How to choose the right payment method

The payment landscape is in a process of constant evolution, and online merchants who fail to keep up with changing trends and customer preferences risk losing out on sales. 

Credit and debit cards are still popular, but emerging methods like mobile wallets and buy now, pay later (BNPL) are gaining traction with consumers by offering more convenience and being more closely aligned with their needs. 

But offering an infinite list of payment methods to customers at checkout isn’t necessarily an optimal strategy. You need to offer payment types that best suit your business by considering everything from the markets you operate in to the security risks you face. 

Below, we explain why choosing the right methods is so important, outline some popular methods you can offer to your customers, and detail the key factors to consider when choosing the best payment methods.  

‍

Why is it important to choose the right payment method?

Our research shows that 60% of ecommerce shoppers will abandon their cart if they cannot pay using their preferred payment method. Losing a customer at the checkout because you have not offered their preferred payment method doesn’t just mean lost revenue, it means that any money spent on acquiring that customer has been wasted. 

The cost of one lost customer might seem marginal, but if customers are frequently dropping out at checkout due to a lack of options, those costs can really rack up. 

A strategic approach to payment types allows you to optimize your customer journey from the moment they first engage with your website to the moment they confirm payment. That means increased conversions and, if your checkout process is frictionless enough, repeat sales from customers who will value a streamlined experience. 

Another thing to consider is that poor customer experience is frequently cited as a top reason for disputes. By choosing the right types of payment to offer your customers, you’re mitigating the chances of them having a bad experience that could lead to a dispute and, ultimately, a chargeback. For example, a customer that’s able to use BNPL for a purchase, and therefore to spread its cost over several installments, is less likely to experience buyer’s remorse.

Popular types of payment methods

Here are some of the most popular payment instruments:

Debit card

A very popular payment method worldwide, debit cards allow your customers to pay for goods and services directly from their bank account. Once their card details have been entered into a browser window for the first time, they can be securely stored for quick and easy future purchases. 

Credit card

Credit cards give customers a line of credit that they can use to make purchases from a credit card provider. Essentially, they can borrow up to a pre-agreed amount, which they then settle after a given period. Both debit and credit cards are commonly used across sectors and regions. 

Buy now, pay later

BNPL, which allows consumers to spread the cost of a purchase over several installments, is growing in popularity, especially among younger consumers, who don’t always have enough to pay for big ticket items upfront. The BNPL market was valued at $6.13 billion in 2022 and, while predominantly popular in retail, is starting to penetrate a variety of sectors, including food delivery and travel. 

Bank transfer

A bank transfer involves the direct transfer of funds from one bank account to another. Traditionally, this required the sender to open an app or online banking, but bank transfers can now be achieved instantly at checkout through open banking APIs, and are amongst the most popular payment types in some regions. For example, iDeal, A Dutch bank transfer service, is used by more than 60% of consumers in the Netherlands.

Digital wallet

Digital (or mobile wallets) allow smartphone users to store card details on their digital devices for quick and easy online or in-app purchases without having to re-enter their information every time.  Digital wallets are the big payment success story of the last few years, and, according to Statista, are used for around half of all ecommerce payments worldwide.

Mobile payments

Mobile payments refers to any smartphone-enabled payment type. This includes the aforementioned digital wallets, as well as mobile payment apps, SMS payments and in-app purchases. With global smartphone penetration now at approximately 6.3 billion people, mobile payments should be high on any merchant’s list of payment methods to offer consumers. 

What to consider when choosing the right payment method for your business

Not every payment method is suitable for every business, it is important to know exactly what fits you. Here you can see some advices on how to choose the right ones.

Customer preference and markets

When expanding into new markets, it’s essential to understand the payment preferences of your local customers. Whether these are dictated by trends or necessity, aligning the payment methods you offer at checkout with local preferences is the best way to maximize conversions and build loyalty. 

