Why less is more when it comes to the future of e-commerce payments

Decisions, decisions, decisions. Too many choices can sap our brainpower and make it hard to think straight. Unfortunately, when making an e-commerce purchase, things aren't all that different. The time has come for retailers and digital financial services firms to make the online payments experience smarter. It should become smart enough to hide payment options that aren't relevant and present the buyer with the one that works best.

E-commerce brands typically support as many popular payment options as possible on their websites. And why not? Customers expect it. Competitors offer it. It prevents businesses from being dependent on a single payment provider. And more payment options generally lead to more paying customers. But is a crowded checkout page with multiple options really the best experience? Probably not. In fact, according to recent research from Baymard Institute, the average e-commerce site can improve its conversion rate by 35% solely through design improvements to the checkout process.

When thinking about how to pay for something online, today's customers face a dizzying array of options. Card payments. Direct bank deposits. Multiple digital wallets. Peer-to-peer payments. Add to this the explosion of buy-now-pay-later (BNPL) providers such as Klarna and AfterPay – with Affirm and Apple as the latest entrants to the market – and consumers have even more choices. And this doesn't account for emerging payment methods such as cryptocurrency, biometrics, contactless payments, QR codes, and Bitcoin. With all of these choices, checkout pages are busy. And merchants must select on behalf of their customers not only which types of payments their e-commerce sites will support but also which brands. For example, one retailer may use Klarna, while another may use Affirm. So, a customer who is shopping online at both retailers would have to create multiple payment accounts for multiple retailers and geographies. In the brick-and-mortar world, this would be akin to a customer deciding to pay by credit card and then finding out that the store only accepts a Citibank or JPMorgan Chase card.

The proliferation of payment options doesn't only make things more challenging for customers. The growth in digital wallets and the number of payment choices are making things more complex for merchants too. Global wallet choices offered by US providers alone include Apple Pay, Google Pay, Samsung Pay, and PayPal. In China, wallets are the most popular way to pay, with Alipay being a preferred payment method. The four major credit card payment processors rolled out Click to Pay. And many merchants, such as Amazon, Walmart, and Fitbit, even offer their own payment solutions. How's a merchant to decide which ones to implement? With all of these options, payment processing companies, such as San Francisco-based Stripe and Dutch payments company Ayden, have introduced turnkey support for multiple wallet options to make them easier for merchants to implement and manage. Such companies have built an economic infrastructure to support making and accepting payments. And they process card payments, ACH payments, and some digital wallets and local payment methods. A similar trend is emerging to help merchants tackle the complexity of BNPL options. Companies such as ChargeAfter provide a single interface for merchants to choose which BNPL options they'd like to implement.

Though such solutions may simplify the merchant's development process, overcomplicating the checkout page will never be the answer. And moving forward, the continued evolution of the vast technological advance fueled by the internet only promises to make things more complex for merchants. Ronak Doshi, partner at Everest Group, agrees.

"The rise in Web 3.0 and metaverse adoption will expand the number of channels and the payment methods that come along with them," he says. "At the same time, the rise of real-time payment schemes are poised to add more competition and players in the payment ecosystem. This will simplify the payment processes but increase the number of choices for e-commerce firms and their customers."

Consumers don't necessarily need more payment options – they need the right option at the right time. This means that companies need to put forth the proper payment platform for a specific purchasing scenario. In this way, payments should take a page from the playbook of digital-native companies such as Netflix, YouTube, and Amazon, which use product recommendation engines to entice users with relevant suggestions based on their previous choices.

Extending product recommendation engines to payments would enable the customer to select the best payment option for them. This requires deeper insight into consumer buying preferences and predictive modeling.

E-commerce product recommendation engines are sophisticated systems that use algorithms and data to predict the products most relevant to the customer in a given context – increasing the likelihood of a purchase.

The proliferation of choice is less about the next big payment platform and more about being smart about how we use the payment platforms that are already available.

Which companies will be the first to improve the customer experience by personalizing the types of payments they offer at certain touchpoints in the purchasing journey? That remains to be seen.

But one thing is certain. Those that do will have a competitive advantage and provide customers with a great experience all around.

This article first appeared in PaymentsJournal. It was authored by Kristine Demareski, global head of payments at Genpact, and Eddie Chin, experience solutions lead, financial services and insurance at Rightpoint, a Genpact company.