Payments that can be done digitally, with no involvement of physical objects like coins or papers, can be termed online payment methods. Online Payments are not a new concept, but in the earlier stages, it was a very hectic process and involved a lot of physical record maintenance. Thus, the method did not become very popular as both the consumers as well as the companies, tried to avoid such hassles. With the advent of e-commerce, the problem was solved as the essential required infrastructure of powerful and trackable databases was solved by these companies. This provided a huge boost to the online payment options available on most eCommerce websites.
Over the years, both the scope and the reach of online payment methods have expanded exponentially. Such is its growth that now these payment methods are driving e-commerce sales. Online Payment Methods are now the drivers of the e-commerce sales growth wagon. It is now almost an essential requirement for any e-commerce company, to accept various online payments for any of its purchases.
In this article, points will be covered to ascertain how modern online payment methods have impacted the overall e-commerce industry.
1. Convenience
Convenience is the most important impact that online payment methods have on the customers of e-commerce businesses. Customers don’t have to arrange for cash before their product deliveries, they are not required to fill any forms for cheque deposits, nor any forms for NEFT or RTGS. Customers can complete their payments instantly via Credit or Debit Cards, Net Banking, UPI, E-Wallets, and Gift Vouchers. This is paperless hassle-free work. Customers are likely to purchase more due to faster check-out experiences. Online Payments also reduce the rate of cart abandonment.
2. Increased Revenues
Recurring Payment Instructions can be set up on e-commerce platforms using online payment methods. This ensures that the customers purchase their recurring requirements from a single website only, thereby resulting in increased revenues as well as brand loyalty. Amazon, for example, offers the subscribe and save option on its platform for the selected products against the selected payment method.
3. Faster Processing
Payment from online methods has faster processing speeds than any other means. In the sales world, it is a common saying that, the faster the customer pays the longer he stays. By accepting online payments, companies are ensuring that the customers do buy products from their sites after a visit to the product description page. This is working in their favor as sales have almost doubled in a maximum of 3 years once the company starts accepting online payments.
4. Costs Reduction
Handling cash and cheques is the most cumbersome and cost negative for a company after a successful delivery. These payment means have the highest level of insecurity, and fraud chances, as the trackability of cash and cheque is almost negligible. If at any point there is a mistake by the employee in handling these, it will result in a direct loss for the company. Thus it is a sensible and prudent move to incorporate online payment methods simultaneously with Cash on Delivery (COD) options. This will ensure the least of the loss that can be incurred via a cash management error.
5. Traceability
Every transaction that is being conducted online comes with a unique reference id which is shared with the customer as well as the financial institution. In case of any dispute or fraud, the transaction can be easily traced and verified back and forth. This reduces the liability of the companies towards their customers as well as simultaneously increases its accountability. This also builds trust between the customers and the companies and promotes word-of-mouth marketing.
6. Increased Customer Base
When a company starts accepting online payments, it also gains access to the participating financial institution’s user base. This results in an increased customer base and a corresponding amplified sales growth rate.
7. Increased Productivity
E-Commerce companies have increased their productivity manifold by automating most of their payment-related operations. This has all been possible because of a strong online payment ecosystem. Membership Renewals, Product Refunds, Payrolls, and more are all now automated with the partner financial institutions. This automation ensures that employees of these companies focus more on selling a product than on the payments after the sale.
8. Useful Industry Insights
Online Payments also serve as a database from where useful industry, customer, and company insights can be gained. As these are generally stored in a particular format, relevant data relating to a particular customer can be easily extracted. Insights like the Average Ticket Size Per Sale, Product Categories of Customer’s Interest, Times the Customer Shopped on the platform, and many more. This data can then be used for personalized customer targeted marketing for achieving maximum sales volume.
9. Newer Product Offerings
Online Payment Methods facilitate the sale of e-products on e-commerce sites. Companies can easily sell online products like software, games, ebooks, podcasts, movies, web series, and more. These offerings earlier were only possible in the physical format in the CDs and the DVDs. But, digital payments have opened up new avenues for sale on these e-comm sites.
10. Customer Incentives
Newer customer incentive schemes have come up with the penetration of online payment methods. Companies now offer direct card offers, cashback, and instant bank and e-wallet discounts. These incentivize the user further for continuing their online cash-free payments. Reports suggest that these incentives increase customer spending, as they are attracted to earn more rewards by spending more on purchases.
11. Easy Loan Services
Online Payment eco-systems have played a pivotal role in providing customers the edge for purchasing luxurious top-priced products. No Cost EMIs (Equated Monthly Installments) with the appropriate calculators, Buy Now Pay Later, Postpaid, and all kinds of easy personal loan options are now available on major e-commerce sites. These easy loan options, make a prospective customer buy an expensive item and contribute towards increased revenue growth of the company.
12. Global Reach
Online Payments facilitate an opportunity for e-commerce businesses to expand globally by shipping their products across the globe. The main hindrance in any global trade is the possibility of a payment fault. Sellers can now take advance online payments and then ship orders, which eliminates the risk of payment failures in global trade. It also boasts a company’s brand image and product acceptance.
13. Customer Journey Optimizations
Online payments facilitate faster order confirmation and deliveries. While the order confirmation mail is almost instant, in cases of digital product purchases the delivery is also instant. This improves the overall customer’s shopping experience on the site and results in better prospects of future sales.
14. Edge over Offline Stores
Most offline stores still do not accept online payments for their sales. While they have an upper hand in various categories, e-commerce is fastly eating up its market share with the help of online payment facilities. Customers do not have to withdraw cash each time for making a purchase. They can conveniently use e payment options at e-commerce stores.
15. Increased Impulse Sales
Many a time people make purchases purely based on impulses. While in COD orders there are high chances of cancellations for this impulse-based buying, in the case of online payment the rate is much lower. Reports suggest that around 60% of the instant add-to-cart products are canceled by the customers. Out of this, 90%-98% of products are COD-based. Thus, e-commerce companies can greatly benefit from this impulse sale by a simple integration of online payment acceptance.
16. Range of New Marketing Channels
Online Payment methods open up new marketing channels for the companies. One such channel is affiliate marketing companies. Affiliate Marketers generally tie up with the companies accepting online payments, as they can easily track and validate the sales generated via their links. Affiliations increase the sales by almost 28% over the companies’ current sales, and that too at a very low comparative cost.
17. Credit Card Issuances
Banks offer credit cards of their partner e-commerce sites, often to the customers who have an online payment history. These cards often reward heavily the customers for their purchases on the partner e-commerce sites. They also help build credit histories for the customers. People having a good and old credit history can secure loans at rates lower than the market, because of their proven track records. Amazon Pay ICICI Credit Card and Flipkart Axis Bank Credit Card are some of the best examples.
These were some of the points that described how modern online payment methods are impacting e-commerce businesses. In general, a lower dependency on cash is greatly positive for the e-commerce industry and the economy as a whole. Governments that have to print lower currencies have higher GDP (Gross Domestic Products).
Overall the usage and adoption of online and electronic payment mediums have been increasing manifold. Particularly, after the pandemic, the growth has been in a linear upward direction, as people try to avoid physical contact.
Moreover, with smartphone penetration recording new highs, a rise in the use of digital payment means is inevitable. With advancements in the spectrum speeds like wider 4G adoption and faster 5G implementation, user experience is going to improve multiple times. This improved user experience will, in turn, benefit the online payment methods to become as mainstream as cash on delivery and boost e-commerce sales multiple times.
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