But it’s not just the method that you need to be conscious of, it’s also the provider. For example, bank transfers are still very popular in Europe, but customers in different countries have very specific preferences for bank transfer payment options. So, in Germany, consumers like to use Giropay to make bank transfers; in Switzerland, they like to use PostFinance. 

BNPL providers like Klarna are also very popular in many European countries, including Sweden, Germany, Austria, and the Netherlands.

Analyzing consumer preferences and behaviors first-hand is one benefit of our global yet local approach. 

Understanding variations in banking and payment regulations is another. What’s more, we act as the legal trading entity for you in countries that mandate it, saving months of form filling and set-up costs.

We have people on the ground in key markets across the world — from Dubai and Riyadh to Hong Kong and Singapore, San Francisco and New York to Barcelona and Paris — and we’re rapidly expanding into more.

“Checkout.com’s deep expertise across MENA stood out from the crowd. It has teams on the ground that know the market and where customer demand is. That’s an attribute that other global payment providers just don’t have.”

Red Bamba, Digital Payments Manager, Alshaya Group

Fraud risk and security

The extent to which each payment method exposes you to fraud risks should be a major factor in your decision-making. 

Most online payment methods can be protected by advanced authentication methods at checkout, which prevent fraudsters accessing your systems or stealing sensitive customer details. However, you can’t completely eliminate security risks, which vary from method to method. 

For example, digital wallets can be a lot safer than card payments as they often require the customer or smartphone user to approve the transaction using multi-factor authentication, which is very hard for criminals to bypass. Additionally, card details that have been stolen through phishing and other malicious means are often bought and sold online. That said, digital wallets are still exposed to the risk of friendly fraud. 

BNPL also presents a number of fraud risks as it doesn’t require proper credit checks and, as it’s designed to be quick and frictionless for the customer, leaves less time for proper authentication. There’s also the risk of account takeover, where fraudsters hack into BNPL accounts and place orders, and non-repayment, where they make purchases with no intention of paying back the loan. 

Churn rates and subscriptions

Churn rate is the percentage of customers who stop using your product or subscription service within a given period of time. There are two main types: voluntary and involuntary. 

Voluntary churn occurs when a customer chooses to leave your product or service because they’re dissatisfied with the product or simply because there’s a change in their circumstances. Involuntary churn occurs when a customer is unable to pay for your product or service due to a technical issue, such as a failed payment.

The payment method you offer can have a significant impact on your churn rate. If customers have difficulty making payments, they are more likely to stop using your service, which would be voluntary churn. Or if a subscription customer’s card details expire, you won’t be able to take a recurring payment, which would be involuntary churn. 

adviceReliable, easy-to-use payment methods that make it as easy as possible for customers to pay, such as digital wallets, can help to reduce voluntary churn rate. To combat involuntary churn, you could use tokenization. Tokens are completely unique and replace sensitive card information during transactions so that there is nothing for a fraudster to steal. The relevance here is that the card network is responsible for updating customer card details when a card is lost or expires, but the token remains the same. That means the customer doesn’t need to bother updating their details, and the merchant doesn’t need to worry about failed payments.

Payment disputes and chargebacks

Disputes and chargebacks can be costly for merchants, due to time and resources spent challenging them and fees if you lose if the customer is successful. Reducing the risk that you’ll experience them is essential. 

Generally speaking, payment methods with stronger levels of customer authentication are less likely to result in disputes. For example, credit and debit card payments are easy to dispute because a customer can quickly enter their card details on a website to make a purchase and then later contact their bank to dispute the charge claiming that they don’t recognize it on their bank statement. This is known as chargeback fraud. However, a digital wallet payment that's been authenticated using biometrics is much easier to prove genuine. 

Payment privacy

Some customers might value their privacy when paying for goods. This could be because the merchant sells goods or services related to sensitive medical matters or of an adult nature and they don’t want the charge to appear on their bank statement. A consumer could use a VPN to disguise themselves when making online payments, but on the merchant side, cash is the only truly anonymous payment method you can offer your customers. Cash-on-delivery is an option for ecommerce businesses, but it’s not particularly practical. 

