How to increase payment conversion?

March overview: what happened in the digital ecosystem?

Growing the percentage of successfully paying users is one of the most important goals for any digital and e-commerce business and its importance as a key performance indicator keeps growing. Better payment conversion means more users, more revenue and lower average customer acquisition costs. But how to get more people to make payments?

One way how to approach the challenge of improved payment conversion is to put yourself in the customer’s shoes and separately, to analyze the data that you have on them and iterate on that. What is preventing them from making the payment and can that reason be resolved?

Below we have brought out a few ideas for benchmarking your payment service so you can make sure you’ve covered all angles with your payments strategy.

How to convert people who leave the payment flow?

Some users initiate a payment but cancel it halfway through. How to keep them in the flow until the end?

There are at least three ways to improve the checkout so that more users end up as paying customers: removing unnecessary steps from the checkout flow, making the process faster and making the flow more familiar to users.

In order to reduce unnecessary steps:

  • Map out the entire user journey from them entering your landing page to successfully completing a payment
  • Map out what steps and actions in the process are completely unavoidable for the user to complete the payment (e.g. goods selection, payment confirmation)
  • Discard as many of the mapped steps that are not completely unavoidable

For example, asking the user for their contact details to after they have made a payment reduces the steps to a successful transaction. Most user journeys have been built with credit card payments in mind and thus involve additional steps that are not needed with alternative payment methods. With carrier billing only the user’s phone number is needed to process the payment, which means details about their address, location or ZIP code are redundant.

Another way to reduce the amount of steps is through prefilling of information. Google provides developers with autofill attributes, in case of carrier billing the user’s phone number can be prefilled (MSISDN parameter) if you have for example already asked for it at sign-up.

The second part in reducing cancelled payments is making the payment process faster. Removing steps from the flow already supports that, but loading speed times of steps in the checkout flow need to be kept as low as possible as well. The importance of this aspect grows the more you are focused on developing markets - having a lighter mobile UX for markets with lower-end devices and poor 4G connectivity is critical.

Google has recently introduced a helpful website which estimates how much additional revenue can be generated from making sites load faster. The same logic should be applied to payment windows and their speed tracked on an ongoing basis.

If load speed times can not be reduced, then at the very least users should be made aware of things going on in the background. For example, if the payment is being authorized, the users should be notified: “Please wait, authorizing payment, which may take up to 10 seconds”.

As the third part, review how familiar your checkout flow is to the consumer. If the user initiates the payment but ends up in a different looking payment window, it reduces their trust. With most payment providers, it’s possible to whitelabel the payment window to match your visual identity. Further trust can be added by displaying brands in the flow that the user trusts - for example, with carrier billing showcasing the telco logos makes it clear to the consumer that this is the channel that they will be charged through.

How to convert users who are unable to make payments?

Regardless of what your core markets are, there will always be some users of your service who are unable to make online payments in those countries. Bank-based payments are available to most people in Western countries but the situation changes when looking at emerging markets. In the United Kingdom, 62% of adults have a credit card, but the number stands only at 4% in India.

Even “global” digital wallets only tap a small portion of the digital audience: PayPal has 220 million users, but the total amount of smartphone users in the world is already above 2.5 billion. The first step to increasing payment conversion is thus to make payments available for more people through alternative payment methods.

Alternative payment methods should be considered for all countries where existing payment methods are clearly underperforming. If 10% of customers are paying users in the UK but only 1% end up making payments in India, alternative payments are worth investigating. Key things to consider when selecting additional payment methods are:

  • Ease of implementation: how long does it take to integrate and launch?
  • Consumer reach: how many users in the target market can be reached?
  • Consumer experience: is the payment method a good match in the user journey?
  • Conversion: what is the average conversion rate of the payment method?
  • Cost: what visible and hidden costs does the payment method incur?

Each alternative payment method has its own strengths and weaknesses compared to traditional solutions. For example, Boleto Bancario is popular in Brazil (good consumer reach) but does not perform well in online environments and for digital services that are subscription based (consumer experience, where user has to go offline to complete the purchase). As an alternative payment method, it makes sense to use for high-value, non-impulse purchases, but not for example in gaming or entertainment. The other thing to account for when assessing alternative payments is the aggregated cost. For example, carrier billing usually has a lower payout per transaction than credit card payments, but since it converts better in online environments, the merchant stands to gain in the big picture.

Looking only at costs, the potential benefit looks dubious:

  • Credit card: 98% payout
  • Carrier billing: 75% payout

… but when we account for conversion, the picture is totally different:

Credit card:   Carrier billing:
98% payout   75% payout
2% conversion   4% conversion
100,000 users   100,000 users
$1 item value   $1 item value
2000 paying users * $1 * 0.98 = $1,900.6   4000 paying users * $1 * 0.75 = $3,000

Therefore, make sure to consider account for integration costs, consumer reach, user experience, conversion rates and total costs (= gains) when assessing which new payment methods to add, as well as reviewing whether you need to change pricing with different payment methods.

How to convert users who don’t have money?

It might seem absurd, but converting people without enough money to pay for your service is an important goal to have when attempting to improve conversion. The reason is that whatever the asking price of your service, that price is not universal. The Big Mac Index highlights this in an excellent way: burgers don’t have the same value across the world. So why should digital content?

People living in different countries have different levels of (expendable) income which means that their expectations on how much digital content should cost is also different. Assuming the same amount of your users have access to payments in two countries, the amount of paying users should be the same as well. If it’s not, that usually indicates a mismatch between the consumer expectations and your service pricing.

This does not necessarily mean that you need to simply charge less for your content. In parallel with a reduction of prices, you can reduce the amount of content sold as well. For example, instead of selling 1,000 gold coins for $10, you can sell 100 gold coins for $1.

Localizing pricing is also effective in the opposite direction. For regions like the Nordics & Middle East and countries like Switzerland & Japan, you can consider increasing your pricing to maximize revenue and give the perception of a more valuable service.

Which specific pricing strategy to choose is highly dependent on the country and service being sold. For carrier billing, we publish data on market pricing dynamics on a monthly basis which gives a basic understanding of the pricing levels people in each country are accustomed to.

One solution to leverage for challenging markets is the booming micro-lending industry. In case of carrier billing, there are multiple companies on the market offering credit to prepaid users without sufficient balance on their SIM cards, with the goal of recouping the credit with a small interest during their next recharge.

In summary…

Improving payment conversion is one of the most impactful things that a digital business can do to grow their revenue. Growing payment conversion from 1% to 2% means double the payment volume. If you see some markets underperforming compared to others with your existing payments setup, it would be a good idea to review the feasibility of alternative payment methods, user journeys and the way you have set up your pricing.

Want additional help on improving payment conversion? Get in touch.