Understanding the range of payment options for your customers

Make sure you offer payment methods best suited for your market

Understanding the range of payment options for your customers

1 Overview

The challenge

Increasingly, consumers are choosing alternative payment methods such as online bank transfer, mobile wallets or cash based payment options when completing a purchase. In many countries, alternative payment methods represent a higher proportion of e-commerce growth than credit cards. They offer people a fast and secure method of payment. They are also attractive to consumers who do not have a bank account.

Your aim

Make sure your business supports the right payment methods for your customers by offering them traditional and non-traditional payment methods.

The way consumers pay has changed

Your customers now have more ways to pay than ever. For millions of people, electronic payments are a main method of payment, with many consumers using their mobiles to make payments. Advances in technology have made customers more accepting of innovations, and also more demanding of their merchants.

You can be ready for your customers wherever they are in the world by adapting your site to give people the payment choices that are right for them.

2 A revolution in payments

The way your customers pay for goods and services has changed rapidly over recent years.

There are three main trends affecting the way customers make payments worldwide:

Smart phones and internet on mobile devices

These have revolutionised the way people make digital payments. The number of people accessing internet services on their mobile devices is expected to reach 3 billion by 2020.1 This is 65% of the world’s adult population.

By 2020 it is expected that 80% of all internet users will be accessing the internet through mobile devices2, and 58% of these will be smartphones.3 These are packed with features that have lead to new ways of payments, and revolutionised digital payments.

Smartphone features which have enabled this change are:

  • Powerful processors
  • Large memory
  • Cameras
  • Barcode scanners
  • GPS geocoding
  • Wireless technology
  • Social networks
  • Platforms for deals and offers

Added to this, there are a host of innovations in payment access and security technologies such to reduce fraud, and biometric authentications.

The entry of non-banking institutions offering payment services and solutions

The number of financial technology (fintech) start up companies is growing rapidly and continues to rise. These non-traditional institutions offer consumers a broad range of ways to pay electronically. These include e-wallets, integrated POS systems and in-app payments.

Customers expect instant and one-touch payment solution

Customers’ needs are rapidly evolving. People expect the best payment experience that companies can deliver. Thanks to technologies embedded in smartphones and tablets, people expect a glitch-free user interface that will deliver a smooth, efficient payment process.

Introducing some of the main alternative payment methods

Bank Transfer

Bank transfers allow customers to transfer money to a merchant's bank account to complete a purchase. Traditionally, this was done in a bank branch to transfer funds to the merchant account, and required the merchant to match the payment to the customer’s purchase before fulfilment.

With the increased popularity of online banking, many online bank transfer options are now available. These allow the customer to start the transfer during the payment process in a merchant's site, while automating the payment matching for a merchant. This means that orders are completed faster.

For example, iDeal was formed by a group of Dutch banks to enable bank account-based payments for e-commerce and m-commerce transactions. This online payment method accounts for the majority of online payments in the Netherlands.

Another example is SoFort banking. This allows fast and direct money transfers between banks in many European countries. This payment method allows e-business customers to speed up their international transfers. It is one of the most popular ways of transferring money in Germany.

Direct Debits

Direct Debits allow merchants to collect payments from their customers’ bank accounts. There are no card networks involved in this form of payment as all communication happens between banks.

A great example is SEPA direct debit. This is a Europe-wide direct debit system that allows merchants to collect Euro-denominated payments from accounts in the 34 SEPA countries and associated territories, including the UK.

Another example of a direct debit network is Automated Clearing House (ACH). This is an electronic network for financial transactions in the United States. ACH processes large volumes of credit and debit transactions in batches.

Local Credit Card Schemes

Many countries have their own local credit card schemes which are often an alternative to the main credit card brands.

By 2015 UnionPay had become the world's largest supplier of payment cards, with over 5 billion cards issued bearing its logo.4

UnionPay cards can be used in 141 countries and regions around the world. It is the third-largest payment network by value of transactions processed, behind Visa and MasterCard. Some UnionPay credit cards are also affiliated with American Express, MasterCard, or Visa, and they can be used abroad as an American Express, MasterCard, or Visa.

Elo is a domestic card brand in Brazil. The Elo brand supports credit, debit, and prepaid card transactions. More than 80 million Elo cards have been issued to date. The Elo credit card supports instalments that allow shoppers to spread their payments for online purchases over a certain period of time.

eWallets

E-Wallets allow people to store multiple credit card and bank account numbers in a secure environment.5 Some digital wallets work through apps on smartphones. When visiting a department store a customer can tap their phone on a compatible register to pay instantly, as well as using their e-wallets for online purchases. All the data is encrypted, so it offers consumers more security than a traditional wallet. An e-wallet lets merchants provide timely promotions, vouchers, and updates to their customers.

PayPal is one of the largest internet payment services in the world. It currently operates in 202 markets with almost 200 million active accounts. As of July 2017 PayPal allows customers to send, receive, and hold funds in 25 currencies.

PayPal lets people make faster payments as they don’t have to re-enter their details every time they make a purchase.

Android Pay lets people make payments on their phone and works with hundreds of thousands of contactless payment points worldwide. Android Pay is easy to set up, and also enables In-app payments. This means consumers don’t have to enter their details every time they make an in-app payment.

Postpay

Postpay payment options allow your customer to pay for a product or service that they purchase online later at an affiliated outlet or store. Due to the delay between the initial transaction and the payment, this payment method is not suitable for all online purchases. However it does have the benefit of offering a cash-based payment option for your online customers.

Konbini ("convenience store" in Japanese) enables a customer to order goods and services online, and to pay for them over the counter in a convenience store. Konbini uses a unique reference number to identify the transaction. Customers use this reference to print a voucher which they then settle at the till in the store. Boleto Bancário is one of the most prominent payment methods in Brazil. The word 'boleto' means 'ticket'. A customer can print a payment slip and pay at ATMs, branch facilities of any Bank, Post Office, Lottery Agent and some supermarkets. Alternatively a customer can pay using a bank transfer from their online bank.