As an e-commerce store owner, you have a variety of metrics you’re responsible for on a daily basis in order to keep a pulse on your online store. Whether it’s reviewing your average-order-value or optimizing your site, there’s no shortage of to-do’s for your website’s task list.
As you start reviewing these metrics and strategizing on next steps, you’re likely considering your current conversion rate. Is there any process you can use to improve your conversion rate? Are you even sure what exactly one is and what can influence your rate?
You may be surprised to learn offering various payment methods to your shoppers can have a direct impact on your site’s conversion rate. But it’s not as black and white as you might think. Keep reading to find out more about the correlation between conversion rates and payment methods.
What is a conversion rate?
If you’re an e-commerce store owner, you’re likely familiar with the concept or term of conversion rate already. It’s simply the percentage of the number of shoppers who are converted from browsers to purchasers. For instance, if your percentage conversion rate is 3%, then 30 out of every 1,000 visitors to your site are making a purchase from you after the first initial visit.
It’s also likely as an e-commerce owner you eat, sleep, and breathe numbers like this. You know that it’s important not only to get your shoppers to your website, but you need to get them to build a shopping cart and complete a purchase to grow your business. The bottom line is, the higher conversion rate means higher revenue.
So what should your conversion rate be for your business? The answer is, it depends. The conversion rate “standard” is different depending on which industry your e-commerce business falls into. The global average is around 2.9%, with e-commerce rates landing anywhere from 2% to 10%.
It’s essential to understand if your online shopping store is experiencing a strong conversion rate — or if there are opportunities for improvement. If you can increase your conversion rate by one percentage point, how much more to your bottom line will this give you?
Fortunately, there are real, actionable steps you can take to influence this rate. Let’s look at how the various payment methods can help you achieve your higher conversion rate goals.
Selecting the right payment methods
To increase your cart conversion rate, you must give the shopper as few reasons for cart abandonment as possible.
It may seem like a straightforward task to choose a payment method for your shoppers, but the reality is, there are over 200 options available for you to choose from. Payment methods take on many forms. The question is, which ones should you choose that are preferred by your shoppers and benefit them the most? Here are several of the most popular payment methods available:
- Credit/debit cards
- Pre-paid cards
- Bank transfers
- E-wallets or digital wallets
- Mobile wallets
- Cash
- Installment payment solutions
Depending on the country your online store operates in, your shoppers may have a preference of one payment method versus another. By choosing the right payment options targeted to your shoppers can improve your conversion rate as much as 30%.
For instance, credit cards and debit cards are still the most preferred method of payment in the United States. But digital wallets are gaining traction, as are installment payment plans. If your shoppers are mostly from the US, then it’s in your best interest to offer the payment methods most preferred.
Add an installment payment plan option
The installment payment plan landscape has changed quite a bit over the years. These payment plans, also referred to as Buy Now, Pay Later, have actually been available for years, but in recent years the growth has accelerated as consumer demand for this option has increased.
COVID-19 has also pushed the growth of installment payment plans as more shoppers are looking for ways to purchase quality products while still staying within their predetermined budgets. Here’s a brief summary of a few of the most popular options available:
- Affirm. This payment option requires a credit check and application from your shopper and reports the information to the credit bureaus. It offers installment options ranging between 3 to 36 months, depending on the merchant.
- Klarna. This option is available in several countries and offers three choices for payment:
- 4 interest-free monthly installments
- Financing (0 to 29.99% based on credit rating)
- Pay in full in 30 days
- Splitit: Splitit is an installment plan solution for your shoppers that works with their existing credit cards. This means there are no applications or unnecessary credit checks. Shoppers can choose installment payment options up to 12 months, depending on the merchant.
Installment plans, like Splitit, can easily be integrated into the checkout and payment process for your shopper. You can also choose more than one option, if you find the demand from your shoppers supports these payment options.
Multiple payment methods means convenience for your shoppers
The shopping cart is abandoned by shoppers for an abundance of reasons. They get distracted. They find another item they like from another store. They don’t have enough money in their account. In other words, it’s hard to say why someone doesn’t complete a purchase.
Fortunately, there’s data that can point you in the right direction so you no longer have to guess. According to a Baymard study, 50% of shoppers abandon their cart because the costs were too high – including shipping costs. 28% of shoppers gave up because they didn’t want to create an account. Another 21% abandoned their cart because the checkout process was too complicated.
Additional data shows the more payment options you offer your shopper, the higher your conversion rate will be. Not only are you making it convenient for them, but you’re taking away a reason for cart abandonment.
The checkout process
As mentioned above, 21% of shoppers abandon their cart because the checkout process is too complicated. No matter which payment methods you choose, the shoppers nowadays demand a smoother payment process, otherwise they’re likely to leave.
So what can you do to make the process as seamless as possible and turn the shopping cart into a complete purchase?
- Optimize your site. A slow site will slow down the payment process. Shoppers expect speed and data shows every second your site takes to load leads to an increased cart abandonment rate.
- Be mobile ready. Transactions take place via desktop, tablet, and mobile. But mobile transactions are growing in popularity. Your site has to be optimized for both speed and mobile devices.
- Allow guest checkout. You can overcome two major obstacles for cart abandonment by allowing guest checkout and offering multiple payment options. Shoppers prefer not to create a separate account, as it adds time and frustration to the checkout process.
- Make security visible. Shoppers want to know their transactions are secure, no matter what payment method is being used. Shoppers want to see badges and information such as HTTP and HTTPS.
All of these tasks not only enhance your site, but all revolve around payment methods and making the payment process as convenient for your shopper as possible. By addressing each of these needs, you’re diminishing the chance of cart abandonment and increasing your conversion rate. That’s a winning combination for e-commerce merchants.
The bottom line
There are several factors contributing to a conversion rate. One of these factors is the payment methods your online store offers your shoppers. Not only does the number of payment methods matter, but it has to fit the preferences of your shoppers.
Shoppers are looking for convenience and ease of checkout when it comes to online shopping. By offering a variety of payment methods, including an installment payment plan such as Splitit, you’re making it even easier on the shopper to say yes to your site. Contact us today to learn more.