How to choose the right payment options
Anyone who has an online shop knows that payment options are important and often make the difference between a successful sale or not. For this reason, in this post we will take a closer look at which criteria are important when selecting payment options in an online shop, so that you can make the right choice of payment options to suit your target group.
Why is the selection of payment options so important?
Customers today want to experience maximum freedom when shopping online. This doesn’t just apply to product selection. Every touchpoint along the entire customer journey should offer as many different decision options as possible – whether it’s shipping options or payment options. The importance of taking a look at payment options is shown by the results of a study: around 78 % of respondents have abandoned their purchase at least once because their preferred payment option was not offered.
A shopping cart abandonment means that a customer has already decided on a product or service, but abandons the purchase shortly before completing the order because his or her requirements are not met. In this case, the customer is unable to use the payment option he or she is accustomed to using.
There are payment options that customers increasingly prefer. PayPal has become one of the most popular payment options in Germany, closely followed by the previously preferred purchase on account. However, the purchase on account has the highest sales and has a market share of 30 %. However, many customers also like to use credit cards and direct debit.
The figures clearly show that the right choice of payment option is one of the most important success factors in e-commerce and, in the sensitive phase of the purchasing process, decides whether the purchase is completed or the shopping cart is abandoned. Now, one could get the idea of simply offering all payment options that are available. However, this method is not necessarily effective either, because it is important to remember that some payment options are more risky than others. Likewise, direct or indirect fees are incurred for transactions.
Before you integrate different payment options into your store, you should consider a few criteria in advance and evaluate the various options based on your individual situation. We will show you what these are in the following.
Learn more details about each payment method.
How to choose the right payment options
Now you know that payment options are important for customers. Online merchants have the possibility to define for their online shop which payment options they offer. Customers receive the information of the offered payment options at the latest from the order process. It makes sense to present these with the familiar symbols already on the start page. It is common to embed the provider logo in the footer.
To find the right payment options for your own shop, you need to check them for various factors and weigh up the advantages and disadvantages. Among other things, you should ask yourself the following questions when making your decision:
- How high is the risk of the payment option?
- Which payment option has a high acceptance rate and is most frequently used by customers?
- What are the fees?
- Which payment options incur the least effort?
- Which payment options fit the target group?
In any case, a payment option should have a permanent place if this is very popular with the target group and ensures that the conversion rate increases.
Use the calculation of the conversion rate of the different payment methods as a basis for your decision. This provides information about the interaction with the payment options in relation to the visitors of the store. If a payment option is offered, but hardly used, it makes sense to see if it can be outsourced or replaced. If purchases are frequently abandoned at this touchpoint, it is important to check which payment options customers are missing.
Evaluate and minimize risk
With some payment options, the risk of default is higher than with others. In the aftermath, this always means a lot of work with receivables management. Reminders must be written and sent and, in the worst case, legal action must be taken. A riskier payment option is, for example, purchase on account. At the same time, you remember, after PayPal, purchase on account is the most popular among customers and is considered the safest. In this case, it is advisable to ensure that the risk is minimized if you want to offer these payment options.
For example, a credit check can take place in advance to ensure that the customer is solvent. Different providers obtain this information for the online shop. Another option is to “sell” receivables to a factoring company. In this case, the online merchant transfers invoice management to the provider, who thus also bears the default risk. It is important to ensure that this is “genuine factoring”. Ultimately, the default risk can be minimized by cooperating with payment service providers, who also bear the risk of payment defaults.
Although cooperation with external partners always involves fees, it is worthwhile in most cases – especially for risky payment options.
Checking customer acceptance
There are payment options that enjoy a high level of acceptance among customers, even if they may be less attractive or even associated with risks for the online merchant (cf. purchase on account). Nevertheless, it is important to meet users’ demands and make the ordering process as convenient as possible for them.
The more preferred payment options an online shop offers, the lower the abandonment rate and the higher the conversion rate. Instead of mass, focus on your target audience’s three to five preferred payment options. Basically, most online shops carry direct debit, prepayment and PayPal. More and more, purchase on account and purchase with credit card are becoming the standard.
Compare payment options fees
Payments are associated with fees. Thus, when choosing payment options, it is important to take a look at the costs as well. Prepayment and invoice incur account management fees, which are described as indirect costs. PayPal or credit card payments incur a transaction fee or a monthly base fee and variable costs per transaction.
