Why has diversity at the checkout become such a must-have compared to 20 years ago?
For a long time, the payment landscape was mainly dominated by global systems, cash and checks. In recent years we have seen more and more fintechs, encouraged by regulators and a technological framework evolving more than ever, proposing multiple convenient and seamless payment methods. Most of these payment methods are designed to meet the needs of specific customer segments and address their particular vulnerabilities. Some of these payment methods, like Alipay and WeChat Pay for Chinese customers or BNPL methods on a much larger scale, have become a must that no merchant can ignore, otherwise they would dramatically affect their conversion rate.
We hear the credo “to go global, go local” a lot in the industry. Do you think it’s always a relevant statement?
From the retailer’s point of view, proposing only the most important global schemes at checkout seems to be the quickest way to expand globally. Unfortunately, it’s not that simple, and even if e-commerce is becoming more and more global, we have to keep in mind that payments are still very often local for several reasons (rail purchases, currency convertibility restrictions or local culture and habits).
From the customer’s point of view, local culture and customs are the most important aspects that a retailer should consider. According to several studies, the main reason for cart abandonment at checkout is the lack of preferred payment methods.
It’s not that obvious, but you have to distinguish between a clear request from your customers and a biased industry perception.
Diversity is such a buzzword in the industry with the cohort of BNPL and LPMs, but how do you identify the best payment method mix?
As a merchant, you can easily be seduced by the narrative of alternative payment methods that promises seamless experiences. However, before you offer dozens of APMs, you should ask yourself if this is the best strategy for making customers happy.
To answer this tricky question, several parameters should be considered:
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business model: one-time, subscription model, a mix of both;
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product: physical goods, services, digital products and experiences;
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Industry: travel, luxury, fast fashion, high-tech, car rental, cosmetics;
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Risk of fraud in the industry: resellers, re-shippers, complex behavior of scammers;
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Buyer Personalities: financial inclusion, socio-occupational category, age, tech-friendly, early adopters, conservative;
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Target customer/region preferred means of payment: cards (global versus local systems, wallets, bank transfers, installments, cash on delivery;
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applicable regulations: PSD2, GDPR, PIPL.
Standards such as PCI DSS and other regulations have a significant impact on the merchant’s decision to retain full control over the checkout experience. How can retailers balance regulation, choice and the uniqueness of CX?
To face the regulations and standards that are challenging the pace of development and impacting their customers’ experience, global traders should first weigh the pros and cons of each of the possible strategies:
1. Rely on their PSP’s cash register:
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Advantages: reduced compliance scope, fast time to market, easy to add/remove a payment method;
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Disadvantages: heavy reliance on PSP, could require integration of multiple PSPs to address all target markets, different CX from one PSP to another, could lead to complex monitoring and tuning.
2. Rely on a payment orchestrator:
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Advantages: a single integration to connect to a very large catalog of PSPs and payment methods, unified CX, seamless switching from one provider to another, fee optimization, simplified monitoring and reconciliation;
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Disadvantages: very heavy reliance on the payment orchestrator and its own resilience, loss of functional coverage if the payment orchestrator does not follow the upgrade pace of the payment providers behind it.
3. Build your own checkout and directly integrate the different payment methods:
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Advantages: full control over the CX, independent of the behind-the-scenes payment providers and their resiliency;
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Disadvantages: Each payment method creates a new project, time-to-market can be long, direct procurement is required, and each time a standard or regulation evolves, there can be large investments.
By giving customers more choice at the checkout, what potential impact does this strategy have on a business?
In fact, as a merchant, you need to consider alternative payment methods to earn your customers’ trust and maximize conversion rates. However, adding diversity at checkout also brings more complexity, not just from the technical side (does my global PSP suggest this LPM or not? Should I go with a local acquirer? Should I consider going with an Orchestrator or a LPM Aggregator?), but also in terms of the financial and operational sides (accounting and reconciliation, acceptance currencies versus billing currencies, fees, chargeback policies, authorization versus capture) and in some cases even a local entity is required.
My advice when deciding whether or not to add a specific LPM to your checkout would be first and foremost to understand your customer’s payment expectations and thoroughly analyze the impact on your business to estimate the cost can. Effectiveness of this additional payment method.
About Ikbel Snoussi
Ikbel is Head of Retail Payment Practice at Rhapsodies Conseil. With over 18 years of experience in the payments industry, his primary focus is helping leading merchants define their payment strategy, educate their decisions, optimize their payment funnel and meet their highest functional, technical, financial and regulatory expectations.
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