The number of ways in which merchants can collect payments from their customers.
How do you pay for a purchase? Let’s count the ways.
In a store, perhaps you use cash, credit cards or mobile payment options like Apple Pay. When online, you may want to make a direct bank transfer for local payments or go with PayPal for global transactions. For services like Uber, you probably have an online wallet linked to your credit card.
And under each method (say, credit cards), you have a host of options (Visa, Mastercard and American Express, to name a few). In fact, there are more than 200 alternative payment methods worldwide. So how many payment options should you give your customers when they come to your checkout page?
Things to Consider While Shortlisting
In general, having multiple payment options is obviously good for your customers. For instance, a 2014 study by the PPRO Group found that 68% of UK consumers abandoned an online retail site due to the payment process. 57% of them left because the process was too complicated, while 46% did not complete the transaction because they weren’t offered their payment method of choice.
So fewer payment methods lead to higher bounce rates. But give buyers a ton of options and they’ll drop off just the same. As always, there’s a UX cost associated with having too many choices.
So there’s a happy medium to be struck, like the children’s fairy tale where Goldilocks tries different chairs, bowls of porridge and beds in the unsuspecting bears’ house until she finds one that’s ‘just right’. This golden mean for payment methods depends on factors like:
Find out which methods complement both your company’s country of incorporation and your customer base location. You may need to change payment methods for customers in different countries too. For instance, in Germany direct debit through SEPA, Giropay and open invoices are all more popular than credit card payments, a residual effect from World War II, when financial systems were failing.
Do customers use your services online or offline? Choosing the most-used mix of omnichannel payment options in the customer location may be the best option if they do both. If they primarily checkout online, you can safely omit offline options like cash on delivery and focus on picking online payment methods for your demographic.
Do you have a recurring billing model or predominantly process one-time payments? Factor in an added layer of complexity if you have subscription customers.
The bottomline? Shortlisting payment methods that satisfy these basic parameters is the first step. Your next step should be to look up cost and risk assessment processes associated with these options.
For instance, PayPal is incredibly simple to sign up for and makes international transactions easy, but once you do their aggressive risk prevention processes may lead to payment holds with little explanation.
If you’re laying the ground for internationalization, it’s also important to note that not all payment methods support multiple currencies. And it’s always best to keep an eye on outliers—options that may not be popular widely, but are used heavily within your customer base—to ensure minimum churn during checkout.
Multiple Payment Methods in Recurring Billing
Recurring billing uses the same payment methods as one-time transactions, ie., credit cards, direct debits processed with ACH (US), Bacs (UK) or SEPA (Eurozone), PayPal, Amazon payments, etc. The difference is that when you use a billing system for recurring billing you can configure two kinds of payments:
With automatic payment collection, your customers can choose a payment method that will be auto-charged on renewal of the billing cycle. With manual payments, you collect dues yourself and record them.
In automatic payment collection, some billing solutions go one step further by allowing your customer to choose and set up multiple payment methods at once. This provides revenue assurance in the event of failure of the primary payment method. The billing solution can then automatically try the backup payment options without customer intervention and further delays.
Ultimately, picking an optimal set of payment methods will ensure that your customers can pay you in a way that’s easiest for them and have more flexibility to do it on time.
You’ve set up automatic payment collection with primary & backup payment methods for your subscription customers. But what happens if both fail?
Sometimes, customers forget to update their credit card information and may not have opted in for you to collect updated data directly through the account updater. Or their backup payment methods could have been improperly set up to begin with. Whatever the case, Chargebee makes sure that the dunning process kicks in if all payment methods fail after repeated retries, so you don’t have to manually deal with involuntary churn.
The Billing Intelligencer
Looking for a place to start before you set up different payment methods? Here are a few basic articles which lay out the basics of why this is important for your customers and your business.
A good read on why multiple payment methods matter with some interesting takes on accepting P2P payments and cryptocurrency like Bitcoin.
Do you offer your customers enough payment options
Selina Tobaccowala from SurveyMonkey makes a strong case for avoiding a problem by anticipating internationalization rather than solving it when it’s at your doorstep. And payments and pricing is a big part of that. She says, ‘Regardless of the payment service providers you use today, you're going to have to use a different one for other countries’.
The inside story on how SurveyMonkey cracked the international market
Payment preferences vary from place to place. Expert Merchant Accounts used data from global payments company Adyen to map the distribution of payment methods around the world in a comprehensive infographic and highlight differences in regional preferences.
Online payment methods around the world
Chargebee’s Yohann Kunders explores over 20 ways to handle failed payments. Exhaustive, thorough and well-structured, this in-depth guide is meant to provide a larger picture of the payment failure life cycle, without viewing each problem in isolation. Whatever your business model is, this is a brilliant reference point to help you figure out the most effective combination of tactics and payment methods for you.
Failed Payments and Involuntary Churn— A Definitive Guide
A basic checklist from the Kissmetrics blog on what makes an easy, user-friendly payment process.
9 Ways to make the payment process easy for online customers
From a business perspective, multiple payment methods also contribute to growth. This article lists some of those benefits, and also provides a list of handy questions to ask while choosing payment methods to integrate into your website.
4 Reasons why accepting multiple payment options will grow your business