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More payment options create checkout success
October 15, 2024
As e-commerce accounts for an increasing share of retail sales, merchants will need to prioritize the payments experience and offer multiple solutions – like digital wallets and Buy Now, Pay Later – to accommodate the preferences of each generation and avoid losing sales at checkout.
Responding to ever-shifting trends and consumer preferences, retailers are experts at finding innovative ways to gain a competitive edge. They were early adopters of technology that streamlined online checkout to boost sales and attract new customers. Now, they’re finding that offering more consumer-friendly payment options improves sales and reduces cart abandonment.
E-commerce dominates the retail landscape
Post-pandemic, e-commerce’s popularity has exploded, driven by factors that include a wider selection of goods, price competition, and the consumer’s ability to research products and pricing. The speed and security of online checkout are also factors.
In 2023, global retail e-commerce sales reached an estimated 5.8 trillion U.S. dollars. Projections indicate this figure will grow by 39% over the coming years and may surpass $8 trillion by 2027.1 With increasing competition for sales, online retailers are improving the shopping experience with more flexible payment options. According to a recent study, conversion increases when the checkout takes less than 90 seconds. If it takes longer, the conversion rate may decrease by as much as 47% on average.2
A generational shift toward digital
53% of people use digital wallets more often than traditional payment methods.3 While Millennials represent the largest generation in terms of population, the influence of Gen Z on e-commerce and a variety of digital transactions is seismic. Gen Z lives daily life online – they’re most likely to use mobile payment apps, including those that enable instant funds transfer on their mobile device. Gen Z makes up 21% of the population but controls an incredible $360 billion in spending power.4 When making purchases, they crave speed, convenience, and security. Recent data about Gen Z shows that:
- 79% use mobile wallets to pay for everything from online merchandise to recurring monthly bills.5
- Almost 70% enjoy shopping more when they can make automated payments at checkout.6
Their preference for alternative payment methods is clear. They are up to three times more likely to use an alternative payment method, such as contactless payments, payments apps, or Buy Now Pay, than Gen X, Baby Boomers, or Millennials. 7 And while they’re flexible about using alternative payment modes, Gen Z likes to stick to their preferred method. When they can’t, they’re twice as likely to delay their purchase rather than use a different method 8.
While Gen Z embraces digital wallets and mobile apps, Gen X and Baby Boomers prefer credit cards for online transactions. The combined buying power of all these generations is enormous, so providing the payment methods they prefer is critical to increasing sales and minimizing cart abandonment.
Choice rules — the benefits of multiple payment options
Multiple payment options, including digital wallets, simplify the checkout process — a goal anyone who has ever had to find and manually enter their credit card number would cheer. 74% of merchants believe customers abandon carts when they must manually enter their 16-digit credit card information.9 55% of merchants believe customers abandon their shopping cart because their preferred payment option is not offered.10 Research confirms their suspicions:
- 20% of Gen Z shoppers will likely abandon a retailer’s or app’s checkout page if they have to create an account.11
- 65% would abandon an online checkout if they can’t use their preferred payment method. 12
Payment options like digital wallets lower cart abandonment rates by providing:
Seamless guest checkout
Customers can skip the hassle of setting up accounts and logging in to make a purchase—the digital wallet stores the cardholder’s account information, including name, address, payment card data and contact details, allowing the user to bypass entering any of that information.
Increased security
Customer financial data doesn’t interact with the merchant’s environment, safeguarding personal information and eliminating the need to store account information on the merchant site.
Additional brand benefits
Digital wallets can enable sought-after features like digital smart receipts and loyalty points— services that expand consumer loyalty and purchase conversion.13
Another trend is gaining traction
As the consumers of today (and tomorrow) flock toward multiple payment methods, financial institutions are taking note. Some are launching bank-backed digital wallets, removing the need for third-party providers like Apple Pay, Google Pay, and PayPal, and building on the reputation they’ve already established with consumers who trust them with sensitive financial and personal data.
Retailers know that understanding and prioritizing consumer needs and preferences at every stage of the purchasing journey is critical. Providing an optional checkout experience that includes multiple convenient payment options like credit/debit cards, digital wallets, and Buy Now, Pay Later boosts satisfaction, reduces cart abandonment, and raises brand credibility.
If you’d like to learn more about the right payment options, we can help. Learn more about our payment acceptance solutions.
Sources:
1 https://www.statista.com/statistics/379046/worldwide-retail-e-commerce-sales/
2 Optimizing The E-Commerce Payment Experience: A custom report for Paze SM from the editors of Digital Commerce 360. (2023)
3 Forbes https://www.forbes.com/advisor/banking/digital-wallets-payment-apps/
6 https://www.linkedin.com/pulse/gen-zs-shopping-habits-future-payments-total-processing/
7-8 https://www.ey.com/en_us/payments/how-gen-z-is-changing-the-payments-landscape
9-10 Optimizing The E-Commerce Payment Experience: A custom report for PazeSM from the editors of Digital Commerce 360. (2023)
11-12 https://www.bolt.com/blog/gen-z-payment-preferences
13https://www.emarketer.com/content/payments-trends-watch-2024
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