If privacy is a concern for your customers, you could give them the option to pay using cryptocurrencies, prepaid cards and gift cards, or virtual cards, which all offer a degree of anonymity. It’s also possible to pay through PayPal using virtual card or phone details and a throwaway email address. 

How Checkout.com helps with payment methods

Analyzing your customer data

Build smarter strategies by evaluating and adapting your APM portfolio with insight into conversion, cost and risk.

Payments should be a continual process of optimization. Knowing the right APMs for each market is not the only way to gain a competitive edge. Delving into your transaction data will unearth all manner of insights — from which APMs deliver the best checkout conversion to which have the lowest fraud levels.

“Data is key to our business,and Checkout.com allows us to see our payments data at a more granular level than ever before. Having this detailed view of the transactions flowing across our business is game-changing. It’s allowing us to spot trends that we’ve never had visibility into before and make better-informed decisions at speed to optimize our flows and ensure we’re getting full value from every transaction.”

Aleksandr Povarov, Product Manager at Wise

We believe in continuously making solid recommendations to help you expand your business and revenue. Data is central to this. Our experts analyze, interpret and draw conclusions from the data to inform APM strategies and action-ready insights.

A world-leading franchiser, Alshaya supports over 90 international brands — including Starbucks, H&M, The Body Shop and Victoria’s Secret. Thanks to our granular payments data, along with expert guidance and single API, Alshaya was able to seamlessly add the most suitable payment methods across Saudi Arabia, Kuwait, Qatar and Egypt, and increase their approval rates by 15%.

“The fact Checkout.com allows us to accept more payments than ever before is incredibly important for the growth of our business.We saw a 40% increase in the overall number of top-ups made by our customers in the month after Checkout.com enabled Apple Pay and Google Pay,">

Gin Gindre, Chief Operating Officer at Rebellion Pay

Payment methods through our single API.

We have integrated scores of local payment methods which can all be accessed through our single API. And, when new ones are added you will be able to access them through this API. This makes it easy for you to switch on new APMs. The same integration gives access to traditional payments too — all in one place. This means businesses can adapt to changing customer preferences quickly without taking on additional complexity.

“Checkout.com’s footprint, combined with the flexibility of its unified API, meant we could enter new markets quickly and without the complexity of integrating into third parties. This is a game-changer for our business and allows us to take advantage of growth opportunities when they arise.”

Dominick Fuchs, Product Operations Manager — Payments, Dott

The leading Pay-TV provider in the Middle East, OSN, did just that. With Checkout.com, it's enabled Apple Pay across the region, Fawry in Egypt, KNET in Kuwait, and Mada in Saudi Arabia through a single integration. Offering these payment methods has helped OSN to expand its customer base and provide a better experience. It has also allowed OSN to stop accepting cash payments entirely — and remove the risks associated with that.

Continued support

We want you to be able to seamlessly introduce new payment methods to your customers so that they keep coming back to your business. We will work with you to make sure your new payment method gains traction in the market. And, if your customers need help paying with the new payment method, we’ll step in.

“They've supported us every step of the way — even ensuring our customer service teams are prepared to support customers using the new payment methods we offer. So now our customers have a better experience and we've removed the high costs associated with handling cash from the business."

Richard Farrell, Deputy Chief Financial Officer at OSN.

At Checkout.com, every customer has a dedicated Customer Success Manager as well as access to our experts for ongoing consultancy.

We will partner with you and listen to your needs — building strategies to help achieve your ambitions.

We want to work with you to build the best APM strategy so you can be confident that you can keep up with any changes in your business or to the market. We will become a partner for the long-term who ‘gets’ the business and makes regular, workable suggestions to improve it.

"Checkout.com is much more than a payment processor. We see them as our growth partner."

Choucri Khairallah, Vice President Of Business Development, Anghami.

Offering the right payment methods at the right time to the right customers is an important part of making sure you convert sales at the checkout. Get in touch with us to find out more about how we can switch on new payment methods for you.