4 minute read
For many of us, shopping online means paying with our credit card. However, with the emergence of alternative payment options that might not be the case for much longer.
Alternative payment options have exploded in popularity in recent years, and today shoppers expect to have flexibility in how they pay. In fact, the Checkout Conversion Index found that the top online retailers accept an average of 8.3 payment options – and no, Visa, Amex, and MasterCard don’t count as three different options, they count as one.
While it’s clear that having a variety of payment options is important, knowing which alternative payment solution to use and why is considerably more muddled.
Buy Now Pay Later
One type of alternative payment that is winning over both consumers and retailers is instant financing, also known as customer financing or buy now pay later (among other things).
Instant financing providers allow shoppers to pay for their purchases over time while paying the retailer upfront. It’s a win-win as shoppers can check out in seconds and have more flexibility in how they pay, and retailers capture sales they wouldn’t have otherwise realized.
While results vary across different sectors and price points, retailers are seeing some impressive upticks from adding a flexible financing option: a 17% increase in incremental sales and a 15% increase in AOV.
Millennials are one of the driving forces behind the surge in alternative payments. Since the tumultuous period following the 2007 financial crash, Millennials have become distrustful of the traditional banking structure. One way this distrust has materialized is in their avoidance of credit cards. In fact, a survey by Bankrate found that 63% of millennials don’t have a credit card.
This means that retailers need to have a payment option that doesn’t require a credit card in order to ensure their millennial shoppers can make a purchase. But there are reasons beyond catering to Millennials as to why you should accept a credit card-free payment option.
There are a handful of other reasons why someone might want to make a purchase online without using a credit card. For instance, couples sharing a credit card may not want a purchase showing up on their shared statement, especially if they are buying a gift or planning a surprise for the person they share a card with.
Security concerns are another reasons why shoppers might want to shop online without a credit card. In fact, a survey by MasterCard found that 50% of North Americans cite security concerns as the reason they don’t shop online.
Lastly, how do you handle credit card declines? False credit card decline cost retailers billions of dollars every year, so if the answer is anything other than “offer them a card-free way to pay”, you are probably missing out on sales. In 2014 alone, false credit card declines cost retailers $118 billion in sales.
TL;DF (Too Long; Didn’t Finish)
But having alternative payment options isn’t just about having variety for variety’s sake. One of the biggest advantages of alternative payment options from a customer experience perspective is how they can speed up the checkout process and reduce friction.
Friction at checkout is one the largest contributors to cart abandonment, and alternative payments can cut down on this friction. Whereas the typical credit card checkout requires multiple clicks, a handful of form fields, and typing out a 16-digit card number – some alternative payment methods drastically improve on user experience. For instance, with FuturePay shoppers only need to enter their email, birth date, and the last 4 digits of their SSN to checkout, and future purchases can be done with just an email and password.
Removing friction helps to reduce cart abandonment and improve conversion rates, especially for shoppers on a mobile device.
The next step is to consider how alternative payment options can benefit your business. Do you want to reduce cart abandonment? Then add a payment option that reduces checkout friction. Do you need a buy now pay later option? Then offer instant financing at the point of purchase. Are you focused on recapturing credit declines? Then give your shoppers a card-free way to pay.
If you’re interested in learning more about how alternative payment can help grow your business, get in touch with us.