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Improving checkout conversion rates may be a priority for large ecommerce businesses. Developing a flexible and friction-free payment process can help to enhance customer experience and reduce cart abandonment. Ecommerce enterprises that cater to diverse customer preferences can also increase checkout conversions and improve customer loyalty.
Credit and debit cards are still the most common payment method for American shoppers – but mobile wallets and Buy Now, Pay Later (BNPL) options are on the rise and becoming preferred methods of payment for many1. Consumer payment preferences show that shoppers love the convenience of digital wallets2 and value frictionless payments with fewer barriers3. Younger consumers will even spend more when they use them2.
53% of US-based consumers surveyed by Forbes said they use digital wallets more than traditional payment methods2. Young consumers seek flexible payments and Gen Z is leading the way – 78% would even stop shopping with a merchant that didn’t accept digital wallets2. This growth is cross-generational too – 50% of Gen Xers and 59% of Millennials also prefer to pay with a mobile wallet2.
BNPL may also be changing global shopping behavior. According to Juniper Research, an estimated 360 million current global users is expected to double in the next five years4. 40% of BNPL users pay with it at least once a month5. These consumers want a convenient payment method which allows them to spread out payments and avoid interest charges where possible5.
The statistics are clear. Businesses that fail to meet these flexible payment expectations stand to lose customers, reduce customer satisfaction, and even increase cart abandonment.
By offering diverse payment methods, large ecommerce enterprises can potentially increase checkout conversions, improve customer acquisition, generate greater customer loyalty, and increase customer lifetime value.
According to 2024 data from the Baymard Institute, 22% of shoppers abandoned their purchase because the checkout process was too long and complicated, while 13% stopped shopping because there were not enough payment methods to choose from8.
A Nielsen Study commissioned by PayPal found large enterprises offering PayPal can increase conversion rates at checkout by 33% on average9.
Offering a variety of payment options can help attract new customers and demographics, making large ecommerce businesses more competitive. 14% of Americans used BNPL in 2023, rising from 12% the year before5. Alternative payment methods such as BNPL may attract younger consumers in search of flexibility. This includes leisure and everyday purchases too – the top BNPL purchase categories are clothing, health and beauty, appliances, and consumer electronics6.
Flexible payment options can build customer trust and satisfaction. BNPL is more common amongst younger generations, with 58% of Gen Z and 64% of Millennials favoring it according to one survey of 2000 Americans5. Additionally, 60% of Gen Z and 70% of Millennials in the same survey trust BNPL providers more than credit card providers5. This growth is already evident in countries with higher BNPL adoption rates than the US, including Australia and Sweden12.
Flexible payment methods may help encourage higher order values and greater customer lifetime value. Mobile wallets can also be a catalyst for generating meaningful customer data and informing personalized promotional offers.
BNPL consumers can also be more regular shoppers. One in three BNPL users will use this payment option at least once a month4. In the US, Pay Later AOVs are higher than standard PayPal AOVs for merchants across a huge range of different industries, including cosmetics, electronics, and fashion13. Enterprises can drive conversions with PayPal - PayPal Pay in 4 (55%) is the most popular BNPL option for online purchases8.
It’s critical to measure the effectiveness of new payment strategies to accurately evaluate how they affect conversion rates and overall customer satisfaction. Tracking and analytics methods can show where consumers join the payment funnel, where they may leave it, and which incentives keep them engaged.
There are many different KPIs to consider in ecommerce, but these are some of the most relevant for monitoring the success of flexible payment options:
Marketing stakeholders may also be interested in the bounce rate, time on site, new/returning visitors, traffic source, and average session duration.
While BNPL continues to evolve and grow in popularity, other alternative payment trends are also on the rise.
According to BSV Blockchain, blockchain-enabled payments are predicted to be worth $70 billion by 2030 – but just 2,300 US businesses currently accept payment in crypto9.
Crytocurrency ownership and use in the US has increased from 5% to 16% over the last 5 years11. There may be an increasing demand for crypto wallets which would allow consumers to spend their cryptocurrency in a range of online locations. Consumers are likely attracted to its anonymity, high security, and lower transaction fees. But more reassurance is needed for consumers to embrace crypto, as it can be associated with less financial protection and the market can be especially volatile. This can also change compliance standards for ecommerce businesses, potentially affecting how businesses build and maintain their security features, integration capabilities, and privacy features.
AI in payment systems can also power recommendations, dynamic pricing, customer service chat bots, segmented marketing campaigns, sales forecasting, fraud detection, and more. Amazon uses dynamic pricing to help it remain cheaper than its competitors.
Adapting to the future of ecommerce payments early can help large ecommerce businesses reduce their competition, influence the market, and expand their tech-savvy customer base.
Ready to evaluate your enterprise’s current payment options? Ecommerce businesses can help drive more sales with PayPal Pay Later’s seamless checkout, speedy decisions, and dynamic messaging.
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