Increase Payment Options to Boost Revenue
by Christopher Saunders
June 14, 2004
www.e-commerceguide.com


It's no real surprise that adding multiple ways for customers to pay for their purchase can make it easier to close a sale, but just how much easier has always been up in the air. Now, it's becoming clear that multiple payment methods can have a significant dollar value, thanks to a new study by Quality Research Associates, commissioned by CyberSource.

The study polled 147 of the leading online retailers and found that sellers who accept four types of payments -- such as credit cards, online checks and similar services, or gift certificates -- have more visitors convert into customers than do merchants who offer a single payment method.

For e-tailers who offer multiple payment options, their conversion rate grew 20 percent, to 72 percent of overall site visitors, compared to single-option merchants, who convert an average of 60 percent of their shoppers.

According to CyberSource, the difference in conversion rates stems from the ability for sellers to reach different segments of buyers, who might not always be able or willing to use PayPal or credit cards, for instance.

"We're hitting different demographics now; people who may prefer not to use credit cards and people who don't have them," said Doug Schwegman, CyberSource's director of customer and market intelligence. "Others simply prefer the convenience of an alternative payment method for a single transaction."

Schwegman also said that while some level of cart abandonment is to be expected, offering a variety of payment options is one way to reduce that level.

Despite the benefits, online retailers aren't necessarily availing themselves to the benefits of adding additional payment methods. About 45 percent of all North American e-commerce sites offer two or more payment methods. Only 20 percent offer four or more payment alternatives, while about 18 percent of North American online merchants offer one payment type.

Still, there's hope. The survey found that 38 percent of merchants polled plan to consider adding -- or will add -- new payment methods within the next 12 months.

The majority of those surveyed -- 31 percent -- say they anticipate first adding electronic check support to their current offerings. PayPal and similar services will be implemented first by 26 percent of the merchants contacted by Quality Research, followed by private-label credit cards, gift certificates, instant credit, and subscription billing.

Not surprisingly, the news is complimentary for CyberSource, which provides a number of payment options including credit cards, electronic checking, certificates, recurring billing, and PayPal support. But it's also important considering that there are a slew of competitors offering their own payment methods, including PayPal.

On a similar note, offering payment options in site visitors' local currency is also thought to increase conversion rates.