Many retailers haven’t yet extended their payment acceptance beyond debit and credit cards. But while these two payment methods have been popular among consumers for a long time, our latest Lost in Transaction data shows preferences are becoming increasingly diverse, particularly following the pandemic. And customers have never been more likely to abandon their online baskets if their preferred payment method isn’t on offer.
So how are customers’ attitudes towards online payments shifting, and why should retailers be looking to accept as many different types of payment methods as possible?
An increasingly fragmented landscape
While cards have been a staple of online commerce for the last twenty years, our research shows their monopoly is on a downward slope. In 2018, 43% of those we surveyed told us they’d used a credit card to pay for an online purchase at least once in the previous month. But, in 2020, only 27% said they’d done so, representing a 16% drop. The frequency of debit card payments also looks to be on the wane. In 2020, 32% told us they paid online with a debit card at least once a month, down 1% from 2018.
These declines have coincided with upticks in the adoption of alternative payment methods. A growing number of customers have now tried prepaid cards, direct bank transfers, e-cash, digital wallets, and even cryptocurrencies for the first time in 2021. For example, almost a quarter (23%) of all consumers used digital wallet for the first time in the past 12 months, and a third (32%) are using digital wallets more frequently now than last year. In some countries such as Italy, digital wallets are now the most popular online payment method. Alternative payment methods have become the go-to choice for small but significant percentages of customers.
The Covid-19 effect
The pandemic has played a significant role in realigning customers’ checkout preferences. The huge number of business closures due to lockdown restrictions led to unprecedented numbers of people put on government assistance or being laid off. Covid-19 also created the perfect storm for cybercriminals. According to security company F5 Labs, phishing scams — whereby criminals pose as a legitimate organisation in order to harvest payment details — were up 220% at the height of the pandemic. In the UK alone, victims lost £207 million (about $292 million). And, in the US, losses added up to an eye-watering $4.2 billion.
This combination has had a big impact on customers’ attitudes towards both convenience and online security. According to our research, the security of financial data and fraud are the top two concerns for consumers when choosing which payment method to use online. But the fact that money has become more tight is also influencing some customers’ payment choices. 26% told us their payment preferences changed during the pandemic because they want to be able to track their spending more accurately. And, for 32%, whether a payment method is free to use is of top importance when choosing an online payment method.
Are our new payment habits here to stay?
It’s very difficult to predict exactly what will happen. As we have seen in the past 12 months, the ecommerce space is still rapidly evolving. But what is for certain is that customers expect to be able to use their preferred payment method, whether that’s a credit card, digital cash, or Bitcoin. In fact, 56% categorically state that they only shop in online stores that accept their preferred payment method.
The message to retailers could not be clearer: Unless you accept as many different types of payment methods as possible, you risk losing a significant portion of your customers to competitors that offer those options.
How to give customers more payment choices
If customers are less open to compromise when it comes to how they pay online, it’s not all bad news.
Accepting more payment methods doesn’t have to be expensive or burdensome. It’s possible to partner with one supplier to broaden the payment choices available at the checkout, without having to operate several different interfaces, see an increase in admin, or a jump in costs.
With Paysafe, for instance, you can access a range of payment methods — such as debit and credit cards and eWallets to online cash, direct bank transfers, and other alternative payments — with one API, which removes the worry associated with getting a few different integrations to work.
Another benefit of working with a single payments partner means it’s possible to see all payments data in one place, have one transparent fee structure and a single point of contact if there are any issues or additional supports.
It’s never been more important to diversify payments at the checkout
Some reports are suggesting that the Covid-19 pandemic has sped up the growth of ecommerce by four to six years. Its impact has been far-reaching, including transforming the typical customer’s risk appetite and expectations.
Consumers want more control over their spending and more security, and this means having the final say over how they pay, so it’s important to have a payments offering to match.
Luca Visco Gilardi – VP Account Management, Digital Wallets at Paysafe