Payment Type Analysis
👈 Part II-I| TOC | Part II-III 👉
In this post (Part II-II), I will do some analysis on payment type and its usage in our ecommerce.
To start, let’s look at the purpose of our analysis :
- What is the preferred way to pay in the ecommerce?
- How many installment is usually done when paying in the ecommerce?
Background
In ecommerce, payment analytics may help us to make better business decision. By understanding the local conversion rate & preferred payment type, we might be able to ease & attract more new user to use our ecommerce service.
Not only that, we could also reduce the number of abandonment rate when user check out the basket by providing the payment type that were used by many people (popular) & benefit the user itself. Studies of ecommerce in the world show that the average abondonment rate from its user is about 68.81%, with the most recent study shows about 74,52%.
Depending on the country & customer preference, the prefered payment method might differ. That’s why payment analysis is important to identify / clarify the most popular payment type used by user and ways to improve it.
Before we do our analysis, I would like to inform that e-payment used in ecommerce most of the times can be categorized into 3 categories:
- credit based
- Alternative e-payment that use bank as its medium (debit, etc)
- digital wallet (3rd party)
Based on my assumption and general knowledge, I think that most of the time Indonesian would like to use credit card / debit as the most “preferred” way to pay. As for the digital wallet, it might have a good trend, but still regulation might hinder the usage in Indonesia.
Distribution usage of each payment type
Below figure show a simple representation of our user. If we represent all of order done in our e-commerce to be done by 50 people, 10 will choose to use blipay, 2 will choose to use voucher, 1 will choose to use debit, and the other 37 will choose to use credit card (debit usage are too few to be sampled).
For more detailed info, please kindly check these plots below.
As we can see from bar chart figure above, nearly 74% payment that were recorded is from credit card usage, 19% payment from Blipay, 5.5 % payment from voucher and the remaining is from debit usage.
One of the reason why the payment registered in our ecommerce were more than the order registered is the installment option provided by our ecommerce. From the barplot, we can see that most of the time, the number of installment per order is about 1 ~ 4 times and only few order took more than 10 installment to be paid off.
Payment Type Usage Growth
From the line chart, we can see that the majority of payment is done using credit card. But from March 2018, we can see that the usage on this payment is slightly reduced, meanwhile the usage of blipay is steadily increasing along the time. Also, from May 2018 the payment using debit card is slightly increasing, might be useful it we check the opportunity to invest and improve in this payment service.
From the evolution point itself, I try to calculate the percentage use of payment per month. From May 2018, we could see a slight upward trend from Debit usage, while credit have slight downward trend. But, the trends are not significant enough to see any opportunities.
Payment Type Characteristics (based on payment value)
When answering previous question, a new question comes up to me. What is the characteristic (payment value) of each payment type? Based on the data available, I’m going to try to see the different for the average value for each payment, and each installment
Based on the boxplot above, we could see many outlier from credit, blipay and debit for each transaction (order). From the outlier, we could see that most likely people will use credit card for high value transaction.
From the boxplot with outlier removed, we can see that for high value (price) order, user usually pay with credit card. This might make sense, since credit card usually give cashback (or any other benefit) and you can pay later to the credit card bank. Meanwhile for low value (price) order, user usually pay with voucher (around 78k).
Insight
As final takeaway, here are the things that we need to look out for :
- The most preferred way of paying is by using credit card followed by blipay.
- It seems there are many high value payment using blipay & credit card transaction occurs in our ecommerce.
- For high value (based on payment value) order, user usually pay with credit card. Meanwhile for low value (based on payment value) order, user usually pay with voucher
- Transaction using blipay is also multimodal (can be for high & low value order), and seems like for lesser value even though still dominated by outliers.
- Debit and voucher are not used much as the other payment method. But there are some increasing usage in debit type payment from May 2018, it is worth to dig in further.
Recommendation
Based on insight that we get from the payment analysis, we can recommend few things:
- If we want to payment method more diverse in our ecommerce, we should try to give special discount when using debit / blipay, to increase usage of other payment method.
- Because there are an increasing trend to use digital wallet in Indonesia, we might be able to give some “cashback” when user use blipay or other digital wallet by collaborating with big digital wallet company. The benefit that we can give to them are increasing likelyhood of user welcoming the use of digital wallet
- As many user welcome ecommerce, we can see 1 of the main problem that is cart abondonment in checkout process. One of the reason of this problem is because the ecommerce don’t provide the payment method that they prefered. While this analysis don’t provide payment method that were not being used by our ecommerce, we can do payment method analysis from other ecommerce to decrease the abondonment rates in checkout process because of payment method. One of the strategy that we can do are by applying A/B Testing E-Payment Methods to find out the new more prefered payment method for this ecommerce. ( Lower abandonment rate, Reduced customer acquisition cost and increase profit)
- The Ecommerce can try to find out which credit card bank that the user use to improve the service by partnering with the bank (providing more detail about the credit card)