For all payment methods that have proven to be “common” for quite some time, such as purchase via checking account, SEPA direct debit and bank transfer, as well as purchase via credit card, online merchants are not allowed to charge separate fees according to European guidelines. The situation is different for payment options such as PayPal, Sofortüberweisung or payment services such as Klarna. Online shops can charge a fee for these additional services. Even if charging fees is justified, a payment option should never be a disadvantage for the customer. It is therefore worth examining the payment methods in terms of the possible costs.
The integration of payment options in the shop
The most common payment options are already integrated into most shop systems. All you have to do is make a selection. If payment options are missing, but are important for the target group, it is possible to see whether the provider can easily activate additional payment options or bring a payment provider on board. Both options are associated with costs. Therefore, compare different offers from shop systems and payment service providers in advance.
It is also important that payment options function properly from a technical point of view. That’s why every new payment option must be tested extensively before it actually goes live. A test environment in which various payment scenarios can be tested is ideal for this purpose. The payment options must be tested both in different browsers and on frequently used devices.
Understand the touchpoints of the customer journey
But what if, despite embedding all the payment options that matter to your customers, there are still a disproportionate number of abandoned shopping carts? In that case, another touchpoint seems to have been touched. Here, one consideration may be to work with personalized exit intent popups and individual abandoned cart emails that help users make a decision before the payment process or bring them back into the purchase flow. In this case, uptain’s smart software helps online merchants to steer customers back into the customer journey shortly before they leave the page with targeted purchase incentives tailored to their needs, or to guide them back into the purchase process after abandonment.
Afterwards, it is important that the customers who have been brought back find their preferred payment options in the payment process so that the order is ultimately triggered.
Tailor payment options based on customer needs
Payment options are one of the most important criteria for making a purchase. When choosing them, online merchants should leave nothing to chance. It is therefore first necessary to determine the shopping cart abandonment or conversion rate to get an overview of which payment options perform well and which enjoy little acceptance. The analysis should be carried out over a longer period of time in order to gain a holistic picture. It can also be worthwhile to conduct a target group survey to determine which payment options customers would like to use.
Frequently asked questions about payment options
What are payment options?
Payment options are the methods an online shop offers customers to settle their order, such as purchase on account, prepayment, SEPA direct debit, credit card, PayPal, Sofortüberweisung or services like Klarna. Merchants decide themselves which ones to offer; customers see them at the latest during the order process, and it is common to show the provider logos in the footer.
How many payment options should an online shop offer?
Instead of offering everything available, focus on the three to five payment options your target group prefers. The more preferred options you carry, the lower the abandonment rate and the higher the conversion rate. Most online shops run direct debit, prepayment and PayPal as a base, while purchase on account and credit card are increasingly becoming standard. Every additional option brings risk and fees.
What fees do payment options incur?
Prepayment and invoice cause account management fees, which count as indirect costs. PayPal or credit card payments incur a transaction fee or a monthly base fee plus variable costs per transaction. Under European guidelines, merchants may not charge separate fees for long-established methods such as checking account purchase, SEPA direct debit, bank transfer and credit card, but may do so for PayPal, Sofortüberweisung or Klarna.
How do you choose the right payment options for your shop?
Weigh each option against five questions: How high is the risk? Which option has a high acceptance rate and is used most often? What are the fees? Which options involve the least effort? And which fit your target group? Any option that is very popular with your audience and lifts the conversion rate deserves a permanent place. Test every new option across browsers and devices.
How do you find out which payment options your customers want?
Determine the shopping cart abandonment and conversion rate per payment option to see which ones perform well and which find little acceptance. Run that analysis over a longer period so the picture is holistic rather than a snapshot. If an option is offered but barely used, consider outsourcing or replacing it. A target group survey additionally reveals which options customers would like to use.
What helps if carts are still abandoned despite the right payment options?
Then a different touchpoint is causing the problem. Personalized exit intent popups can help users decide before the payment process, while individual abandoned cart emails bring them back into the purchase flow afterwards. uptain’s software steers customers back with targeted purchase incentives tailored to their needs. Recovered customers must then find their preferred payment option, otherwise the order still fails.
Why is the selection of payment options so important?
Around 78% of respondents in one study have abandoned a purchase at least once because their preferred payment option was not offered. Payment falls into the sensitive final phase of the purchase process, where the decision for the product has already been made. Customers expect freedom of choice at every touchpoint, so the right selection is one of the decisive success factors in e-commerce.
