E-Commerce Payment Options: Is An Installment Payment Solution Right For Me?

Every element of the eCommerce journey plays its own role when it comes to the overall user experience. The checkout process is undeniably an incredibly important part of this trajectory. Any friction at the buying stage can potentially lead to 87% of people abandoning their cart, or 55% of people never returning to the site. This is not a risk worth taking. The solution? A payment option system that works.

Some general best practices when it comes to payment methods are:

  • Making sure available payment methods are visible before checkout
  • Incorporating express checkout positioning
  • Communicating splitting costs services early
  • Including one click checkout

Variety and transparency are the key terms here in order to improve the customer checkout experience. The most common online payment method is, of course, the credit card. But there are plenty more alternative payment methods to choose from. Options such as electronic wallets, bank transfers and peer to peer payments are gaining popularity, and these aren’t the only options available. But are the additional options worth offering? Let’s find out.

Why Offer Multiple Payment Options?

Users appreciate the flexibility that multiple options present. Offering as many different payment potentials as possible shows that you have their interests in mind, and want to make their buying experience as seamless as you can. 50% of customers will abandon their purchase if they don’t see their preferred payment system available, so ensuring you have all options covered is also beneficial to you as the merchant. 

It is vital to make sure that each different customer demographic is able to purchase in the way they are comfortable with. Gen X tends to prefer bank payments, Gen Z may prefer alternative payment applications such as Google or Apple Pay, Millennials are familiar with using their credit card, and so on. Making sure each market’s needs are met will give customers a sense of familiarity, and lead to repeat customers after a satisfactory experience. 

Offering different payment options  can solve the problem of cart abandonment and lost revenue. It can create a global payment gateway, if you’re looking to take your business international. Combining the global potential, with the mixed demographic potential, of multiple payment options- you are appealing to the largest target audience possible.

Some questions to consider when choosing which payment solutions to offer:

  • What is my target customers’ preferred payment method?
  • Where are my target customers’ located?
  • Is this payment method easy to integrate into my store?
  • Which payment gateway best fits my business goals?

A useful method in order to determine the answer to these questions, and in order to figure out which strategy would work best, is to use A/B testing. This means running two tests simultaneously- the control and variable versions, and using the results to find out which method works best for your business.

As with any kind of strategy, firstly determining your business niche, merchandising goals, market interest is the first step.

What Are The Multiple Payment Options?

Some payment options are obvious, but there are new payment methods you may not be aware of. The most popular option is of course, credit card payments. These are offered on the majority of eCommerce stores, and involve credit being taken from the balance of the card of the customer buying. These are the most popular payment feature, as they can be used worldwide and most people are familiar with how they work.

The debit card payment is a close alternative, which functions in pretty much the same way as a credit card except for the fact that the balance is taken directly from the card, rather than on credit. This means that the payment cannot exceed the balance currently in the account. This option would work well for someone on a budget, or without a good credit rating.

A method more popular with mature users is direct bank transfer. This method is a slower and longer method, but it is also more secure and safe. It is for this reason that those with less online experience, knowledge and trust may prefer to stick to a method that they know they can feel secure with.

A direct deposit option applies to similar demographics as it also presents a safe option to more doubtful users, but direct deposit may encounter transfer charges. Simply offering a cash option can work if there is a local store nearby, where people can pick up their orders. This can also work for mature clients who are untrusting of the internet.

On the other end of the spectrum, for those who are very up-to-date with electronic payment methods, there are many app payment solutions, such as Facebook or Instagram who offer features such as this- this can be very appealing to Gen Z or Millenials; the social media generations. Electronic checks (e-checks) may also be used by this demographic. 

Cryptocurrency will be preferred by anyone who has invested in, or uses these. Electronic wallets such as Apple Pay, Google Pay and Amazon Pay are becoming increasingly popular, so are not to be overlooked by the people who like to make most of their transitions through their mobile phone. eCommerce payment gateways are a beneficial system that are only available through online eCommerce platforms, so should be taken advantage of. And lastly installment payments or ‘buy now pay later’ features are becoming increasingly popular with people who are on a tighter budget.

