a competitor take advantage.
Now, Costco itself will surely survive this mishap, as they are giant big-box retailer with massive revenue. But the example is a portrayal of what can go wrong when you, as a retailer, limit your payment offerings, and further goes to show that only offering one main option can lead to chaos in times of transition. After all, in an effort to lure disgruntled consumers away from Costco, Sam’s Club announced that it would allow Costco membership holders to shop at its stores free of charge for a period of time. The more payment methods retailers can offer, the better.
Myth #2: Shoppers rely on their phones only for the research phase of buying, not for checking out.
Although mobile checkouts may have taken a while to build momentum, they’re now considered an indispensable part of e-commerce. Mobile conversions account for 30 percent of all online sales in the U.S., according to a study from the Internet Retailer Mobile 500.
Sephora’s partnership with Snapchat is the latest example of how retailers aim to capitalize on this growing trend. The cosmetics giant recently announced that consumers would be able to purchase products featured in Snapchat stories by taking a screenshot of the product and then uploading the image to ShopStyle, Sephora’s iOS app. From there, shoppers are taken to the product page where they can select a color or size before checking out.
As retailers continue to develop creative and intuitive ways for consumers to complete the checkout process using their smartphones, mobile conversions may begin to take an even bigger hold of the e-commerce industry.
Myth #3: Accepting only credit cards is sufficient for shoppers.
Credit cards may not be as common as you think, especially among millennials. A study conducted by Bankrate found that 63 percent of millennials don’t have a credit card. That’s more than 50 million potential customers that retailers risk alienating with limited payment options. Even for the 23 percent of millennials who do own a credit card, multiple forms of payment can help retailers salvage lost sales.
Approximately 17 percent of U.S. online shoppers have had a credit card declined at one point or another, leading to a $40 billion loss in revenue for retailers, according to TrustInsight. Making more than one payment option available to consumers will help ensure retailers aren’t left empty-handed in the event that a credit card is declined at checkout.
Myth #4: Security is the top priority of shoppers when buying online.
While security is important, convenience often trumps it for consumers shopping online. Roughly 23 percent of online shopping carts are abandoned by consumers who are asked to create a new user account, according to Kissmetrics. On the other hand, just 13 percent of carts are deserted because of security concerns. Given the rise of cyberattacks in recent years, it’s easy to assume that consumers would be more concerned about security. However, the reality of the situation suggests that retailers should focus on developing a shopping experience that is both fast and easy to navigate.
Assumptions are often a recipe for disaster. While some may be true, others can fail to accurately mirror reality. For retailers, the key to creating an effective online shopping experience is all about one thing in particular—data. By collecting valuable insights on consumer preferences and attitudes toward e-commerce, retailers can begin to craft a buying environment that is most likely to drive purchases time and again.
Bobbi Leach is the CEO of FuturePay, an e-commerce payment solution for the omnichannel shopper. FuturePay’s buy now, pay later option offers shoppers instant credit while shopping online or on mobile devices without the high interest fees associated with using a credit card. Contact Leach at firstname.lastname@example.org or interact with her on Twitter at @FuturePay.
In Viewpoints, payments professionals share their perspectives on the industry. Paybefore presents many points of view to offer readers new insights and information. The opinions expressed in Viewpoints are not necessarily those of Paybefore.