Digital payments 101: navigating trends and meeting customer demands

The world of digital payments is undergoing fascinating changes

As industry trends evolve to match customer preferences, retailers strive to perfect the payment experience in order to encourage purchases and increase conversion.

The final phase of an online transaction – how it’s structured and how convenient it is – can often be a deciding factor in whether consumers click the “buy” button. Cart abandonment continues to plague commerce, with up to 79% of desktop transactions between 2006 and 2019 never completed, leaving over $4.6T on the table each year. Among the most popular factors causing customers to abandon their baskets is an unsuitable checkout process.

This phenomenon is compelling website builders to investigate what shoppers want in terms of payment experience and implement the right technology to meet these expectations.

The golden rule of checkout

While no two customers have identical demands, there is one sworn enemy of successful commerce that all retailers must look to eliminate: friction. Payments friction can mean many things, and different types of merchants are using varying techniques to knock down any barrier to sale that could put consumers off during the final payment step.

Last year, digital firm Inviqa surveyed 1,000 UK Millennials, the soon-to-be mainstream customer, on what makes a good online shopping journey and found that, for nearly two in ten respondents, a frustrating checkout is the most common problem. Another interesting finding was that 18% appreciated the convenience of a guest checkout – as it doesn’t require logging in or creating an account. It’s clear that retailers should make the payment process quick and easy, and setting guest checkout as the default option may do the trick. Another simple tactic like retaining card details of returning customers, so they don’t have to fill them in again, can help convert more sales.

When it comes to in-store payments, some major industry players believe the best way to reduce friction is eliminating the checkout altogether. The dream of cashierless shopping is turning into reality, with checkout-free being trialled by Sainsbury’s, and an Amazon Go store soon coming to London’s Oxford Street. Computer vision and machine learning enable shoppers to pick up what they want from the shelves and pay for it automatically with their Amazon account or via online banking. It’s not difficult to see why these store models are taking off: no customer enjoys waiting in line to pay for their shopping – a long queue, or a few extra minutes spent pondering may cause them to abandon their baskets.

Whether it’s online or in store, consumers seek seamless experiences and vendors should bear this in mind when designing their checkout experience.

The luxury of choice

Some industry experts consider the statement “customers want choice” a myth, and argue that too many alternatives end up confusing them. On the other hand, with almost two billion people worldwide shopping online, diversity in preferences is inevitable. Retailers simply can’t hope to satisfy all of their customers with one payment option. The payment provider integrated in the checkout page can determine whether the customer goes through with the transaction – they will be inclined to trust one they know. Therefore, enabling a choice of multiple payment methods is crucial.

Vendors should also consider this when trading abroad. In every region currencies, payment providers and customer preferences vary. If a shopper is about to process a transaction online and they don’t recognise the payment method, they are likely to turn to a local competitor. While expanding into a new market can be a frightening perspective, ambitious retailers can face it armed with a modern eCommerce platform which supports multiple payment options. This way, when spinning new international sites from the same back-end, sellers can simply choose the most suitable payment methods for each country’s online store.

The security factor

Payments are not just about ease and convenience. Where people’s finances are concerned, security is of the essence. According to a recent UK Finance report, eCommerce fraud losses in Britain totalled £393.4m in 2018, representing a 27% increase on the previous year. These figures make the upcoming digital payment regulations even more timely and necessary.

The Revised Payment Service Directive (PSD2) was scheduled to be implemented this September – however, UK retailers have been given an 18-month leeway period to update their payment systems and comply with the new regulation. One of the key aspects of PSD2 is intended to enhance safety of online transactions and will enforce two-factor authentication (2FA) for all payments above £30. Many retailers will see this as bad news: a lengthier and more complex checkout process could represent a conversion barrier, with customers put off by a multiple-stage authentication.

Yet, a checkout page that feels more secure could make shoppers feel at ease offering their bank details – particularly if they are purchasing from a retailer they don’t know. Afterall, over a third of consumers abandon their carts due to security concerns. Therefore, there is an opportunity for merchants to spin the PSD2 to their advantage – perhaps impressing customers with a quick and intuitive text-based identity verification.

To sum up

Payments are an inescapable part of commerce and, as each phase of the shopping experience gains importance and defines the relationship between seller and buyer, retailers must consider how their customers wish to pay for the products they love, or risk getting left behind.

About the Author

Brian Green is Director of Commerce, EMEA at Magento, an Adobe company. Magento is a leading provider of cloud commerce innovation to merchants and brands across B2C and B2B industries and was recently named a leader in the 2018 Gartner Magic Quadrant for Digital Commerce. In addition to its flagship digital commerce platform, Magento Commerce boasts a strong portfolio of cloud-based omnichannel solutions that empower merchants to successfully integrate digital and physical shopping experiences.

Featured image: maxsim