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How to Choose the Best Payment Method for Your Online Business

Choosing what payment methods to accept is a common problem among online business owners.

Aside from customer preferences, you also have to deal with fees, the limits of technology, and even the reliability of certain payment providers. All business owners also want to provide an impeccable customer experience, but are often deterred by a checkout process that isn’t streamlined when it comes down to getting paid. One way to prevent cart abandonment and canceled orders is by providing different payment options, such as cash and online payments, to customers.

As ecommerce continues to evolve, now more than ever during the pandemic, the growing need for convenient and easy online payments have become essential to customer satisfaction. In this article, aside from introducing various payment options, we’ll also be reviewing the advantages and disadvantages of each. As you read on, we’ll also help you choose the best payment providers to partner with on your ecommerce store and recommend which methods are best to use per industry.

Some payment methods are more popular from depending on the region. (Photo by Monstera from Pexels)

Popular payment methods in ecommerce

You’ve heard of them before, but which payment method is the best option for you and your customers? While credit and debit cards still lead the charge when it comes to online shopping transactions, cash and online payment systems still prove to be popular in some regions. Their benefits and downsides, as well as customer preference and convenience, will be explored.

• Cash. As the oldest “way to pay”, cash is easily the most trusted payment option, as sellers receive tangible payment immediately. Paying in cash may include accepting international or domestic currencies, paid by customers through over-the-counter transactions at banks or payment centers. Through cash payments, there are no transaction fees involved compared to credit card or even mobile payments. In the Philippines, cash is most prominently used in Cash-on-Delivery transactions for goods, where payment is made upon delivery as it’s seen as a more trustworthy method, preventing online shopping fraud. Online retailers can benefit from this option. The potential downside could be theft, and with the growing internet user rate worldwide, cash can become troublesome as contactless transactions are becoming the norm especially during the COVID-19 pandemic. Cash can easily be mismanaged as well without proper recording and accounting.
• Credit/Debit cards. A credit card is a bank-issued card for users to pay merchants and businesses against a line of credit, while a debit card deducts payments directly from a user’s checking or savings account. A debit card can also be used as an Automated Teller Machine (ATM) card to withdraw cash. All business types directly benefit from providing this payment method due to its flexible financing options. In a 2019 report by Statista, credit/debit card transactions were the preferred payment methods in the Americas with 82%, India with 73% and Asia Pacific with 71%. Card payments are said to be preferred by customers when paying online due to its convenience. Accepting credit cards on your online store will help in boosting the business’ legitimacy, as a merchant account application for credit card processing undergoes extensive underwriting. Debit cards are also preferred when it comes to low transactions fees, but credit cards allow customers to control their cash flow. Potential downsides when using debit cards are incurring insufficient fund fees for customers. On a credit card, on the other hand, high fees, chargebacks, and fraud are the common culprits in deterring people and businesses from choosing this payment option.

“Debit cards are also preferred when it comes to low fees, but credit cards allow customers to control their cash flow.”

• Online and mobile payments. Online payments include using digital or mobile wallets, payment gateways, online banking payments, and facilitating card payments. Examples include bank transfers, money transfers, and utilizing payment service providers such as Paypal. Digital or mobile wallets are another type of online payment option that can be done exclusively on wireless handheld devices such as smartphones or tablets. In a 2020 report by Statista, it’s estimated that 44.5% of online transactions made worldwide were conducted on digital and mobile wallet payment systems. The popularity of online payments is perhaps due to its quality of being fast, convenient, and available for both buyers and sellers. Transaction fees are also quite low but users are also at a high risk of fraud and data theft. Scheduled and unscheduled technical downtimes on digital wallets are also frequent and may come as roadblocks to quick payments. All online sellers, especially those active on multiple marketplaces such as Lazada, Shopee, or Amazon benefit from all-in-one online payments methods which also offer QR, multi-device, and contactless payment options.
• Checks. A check is a document that orders a bank to transfer funds from a customer’s account to your account. Check payments are more common for service payments, rental payments, and B2B transactions. One disadvantage of this method is dealing with bounced checks. Customers can put a stop payment order on their check or their checking accounts may not even have funds at all. Make certain to get the issuer’s contact information for a quick and timely response to bounced checks. And when all else fails, filing a claim through the court is also an option.
• Digital currencies. The popularity of using cryptocurrencies like Bitcoin and Ethereum as payment options are already used in transactions with regard to NFTs, online gaming, and even mobile load recharging. They are most often done on mobile wallets and cryptocurrency exchanges. Digital currencies aren’t as popular as other payment methods due to its relatively new electronic payment technology, low penetration rate, high market volatility, and potential fraud and security risk. But potential upsides include secure transaction records, fewer regulations, and easier access compared to banks. Online businesses with little to no experience with handling digital currencies and desire financial security should stay away from this option as they are considered high-risk investments.

