Let’s discuss how payment technology increases conversion rates.
While there’s plenty merchants can do to optimise their customer journey to increase conversion rates, one significant friction point in any transaction is the payment process. Inevitably this involves extra steps that might result in customers abandoning or failing to complete a transaction for a number of reasons. Here, we investigate how payment technology increases conversion rates.
Online payment providers work hard to streamline their part of the customer journey. By using technology such as one click and prefilled forms, the process of entering payment card details can be minimised – up to a point. However, online merchants are seeing the most ROI and increased conversion rates when they offer alternative payment methods such as digital wallets.
Digital wallets offer an alternative way to store money on your phone or wearable device, and pay for goods and services in store and online. According to Zion Market Research, “The use of e-wallets is gaining popularity fast. Global mobile wallet transactions were valued at US$594 billion in 2016 and are expected to reach US$3.1 trillion by 2022, growing at an annual compounded rate of 32% between 2017 and 2022.”
A Mastercard study found that digital and e-wallets were mentioned in 75% of conversations people have about new payment methods on Facebook, Twitter, Instagram and YouTube.
Consumers want digital wallets and payment apps. Merchants that offer them as a payment option can attract customers who want to use digital technology for convenience and aspirational reasons, and those that don’t have or want to use a payment card. Gartner predicts that in two years, mobile wallets will hit mainstream adoption, with current rates of market penetration between 5 and 20% across the world.
Why consumers want digital wallets
In a word: Convenience.
Digital wallets have huge appeal to consumers both in store and online. As the name suggests, a digital wallet removes the need to carry a physical wallet. Everything a consumer needs can be stored in their smartphone. Many digital wallet providers like MuchBetter also provide customers with innovative NFC tech such as a contactless key fob – so if you forget your mobile you can still make payments to get yourself home or enjoy a night out.
In my opinion another reason that consumers want to use digital wallets and payment apps is because they’re innovative and fun! We love new exciting technology, whether that’s getting the new iPhone or being the first of your mates to buy cryptocurrencies. A cool payment app, preferably with some wearable tech to go with it, is much more exciting than a conventional payment card.
Moving away from in store payments to online payments, digital wallets have streamlined the online shopping experience, removing the need to key in payment card numbers and multi-step authentication details. They make the online payment process much more convenient and quick.
Digital wallets also allow consumers without conventional payment cards to shop online. In the UK – a country with high payment card adoption rates (96% of UK adults have a debit card) – that might not be a significant concern. However, in some other European countries and around the world credit and debit cards are not as ubiquitous. If you want to increase conversion cross-border, alternative payment methods like digital wallets are the solution.
It’s not just PayPal either. Millions of consumers are starting to use digital wallets, with increased awareness of various brands offering them. A 2017 report by Forrester Consulting for JPMorgan Chase found that “41% of consumers said that they will likely sign up for an e-wallet in the next 12 months, while 55% of merchants said that they will likely accept e-wallet payments in the next 12 months.”
Increasing conversion rates with digital wallets
According to that same study, 67% of merchants expect that some or all payments will go through digital wallets in the next five years. This is not just limited to online transactions either. Consumers want omni-channel payment solutions and digital wallets are the perfect fit.
Digital wallets also provide opportunities to build customer loyalty. Offering customers their preferred payment method, in store or online, is an important way to engage new customers but also hang on to existing customers. There are opportunities to build on this further using digital wallet technology such as by rewarding customers for shopping with your business through specific payment apps. This can also have a positive impact on payment processing costs, by encouraging customers to use alternative payment methods that cost merchants less than conventional card payments.
Many digital wallet solutions, like MuchBetter, also provide merchants with another marketing channel – a chance to promote offers and discounts to customers via the app. In some cases digital wallet providers can also help with customer retention and conversion by sharing customer data with them (with the customer’s consent), and this can be used to personalise the customer journey further.