Remember when consumers had just a few options for buying merchandise? Pre-internet, shoppers paid by cash, check or credit. Today, online shoppers have myriad digital options – one to suit virtually every demographic in every geography.
Which raises the question: why do they pay that way?
To help shed some light on the situation, Worldpay commissioned ‘Why do they pay that way?’ a global study of 20,000 respondents in ten countries, that set out to get to the heart of what drives a consumers’ decision to pay in a certain way – and how retailers can respond. Below are some of the key findings from the report that can help shape a retailers’ payment strategy:
Consumer behavior can mislead retailers
Retailers may be concerned to hear that shoppers are often underwhelmed with the payment choices offered at checkout. This has led to a disconnect between how consumers are behaving and how they want to behave.
One in ten respondents say they use credit cards to make payments because that’s all that most websites offer – not because it’s their preference. One in five shoppers choose to pay with a certain method because it’s the only option available – not because it’s how they want to pay. In an age where choice, flexibility, ease and customer experience are significant differentiators, retailers are clearly not delivering the type of payment experiences their customers expect.
Checkout dropouts are driven by lack of choice
Millennials are more likely to use Alternative Payment Methods (APM) than any other age group, yet they often aren’t able to do so. This absence of payment choice is driving millennials to the competition. In fact, 45% of millennials would drop out of the checkout process and go to another retailer if their payment method of choice wasn’t available.
The use of APMs by millennials, where available, is above the overall market penetration. In Germany, 60% of this age group prefer PayPal – 8% more than the overall market penetration. In China, 48% prefer Alipay – 10% more than the overall market penetration. And there are similar trends in Mexico for PayPal, and Konibini in Japan.
Age impacts payment choice
The tipping point for payment behavior lies with those over 50. While shoppers under 50 choose APMs and debit card options, those over 50 typically spend more on credit – in Japan this is as high as 93%. However, this behavior isn’t true for all countries. Fifty-nine percent of millennials in Brazil, and 44% in France, prefer credit over other payment methods – so cultural trends play a part here.
The findings also show that millennials are looking to choose a payment method that gives them greater control over their finances, yet 35-50 year olds – specifically those in China, Germany, Mexico, Netherlands and the US – want to pay with methods that offer rewards for their purchases.
Tablet usage for payment is comparably higher among the baby-boomer generation, whereas millennials, especially in Asia Pacific, favor mobile devices when making payments online.
So how can retailers respond?
Integrating new payment methods can be costly, time consuming and complex. The good news is that there is a solution. Worldpay and Demandware, a Salesforce company, has integrated 17 of the most popular alternative payment methods as default – including PayPal, Yandex, Boleto Bancario and China UnionPay. This enables retailers to add a payment method with a simple configuration a huge benefit to retailers that want to meet their customers’ expectations. The integration also offers access to a further 200 methods, so retailers can look to tailor their payment strategy specifically to their customer base.
For retailers, the availability of preferred payment options is increasingly important. Having the flexibility to respond and offer the most appropriate payment options will significantly improve the ability to meet customer expectations.
Download ‘Why do they pay that way?’