By Christophe Bourbier, President of Limonetik
The new so called alternative payment methods should represent 25% of the transactions of e-business sites in 2015 according to the consultancy firm ADN’Co which has carried out a study on Payment Methods in November 2011. In practice this won’t happen without the support of trading sites.
For an e-merchant, the decision to integrate a new payment method is designed to:
- recruit new customers,
- increase their average basket,
- improve their conversion rate.
If the payment method chosen doesn’t allow the payment site to improve one of these three levers, or all three at once, it doesn’t have any added value in the e-business sector and no chance of breaking into it.
Whatever one it is, new payment methods bring a real added value to the users and operators of existing trading sites. They should represent 25% of the transactions of e-business sites in 2015 according to the consultancy firm ADN’Co, which has carried out a study on Alternative Payment Methods in November 2011.
This is the theory. In practice this won’t happen without the support of trading sites who are going to have to accelerate accepting complementary payment methods to that of paying with a bank card right now. Yet it’s there that the reality of the payment world seems very complex: the decision for a trading site to accept a new payment method often results in a horrible conundrum rather than a marketing lever with an immediate effect.
This raises a number of questions:
- about the purchasing experience of customers: is the purchasing experience going to be modified? Are the purchasers going to be redirected to an external page and how will they get back to the site after paying?
- about the sites payment method selection conversion rate: won’t the presence of lots of logos surely make the payment method more complex for users ? Is there a risk of abandoning the basket at the final stage?
- about the cost structure: what is the ROI of this new payment method? Is it going to take over other payment methods already offered? How much does it cost?
- about the technical, accounting and customer relation process: what will be the effects on the back office of the site? Is it going to have to adapt its internal processes, its accounts management, its customer service?
- about the choice of payment methods: among the multitude of offers which are going to be the best adapted to their products, their sales channels and their client targeting? The market has numerous players in the areas of gift or prepaid cards (Ticket Kadeos Online, Paysafecard, Ticket Premium…), mobile payment (Buyster, Zong, etc…), e-wallets (V.me by Visa and PayPass by MasterCard), and payment on delvery (Kwixo, Klarna, etc.). Over fifteen in total since the start of 2011 for France alone, without considering local payment methods for sites who are intending to grow internationally.
Another element which doesn’t make the decision easy: it is still very rare to see posts for payment method managers at the heart of trading sites. The “new payment methods” subject is often linked to the IT manager, for whom payment methods are going to be an extra thing to integrate into their roadmap, the director of finance who is going to have to get used to new income flows in his accounts and take into account new possible cases of fraud, and the marketing manager who certainly sees an interest in it, to get new customers, but if they have to take on the responsibility spending numerous days developing the site when they don’t know the ROI, it is unlikely they will support the subject in front of their CEO.
Yet the potential of these payment methods is enormous: 25% of e-business transactions in 2015. Other countries are already ahead of the game. In Germany for example, payment by bank cards represent no more than 40 % of purchases, the same in other Northern countries.
What’s surprising about this “payment method” approach is that it doesn’t resemble anything that is practiced by the sites in other areas. The sites that are developing are pragmatic and analytical: they test, they evaluate the results, they compare, they test again, they improve, get rid of what is bad, keep what’s good and re-launch the cycle.
Why do we find so little pragmatism with payment methods? When we approach this subject, we only find estimated results made blindly: business plans over several years with volume estimations as uncertain as they are complex to define, evaluations of the dominance of payment by bank card, guesses on how to improve payment page conversion rates. E-traders be pragmatic: test while limiting the impact on your IT, but obviously TEST!
And for payment stakeholders, what conclusion can they draw from this? They will have to improve on several levels: ergonomics, number of users, marketing plan proposed in conjunction with sites, highlighting payment methods, facilitating integration, pricing…