Don’t let unreliable payment systems deter your customers from shopping online. (Photo by Anna Shvets from Pexels)

What to look for in a payment provider

It’s good advice not to bombard your online store with all the payment methods available because it does not inspire trust and confidence in customers. Knowing how your customer pays and limiting the methods available will give you a better checkout rate. Researching your customer’s payment habits is also beneficial to you as a business owner when you begin choosing a payment service provider or payment gateway on your ecommerce store website. To guide you, we detailed below the essential characteristics of what a payment provider should possess.

• Security and privacy. Security is the most pressing concern of online business owners and customers. As transactions are increasingly made online, data security and fraud prevention should be provided by the payment provider. Research on how well the provider secures the customer’s personal data. Are they Payment Card Industry (PCI) compliant? How do they prevent unauthorized transactions? How well-supported is their data encryption? Additionally, you can buy an SSL certificate to add protection through end-to-end encryption on your store website.
• Low fees. Affordability is essential to both buyers and sellers. The concept of added service fees, transaction fees, and bank fees are often expensive deterrents that bring doubt to the checkout process.
• Reliability. This refers to how accessible and dependable the provider is in terms of coverage and compatibility on different mediums. Most payment apps are limited by region but they should work well on different channels and devices.
• Flexibility. The payment provider should have the means to let customers pay with ease. Find out whether the customers choose to pay by different means such as through credit/debit card, cash, or bank transfer all on one app or extension.
• Unique features. Customer preferences and unique features factor in payment provider usage. Some of these features include: multi-channel or integrated payment platforms, device compatibility, 24/7 customer service, and accessibility.

Payment service providers at Cafe24

When it comes to ecommerce payment transactions, the solution is Cafe24. At the Cafe24 app store you’ll be able to download payment apps that cater to your business’ specific needs no matter the location or method.

• Paypal. As the leading fintech company in the world, business owners can access over 400 Million users worldwide and utilize Paypal’s integrated payment solutions. Paypal also has PCI compliance and comes with industry-standard security solutions. Businesses with multiple online stores locally and internationally will especially benefit from downloading the Paypal app.
• Dragonpay. In the Philippines, the option to pay in cash is still quite popular. Dragonpay offers Philippine customers the option to pay over-the-counter with cash or checks at banks and payment centers. Customers can still also pay through digital wallets and online banking services. Small and medium businesses in the service or rental industry can especially take advantage of check payments provided by Dragonpay.
• PayMaya. Digital wallets are currently leading the charge in online and mobile payments. PayMaya is a popular digital wallet in the Philippines and has over 28 Million Filipino users. With PayMaya all forms of cashless transactions are accepted as well as credit/debit cards. Users can shop online, buy tickets, send remittances, and more. Retailers and resellers that operate on different online marketplaces should take advantage of Paymaya’s customer base.
• Paymentwall. Accept payments locally and globally through the Paymentwall platform which has a global network of 160 payment methods in over 200 markets. Paymentwall supports multiple currencies and multiple payout methods such as bank transfer or through Paypal. It also supports leading credit card processors such as Visa, Mastercard, JCB, AMEX, and Unionpay.

Internet technology should help enrich our lives. (Photo by Karolina Grabowska from Pexels)

Ecommerce is here to stay

As ecommerce technology continues to evolve, our payment method preferences today may change in the years to come. But for online sellers who continue to make the checkout process an enjoyable experience through seamless payment transactions, then Cafe24 is the answer. Selling online shouldn’t be hard. All you need is an ecommerce platform that gives you the ability to create multiple stores, market well, and grow overseas to increase your presence and profit — All this you can get for free when you register an account at Cafe24.