For the majority of e-commerce history, credit cards have been practically the only way to make payments. If you didn’t have a credit card, had maxed your limit, or didn’t want to share it online, you were out of luck. In the early days, this was sufficient as there were other larger issues for online retailers to deal with such as logistics and shipping costs. As 92% of Canadians have a credit card, this was a case of ‘good enough’. But, as Bob Dylan says “The times, they are a changin’”.
As e-Commerce becomes more competitive, there are a variety of reasons that retailers need to consider different payment options:
- Credit cards are actually one of the more expensive forms of payment for a merchant. While they are convenient to consumers, the interchange fees can significantly impact business. During Walmart’s public fight with Visa a year or so back, I overhead one of their executives complain at a conference that “Visa makes more money on our sales than we do.”
- While 92% of consumers have credit cards, there are other stats that indicate that significant segments are being excluded from online purchases. According to a CPPO study:
- 31% do not want to have a credit card.
- 26% have a running balance.
- 40% have credit card debt.
- Multiple payment options increases overall trust in the merchant. According to a Smart insights study, 40% of consumers have more confidence in a shop that offers more than one payment method.
- Recent data breaches have made many consumers are wary of the information they share online. In the same CPPO study, 66% of consumers are cautious and 20% are strongly concerned with sharing their financial information online.
To address some of these challenges, a few e-commerce players are taking proactive steps. Last year, we partnered with Amazon to launch Amazon Cash in Canada. Amazon Cash is a service that allows shoppers to load funds into their Amazon account using cash or debit at over 6,000 Canada Post locations. Later this year, we are expanding this footprint to over 15,000 locations.
In May we are launching a new solution with one of our key partners that will allow their merchants to offer cash and debit as a payment method for their online stores. We call this a ‘stage and pay’ transaction, where a consumer orders a basket of goods and then that order is placed into a pending state until the in-person payment is completed. Upon payment, the merchant receives immediate notification so that the goods can be shipped.
With adoption of these new models by large well known brands, I believe these new models are at a tipping point where we will begin to see more widespread adoption. While these payment options will never exceed the traditional credit card e-commerce model, they do serve an important role in acquiring customers that online retailers would otherwise struggle to serve.
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