E-commerce payment methods: What they are and how to choose the right ones


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  1. Introduction
  2. What is e-commerce?
  3. Types of e-commerce payment methods
  4. How to decide which e-commerce payment methods to offer

E-commerce has expanded across the B2B space over the last decade, but especially in the past few years. One report says that 23% of all sales will be conducted online by 2025. As a result, customers expect more from every part of the e-commerce experience.

Payment methods are a central part of that experience. It’s increasingly important for businesses to offer a range of payment options to accommodate customers’ preferences and needs, as businesses benefit from accepting multiple payment methods. One study shows that small businesses that offer a variety of payment options increased their revenue by nearly 30%.

Setting up e-commerce payment methods may seem daunting at first, but it helps to find the right payments infrastructure and processing solutions. Here’s what to know about using the right payment methods to ensure a secure, reliable, and user-friendly payment experience that is optimised for conversion.

What's in this article?

  • What is e-commerce?
  • Types of e-commerce payment methods
  • How to decide which e-commerce payment methods to offer

What is e-commerce?

E-commerce, or electronic commerce, refers to the buying and selling of goods and services over the Internet. It involves a range of online transactions, including online shopping; electronic payments; B2B sales; subscriptions for software, services, and consumer goods; online auctions; and more.

E-commerce has transformed the way in which businesses operate, providing a platform for companies of all sizes to reach a wider audience and operate on a global scale. It also offers several advantages over traditional brick-and-mortar shops, such as 24/7 availability, global reach, and lower operating costs.

There are several types of e-commerce models, including business-to-consumer (B2C), business-to-business (B2B), consumer-to-consumer (C2C), and consumer-to-business (C2B). B2C e-commerce involves transactions between businesses and individual consumers, while B2B e-commerce involves transactions between businesses. C2C e-commerce involves transactions between individual consumers, and C2B e-commerce involves transactions in which individual consumers sell goods or services to businesses.

E-commerce platforms require secure online payment processing as well as mechanisms for product selection, order fulfilment, and shipping. Many e-commerce platforms also provide additional features such as customer reviews, product recommendations and customer support.

Types of e-commerce payment methods

Just because e-commerce payments occur over the Internet doesn't mean that they all happen in the same way. As e-commerce has expanded at a rapid rate, the methods by which people pay for goods and services online have diversified. Customer preferences around e-commerce payment methods vary considerably in different parts of the world, and the field is constantly evolving. Globally, credit and debit cards and digital wallets are the most popular e-commerce payment methods, but other payment methods, such as bank transfers and cash on delivery (COD), remain popular in certain regions. The use of mobile payments is also growing, particularly in markets with high smartphone penetration.

Here are some of the most popular global e-commerce payment methods available today:

  • Credit and debit cards
    Credit and debit cards are the most common payment methods for ecommerce transactions. They allow customers to make payments quickly and conveniently.

  • Digital wallets
    Digital wallets, such as PayPal, Apple Pay and Google Pay, have become increasingly popular. They allow customers to store payment information securely and make payments with just a few clicks. According to Statista, digital wallets started pacing alongside credit cards for the first time in 2020 as the most popular online payment method in the US, and it's a trend that has only continued.

  • Bank transfers
    Bank transfers, also known as electronic funds transfers (EFTs), allow customers to transfer money from their bank account to the business's bank account. While bank transfers are used around the world, they are particularly popular in Europe and Asia. According to a survey by the European Central Bank, bank transfers accounted for 45% of e-commerce payments in the European Union in 2020.

  • Cash on delivery (COD)
    COD is a payment method in which customers pay for their purchases when they receive them, not before. This payment method is common in countries where credit and debit card usage is low. Nielsen's Global Connected Commerce Survey noted that around 83% of customers in India preferred COD when paying for online purchases.

  • Mobile payments
    Mobile payments allow customers to pay using their mobile devices. Mobile payments are projected to account for more than 43% of total retail ecommerce sales in 2023, an increase from around 42% in 2022.

  • Buy now, pay later
    Buy now, pay later is a payment option that allows customers to purchase goods or services up front and delay payment until a later date, often with interest or fees.

  • Cryptocurrency
    Cryptocurrency, such as Bitcoin and Ethereum, is a digital currency that can be used to make e-commerce transactions. This payment method is becoming more widely accepted by online retailers.

  • Prepaid cards
    Prepaid cards are a type of debit card that is loaded with a specific amount of money, which a customer can use to pay for online purchases, just as they would with a regular debit card.

How to decide which e-commerce payment methods to offer

There are several factors that businesses should consider when choosing what e-commerce payment methods to offer:

  • Customer preferences and market standards
    Use market research to decide which payment methods to offer. To ensure that your e-commerce experience is competitive, you need to understand how your target customer prefers to pay for goods or services and what payment methods your competitors are offering. For example, if the majority of your customers prefer using digital wallets in addition to credit cards, you should offer those options.

  • Transaction fees
    Not all payment methods come with the same costs. Consider the transaction fees associated with each payment method as part of their decision-making process. Credit cards, for example, typically have higher transaction fees compared to other payment methods. Businesses should weigh these fees against the potential benefits of offering that payment method, such as increased conversion rates or customer satisfaction.

  • Security and fraud prevention
    E-commerce businesses should offer secure payment methods that protect both themselves and their customers from fraud. Payment methods that use two-factor authentication, encryption and fraud detection are generally a better choice than those with fewer security features.

  • Compatibility with e-commerce platform
    E-commerce businesses should ensure that their payment methods are compatible with their e-commerce platform. Some payment methods may require additional integration work, which can be costly and time-consuming. Working with an easy-to-use payment provider such as Stripe can minimise internal strain around setting up and maintaining your payments infrastructure.

  • Demographics of target audience
    E-commerce businesses should consider their target-audience demographics and the payment methods that are popular among those groups. Younger audiences may prefer digital wallets, while older audiences may prefer more traditional payment methods such as credit cards or bank transfers. Again, this is why choosing the right payment-processing provider is so important. Stripe helps ecommerce businesses accept the right set of payment methods.

  • Geographical location of customers
    It's important to identify how payment preferences can vary across different markets. Consider the geographical location of their customers and offer payment methods that are widely used and accepted in those areas. Cash on delivery may be a popular payment method in some countries, while bank transfers may be more common in others. Stripe supports over 135 currencies and leading payment methods around the world.

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