Whichever method you choose, or however many, it is important to demonstrate how each option is trustworthy as possible. Especially if using applications or gateways, make sure to offer well-known brands so people increase their brand trust. 

Should I Offer Installment Payments?

Installment payments, or ‘Buy Now, Pay Later’ (BNPL) options, give people the flexibility to make a purchase such as a high ticket purchase, without having to pay the full price up-front. The item will be dispatched and received straight away, but the payment can be made in monthly installments with no added interest until the balance is complete.

Most of these systems are compatible with major eCommerce platforms such as Shopify, Magento and BigCommerce, as the installment payment system and eCommerce platform communicate via an API.

Employing an installment payment system benefits both the merchants and the customers- and here’s how. From the merchant end, this solution can increase AOV as the customer is able to make bigger purchases knowing the payment doesn’t need to be made all at once. It can reduce cart abandonment, and increase trust and loyalty in the brand as the customers can see that the merchant is thinking of their needs.

From the customer end, there are lots of demographics that might find this kind of payment option preferable. For example, students who have debit cards with a low limit, no credit history or current employment would find installment payments perfect. Young professionals who have the potential for increasing their income but no previous credit history would also benefit from this plan. Mature adults who already have multiple debts, don’t want to carry interest and yet are in need of higher ticket items (for example household appliances or furniture) would also benefit from this option. Retiree’s who have fixed or a less flexible income, don’t want to encounter new debt or have higher expenses are another group who would be hugely helped by this plan.

For many of these demographics, if an installment plan isn’t offered, they may simply decide to leave your store and search for a cheaper alternative- the worst possible outcome. If these payment plans are offered, with interest free payments (as is standard with BNPL options)- there is a 35% increase in shoppers who are likely to make the purchase. On top of that, people are known to increase the size of their purchase if they can pay over a longer period of time.

The more that businesses are offering installment plans, the more customers will come to expect them. If your business has no payment plan offered, this could be a negative factor for new potential customers. Offering a BNPL system doesn’t mean that you don’t have to offer other systems as well; it should be offered side by side with the other payment options. This way there are all bases covered.

How Can I Make Sure It Works?

When choosing which plan suits you, there are some things to take into consideration. Firstly, make sure that you choose an installment plan that works for your business. Trustworthiness is the key factor here. People need to be given maximum reassurance when it comes to a system that will make repeated transactions from their account. 

Preferably, the system should offer low to no fees with a 0% interest rate. It should be easy to navigate and understand, and compatible with browsers, smartphone and tablet. The customer service should be excellent, and it should have highly rated reviews from verified users. It is important that the customer has a positive experience throughout the installment payment process.

It’s important to let shoppers know that the solution is there. One way of ensuring this is by employing advertisements letting the customers know that there is the BNPL method being offered on this eCommerce store. These ads can generate clicks and therefore customers who are looking to make their purchases in this fashion. It needs to be simple and easy for customers to truly get the most out of the situation.

Branching Out

It’s clear that sticking to one payment option only is no longer what is expected of eCommerce stores. Alternative finance spaces and new financial technology are constantly improving the ways the consumers can pay. New opportunities to connect with shoppers are created, building loyalty, goodwill and repeat customers, and driving higher volumes of orders. 

These new systems are sustainable, risk-free and offer wide-reaching choices. Global consumers can be part of the process, and stress is being taken out of the payment process. Customers aren’t having to depend on credit approval or entering long and difficult details in order to make payments. This is all hugely appealing to online shoppers today. 

As we look towards the future of eCommerce, understanding that Millennials and Gen Z comprise the drivers of eCommerce spending in years to come, ensuring that alternative payment options are offered means ensuring that their needs are being seen and counted for.