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Hero shopping payment options Placehoder

5 OCTOBER

5 min read

Abandoned shopping carts is a growing problem for e-commerce and a common cause is that consumers are not offered the “right” payment method. But what payment methods are there, and which payment methods are the “right” ones? To help you answer these questions and grow your online business, we have put together a guide with the different payment method families.

A study found that 25% of shoppers have decided to not make a purchase because the online store did not offer their preferred payment alternative, and another study showed that 71% have abandoned an online purchase at the payment stage because of lack of payment options. These numbers indicate the importance of having the right payment methods for your web shop.

There are two main payment method families, Cards and Alternative Payment Methods (APMs). Within each of these families, there are smaller families with different types of payment methods.

Cards

International cards

There are four types of international cards; Debit, Credit, Prepaid credit cards and Charge. Debit card is when the amount of the purchase is withdrawn from the available balance on the cardholder’s account. If there are not sufficient funds on the account, the transaction is declined by the issuer. Credit card is where the cardholder receives an available credit from the issuer. The balance is rolling and settled monthly. Prepaid credit cards are a bit different to regular credit cards as they are loaded with money in advance to create a balance that can be spent. Charge cards are similar to credit cards, but the full balance has to be settled in full each month.

Domestic cards

Domestic card programs operate like international ones but are used in a specific country. Domestic cards are mostly debit (sometimes credit) and often co-branded with VISA or Mastercard for use outside the country borders. Although co-branded, the domestic branding is often dominant within a country. For example, in Denmark, although Dankort cards are co-branded with Visa, most consumers do not see it as a Visa card but rather only a Dankort card.

Alternative Payment Methods

Wallets

Globally, mobile wallets are increasing their market share significantly. The global number of mobile wallet users grows by 140 million per year and have since 2016 increased by 85% and is expected to increase by another 20% in the next two years. Wallets are user-friendly as they contain delivery and invoice data, and often authenticate the consumer, all in a single step. There are two distinct types of wallets; Payment wallets and Authentication wallets.

Payment wallets authenticate the consumer and process the payment itself in the same step. The most popular example is PayPal. Authentication wallets require the merchant to also have a connection to a card acquirer that supports the authentication wallets, for example Masterpass by Mastercard. This is because after authenticating the consumer, the wallet provides a card number that then needs to be processed through the card acquirer.

Real-Time Banking (aka Online Banking)

Real-Time Banking (RTB) solutions are very popular in Europe. Consumers pay by using their RTB to transfer money through an instant online authorization. Trustly and PayPal are two examples of Online Banking providers.

Offline bank transfer

An offline bank transfer enables the consumer to pay for their purchases offline by using a payment reference they received during the purchasing process. Authorization is not instantaneous.

Direct debits

Whilst most payment methods are push based, Direct Debits are a pull payment method where the merchant instructs his/her financial institution to withdraw money (‘debit’) from the consumer account.

Open invoice and installments

The consumer pays for the goods after delivery; sometimes in one transaction, sometimes in installments. The consumer shares information on invoicing and delivery but does not share any credit card or other payment details. The merchant receives a payment guarantee from a third-party.
Read more about Bambora’s invoice and installments offerings for both online and in-store here.

Credit consumption

The consumer opens credit with a financial solution to pay for their products. This is not that common in the Nordics but popular in Southern Europe.

Prepaid and gift cards

Consumers pay and receive a (gift) voucher before they can use it to purchase a product. Authorization and capture of such cards is online and always immediate.

Cash-based payment methods

The consumer purchases a product or service online and receives a unique reference they use to pay for the purchase at an affiliated outlet, store, or ATM. This method is not that common in the Nordics.

Bambora’s online payment solution

As can be seen, there are multiple payment methods that you as a merchant can offer your customers. However, not all payment methods are suitable for all businesses. Analyze your business and especially your customers, how do they want to pay, what needs do they have etc.? Understanding your customers and their preferences will help you choose the right payment methods.

Bambora’s online payment solution Bambora Checkout offers all of the most common payment methods. With Bambora Checkout you get an easy-to-use payment solution that allows you to safely accept payments from Visa, Mastercard, American Express and Diners club, as well as international mobile wallets like MasterPass and local alternatives like Swish in Sweden, Vipps in Norway and MobilePay in Denmark. In addition, you also get the possibility to offer your customers invoice and installment payments along with recurring payments for subscription services.

Source: Ingenico, FIDH