Over two years since the onset of the pandemic, it is clear that the future of retail is digital. But whilst growing ecommerce volumes can unlock whole new markets, they also make it easier than ever for customers to move between competitors.
The new-found pressure means that a negative experience can be the difference between a sale and the loss of a lifelong customer. With an estimated 74% of European internet users now shopping online and skyrocketing inflation driving profit margins down, merchants are becoming more aware than ever that they need to invest in their online payments processes now.
Our estimates suggest that the average merchant is losing 96% of customers before they even have the chance to make a transaction. That means that, of the 14.5% of sessions where an item is added to the customer’s cart, fewer than 1 in 3 will end in a transaction being approved. Optimising the checkout process increases the likelihood that consumers will get to that all-important transaction stage – and to do so requires strong inter-departmental collaboration from merchants.
With the growth of ecommerce has come the rise of multiple APMs. A consumer might now expect to be able to pay with a number of different options, including Buy Now, Pay Later (BNPL), digital wallets, and open banking.
Many merchants have attempted to keep up with this increasing variety by continuously adding payment methods to their checkout page, hoping to maximise their consumer base and not lose out to competitors. But are those payment methods always appropriate for the transaction and customer? Local payment methods such as iDEAL in the Netherlands may boost spend in their intended regions, but crowd the checkout if offered internationally, for example. In fact, fewer than one in five BNPL users say they would abandon their purchase if their preferred BNPL option wasn’t offered. Too many APMs could also reduce volumes through each party, limiting your negotiating power while necessitating more complex contracting and monitoring processes.So, how to take advantage of a payment method’s consumer base without turning off customers – or implementing options that are sub-optimal for the merchant? One answer may lie with dynamic payments pages, which allow the merchant to target specific payment types towards certain consumers or transaction profiles. This can also be useful if you want to restrict fraud or chargeback rates – by not promoting high-risk payment types on high-value transactions, for example.
Checkout steering, a similar solution in which the merchant’s preferred payment method is placed at the top of the page, or incentivised via other means, likewise allows you to tailor consumers’ online payment experience and encourage the use of APMs which achieve the optimal balance between customer experience and cost, approval success, and fraud rates.
Having successfully enticed your customer to the payment page, there are a few short steps you can take to ensure the maximum possible success before the transaction is sent to fraud and authentication checks.
Your online checkout process is a vital part of your business and a major determinant of the revenue you receive. Implementing dynamic checkout pages, checkout steering, and optimising the input of vital payment information are comparatively simple options that best-in-class merchants are using to streamline the checkout. As shoppers adapt to online retail, a strong checkout strategy is crucial to retain loyal customers for whom shopping with a competitor is as simple as the tap of a button.
In this article, we ran through how we help merchants across the world optimise their pre-checkout processes, but what about after the consumer clicks ‘pay’? HERE you will find the follow-up article focusing on how the post-checkout process is losing European retailers billions – so stay be sure to read it!
An Economist as part of CMSPI’s Insights and Advocacy Team, Katharine’s role is to analyse the payments industry from the macroeconomic perspective, providing strategic insights to merchants across Europe.
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