Payment And E Commerce
E-commerce has long been a part of our daily lives, and in the last two years, the coronavirus epidemic has forced companies who have not thought about it before to consider that option. Growth is not expected to stop in the coming years either. The success of an online store depends on many factors. We can control most, but some are not in our domain. One of the key building blocks that significantly affects the success of an online store is the choice of payment service provider.
Products or services, price, content and the user experience itself can be flawless, but it can all end with the payment process and payment methods. This is a key step of the sales process. That is why successful online stores spend a lot of time analyzing and optimizing the payment process.
It should be simple, fast and frictionless.
Seemingly simple things, however, can be very complex in the background.
In Europe the number of people paying with cards, digital wallets (eg Paypal) and bank transfers is still growing. On the other hand, the percentage of cash on delivery is decreasing. On a European scale, in 2020 only 11 percent of the respondents used cash on delivery method. Slovenia deviates significantly with 43 percent (Source: DPD). This still high percentage has been declining rapidly over the last 5 years, due to more user-friendly and more unified payment experience. Businesses, due to increasing number of online transactions (with different payment methods), should allocate more time when choosing payment service providers, banks and processors.
The approach when implementing payment methods (MasterCard / Visa / AmEx card, Paypal, direct debit, pay by installments, SEPA transfer, instant loans, local payment methods) usually depends on the volume of online payments, technical options, available resources and the staff. The higher your turnover, the sooner it makes sense to consider the independent and direct implementation of individual methods and conclude contracts directly with the bank and other financial institutions that provide payment methods. That brings greater flexibility and lower transaction costs, but on the other hand also greater needs for resources and knowledge, as many tasks and responsibilities will be transferred to you.
Therefore, online stores, at least at the beginning of their business, opt for one of the payment service providers, offering them several payment methods, which we listed above. Among them we can highlight Paypal, 2Checkout, PayU, AliPay, Google Pay, Apple Pay, Stripe, Braitree, Adyen, Mollie and Mangopay.
What should be taken into account when choosing a payment service provider (hereinafter referred to as PSP)?
- Security and fraud prevention
PSP must operate in accordance with the strict international security standards of payment systems (PCI-DSS). In addition, they have their own systems to monitor and prevent fraud. With some PSPs, you can set certain payment limits yourself, which can affect your transaction success rate. The store must also play its role in ensuring security and implement two-factor authentication when accessing the system.
- Fast and frictionless user experience
Despite the fact that a fast and frictionless payment process is one of the main factors for the success of an online store, some providers still do not pay enough attention to it. Outdated graphical interfaces, longer response times, and many visible redirects that deter customers trust when paying, can still be seen when browsing the web. This process should be fast, user friendly and safe. Trust is the key.
- Payment methods
The more payment methods the PSP offers, the less work for the online store. You can spend time on other tasks instead of negotiating the terms and integrating each payment method. Which payment methods are best for you depends on the market in which you operate. The Slovenian market is rather limited and specific in this aspect. The integration of local payment methods, such as Valu, mBills and LeanPay, may be questionable in terms of added value, especially for the first two. Valu and mBills users can order a payment card and pay with it online. Therefore, there is no need for separate integration. LeanPay, which offers instant loans, is successfully expanding its network and has also become a prominent player in our country. In other European countries, online retailers use many other local or regional payment methods, which can have a significant impact on sales (eg Klarna, Sofort, iDEAL, Przelewy24).
In the future, the possibility of paying with cryptocurrencies, which are currently used mainly to access the content (paywall) on media portals, podcasts and streaming services, will also have to be taken into account. Their adoption also depends on the specifics of each market.
When choosing a PSP, you should consider how difficult the integration with your store is. With minimal integration, which is also the simplest, the user will be redirected to the PSP website, where the payment will be made and then return to the online store. In the case of partial integration, the user will remain in the online store, and when paying, he will enter some data in the »hosted« fields. In the third option, the entire payment process takes place in the online store. It provides the seller flexibility and full control, and on the other hand requires a certain level of compliance with the PCI DSS standard.
Main costs are subscription and a transaction fee. The latter can be a fixed cost or a cost consisting of a percentage and a fixed amount (eg 2% + EUR 0.1). Pay attention to all the costs that PSP charges. They can hide in high chargebacks, integrations or other seemingly insignificant costs. When making comparisons, consider everything, not just the cost of transactions.
- Payments in multiple currencies
If you operate in multiple markets, choose PSP, which allows customers to pay in multiple currencies. You should also check in which currencies payouts are supported and what commissions PSP charges for conversions. Significant additional costs may be hidden here.
- Multi-language support
Some providers do not support multi language, which can have a significant impact on the user experience. Older people with a lack of knowledge of foreign languages can have problems.
When choosing PSP, check the liability shift rules in case of fraud. This is an important detail that is often overlooked, and it becomes very important when dealing with such cases. It has financial consequences for your company.
Payout frequency, costs, and supported currencies are key parameters when comparing payouts.
When negotiating with PSP, be sure to ask what kind of Service Level Agreements they offer. Pay attention to response time, communication channel, urgency, priority, resolution time, and of course cost.
E-commerce platforms usually offer “out of the box” integration with several PSPs, which makes your work easier and saves time. However, these PSPs might not meet your requirements.
A few examples
ShopWare supports: PayPal, Klarna, Mollie, Stripe, Amazon Pay and others
Magento supports: PayPal, Braintree, Authirize.net, Stripe, Amazon Payments, and many others through extensions.
WooCommerce and Shopify have their own payment solution, and they also support several PSPs through extensions.
The choice of PSP is a complex process due to the high competition in this field. Before you start researching, make a list of the key functionalities you need for your business. These lists should also include security, area of operation, payment methods, integration difficulty, flexibility, cost, support and user experience. The decision should not be taken based on the price only. The best PSP is not necessarily the cheapest, so take your time and weigh all the factors.