In our increasingly cashless world, credit and debit cards are now just one option at consumers’ disposal for making online payments.
The rise of these alternative payments is opening up a new world of digital wallets and peer-to-peer payment methods—and quickly. In fact, by 2022 digital wallets such as PayPal and ApplePay will likely comprise 47% of global online transactions, a projected increase of more than ten percent over 2018. In the same time period online credit card use is slated to drop from 23% to 17% of all transactions.
So what does all of this mean for your startup or company?
First and foremost, understanding the array of options available—especially those used by your target audience—will be key to your success.
Sound like hyperbole? It’s not: A full 50% of consumers will abandon a transaction if their preferred payment method isn’t available.
The Payments Landscape
Not so long ago, payment methods were essentially binary: Cash or check. Then came credit cards. And now, with the advent of online commerce, digital wallets, prepaid cards and even bank transfers. We’re experiencing a high-speed, simultaneous revolution in both business models and personal finance—and it’s going to be up to businesses to keep pace or risk getting left behind. (Where would an online shop that only accepts cash or check be today?)
PayPal dominates the digital wallet space, followed by other heavy-hitters such as Apple Pay, Google Pay, and Amazon Pay. Not to be outdone, peer-to-peer payment interfaces such as Zelle and Venmo are rapidly expanding into business payments: Total Zelle transactions increased by 16% from 2017 to 2018. Venmo (a subsidiary of PayPal) witnessed its transactions increase by 78%, in part due to merchants offering it as a payment option. Zelle is also considering providing such capabilities.
The Generation Factor
It’s important to remember that while the payments space is undeniably undergoing a profound metamorphosis, its effects are not felt the same way by every customer. Different generations naturally have different preferences.
For example, millennials, on the other hand, are more apt to go for digital wallets, branded payment apps such as Starbucks, and PayPal, which more than a third of them use regularly. Baby Boomers, meanwhile, prefer cash and cards. Very few write checks, but 80% report using debit cards as their primary payment method.
The Business Connection
As an online business owner, it’s by now clear that providing the right payment methods is critical for success.
To meet your customers' payment needs and desires, evaluate the following:
- What types of payment methods do most of your customers prefer?
And then for each method:
- What do you need to support that type of payment in terms of software or online capabilities?
- What fees apply?
- Is the payment option secure?
- How long does it take to access the funds once payment has been made?
The answer to the first questions are paramount. Indeed, open up your payment options and you may very well ramp up your sales. In other words, focus on how your customers are choosing to pay and meet them there. You'll avoid abandoned purchases and increase the potential of improving your revenue in the process.