Payment acceptance is one core wedge that bridles relations between customers and e-commerce businesses, and acceptance rate optimisation should be a core strategy tackled by businesses to ease online transactions.
The 2019 Consumer Payments Survey showed that Australians are continuing to switch to electronic payment methods in preference to cash for their day-to-day transactions. More recently, the switch to electronic payment methods is likely to have accelerated as a result of business and client responses to COVID-19.
The pandemic has also induced a positive significant shift to online shopping. Australian Bureau of Statistics (ABS) data shows that the online share of retail spending picked up significantly from April 2020 and remains high by historical standards. Australia’s e-commerce market has been on a growth curve during the past few years and the recent COVID-19 outbreak has further expedited this trend. The Australian business-to-consumer e-commerce market is worth A$50.2 billion and is set to rise at a compound annual growth rate (CAGR) of 7.5% by 2023.
Digital wallet usage is the 12 months spanning the coronavirus pandemic to March 2021 saw transactions rise from 36 million to 68 million, with the total value more than double from A$1 billion to A$2.1 billion. The Commonwealth Bank of Australia (CBA), which processes around 40% of total card and digital wallet transactions in Australia show that the average dollar value of a digital wallet transaction has risen from A$41 to A$44 (credit) and A$26 to A$29 (debit) over that time.
“Given this increasing move towards digital, we expect the growth of digital payments to keep rising and expect by the end of this year, that every second contactless in-store payment will be made using a digital wallet.” A statement made by the CBA’s Everyday Banking executive GM, Kate Crous.
As Australia’s e-commerce blooms, online shopper numbers are increasing, and their demands are increasing with it. One of such demands is the diversification of payment acceptance options.
The Need to Diversify Payment Options
For a business, maintaining high cash flow is the topmost priority. Whilst credit and debit card payments remain a popular online payment method, alternative payments are growing in popularity with consumers. With the world steadily leaving behind the dated method of cash payment and adopting other stressless forms of non-physical payment we highlight why diversification is a growing need for high payment acceptance rates, and if well implemented, can boost e-commerce sales.
Reduces Cases of Cart Abandonment
According to a recent Future of Australian Retail report, 72% of consumers choose to shop online because they place a high value on convenience and a smooth online shopping experience. So, when faced with a lengthy payment process, 32% of customers jumped ship. Providing multiple payment options does not only benefit the customer but the business. Ease of payment for customers would reduce checkout time and eliminate hassle and stress, a feature that most people look for when shopping online. This gives the business an edge over others, and customers are likely to come back to make another purchase given the ease of payment.
Competitive Advantage & Increased Brand Trust
Increased brand trust and gaining a competitive edge over similar businesses are reasons diversification is key to payment acceptance strategy. With the existence of numerous online businesses and the emergence of new ones every day, diverse payment options have an edge over other businesses trying to reach the same target market. With businesses competing to outdo each other either by offering mouth-watering deals or flash sales all in the bid to attract more customers while neglecting payment checkout options, diverse payment acceptance strategies have become a business idea that should be improved upon. This strategy reforms online shopping and reduces complications that arise during checkout procedures. This boosts brands’ professionality, which in turn elevates brands’ trust.
Catering to a Wider Consumer Base
Diversification of payment options helps cater to a wider consumer base, expanding the business reach and boosting sales in the process. By making local payment options available to target regions, businesses can reach new market audiences and expand their reach, either locally or internationally. Mobile payments such as Apple and Google Pay, digital wallets such as PayPal, Buy Now Pay Later schemes such as Aftepay, and even cryptocurrency wallets are becoming viable alternate payment options.
Accordingly to recent research from yStats, e-wallets account for close to one-half of online sales in the Asian market, which consists of several of the world’s largest and most populated economies, offering a diverse range of payment options. A similar share is estimated for global sales in four years time. Alipay, WeChat Pay, PayPal, Paytm and the likes have become the favourite payment method for digital purchases of many digital buyers across Asia, and according to recent online surveys, ranked second only to cash in consumers’ overall preference for frequently used payment methods.
Following the rise in online payment methods, there has sprung up a growing need for businesses to collaborate with payment service providers to ease payment checkout for customers.
Payment Service Providers: Who they are & What they do
Payment Service Providers, also known as Merchant Services Providers or PSP’s are third-party payment processors that provide both a merchant account and a payment gateway. A merchant account is a type of business bank account that allows a business to accept and process electronic payment card transactions. It is pertinent for an e-commerce business to choose a payment gateway that supports multiple payment methods. Companies like Novatti, PayPal and Stripe are online PSPs that offer various payment options for businesses.
As the world advances past the age of cash payments to digital transactions, e-commerce businesses must strive to take next-level steps to provide convenience and comfort while attending to consumer needs. COVID-19 has provided a clear push to both online purchases as well as cashless payments of different kinds. Offering diverse payment options is a strategy that must be implemented to increase business revenue and solidify online market presence. While credit card payments have and will continue to be a viable form of payment, alternative payment methods are a necessity to meet the needs of domestic consumers or conduct business in Australia’s ever-growing e-commerce markets.