Payment methods

What payment methods are

Payment methods are the routes a customer can pay by. They differ in three points: how early the retailer sees the money, who carries the default risk and what handling costs. Those three points are in tension, because methods that are convenient for the customer are usually expensive for the retailer.

The common methods compared

Purchase on invoice is the favourite with customers and the riskiest for the retailer, because goods go out before the money comes in. The credit card is the most widely accepted internationally and usually pays the retailer immediately, but carries a fee. Direct debit is cheap and convenient for regular customers but fails when funds are short. Instant transfer methods charge directly and are simple for both sides. Advance payment burdens the customer and carries no risk for the retailer.

Regional methods come on top once selling goes international. The Netherlands has its own transfer scheme, Scandinavia has others. Anyone not offering them loses part of the sales there, even though those customers could pay by card.

How the selection is made

• Look at the audience: private customers expect invoice or card, business customers mostly invoice with a payment term.
• Check basket and goods: with goods that are resold, payment morale drops. With goods that need explaining and a long decision, convenience matters more.
• Tier the risk: invoice for regular customers without a check, protection or advance payment for new ones while no history exists.
• Weigh cost against drop out: an expensive method can be cheaper than the lost sale when customers do not order without it.
• A few options are enough: four to five well chosen methods cover the bulk. Too many make the decision harder.

In which order they appear

The order is a buying decision, not a formality. The most popular method belongs at the top, because customers often take the first option and because a familiar method gives reassurance at the end of the checkout. Sorting alphabetically is the worst variant, because it leaves the outcome to chance.

Showing the methods before the checkout helps as well. Anyone seeing on the product page that invoice is possible gains purchases that would otherwise be abandoned at the end.

Frequent questions

• How many methods should I offer? Four to six. More bring hardly any extra sales and make maintenance harder.
• Do I have to offer every method? No. But the second to third preference of the audience belongs in.
• Can I restrict methods per customer? Yes. With conspicuous customers advance payment is permitted when reasoned without discrimination.