For the ever-evolving e-commerce landscape, online payment methods are crucial elements, facilitating seamless and efficient transactions. In 2022, the e-commerce sector saw its most significant expansion in the last decade, rising by 19% to reach $4.6 trillion. This growth represents nearly three years of the average progress condensed into just one year.
Now current projections suggest that in 2024, e-commerce is set to increase by an additional 60%. This growth will be primarily fuelled by mobile commerce via applications and social media platforms, potentially reaching a global total of around $7.3 trillion.
The variety of online payment options available today is a testament to technological advancement and the growing needs of a global market. As online payments prevalence increases, its presence in the retail sector significantly grows, in the final quarter of 2023 online purchases took up over 15% of total US retail sales.
Read on for everything you need to know about online payment methods, their significance in the e-commerce industry, and the trends set to dominate this year.
What are online payment methods?
Online payment methods are electronic systems that enable individuals and businesses to transfer funds via the Internet. They encompass various technologies and methods, allowing immediate transactions across different platforms.
The most common example is using a credit or debit card for purchasing goods online. When customers enter their credit or debit card details on a website, they are encrypted and sent through a secure payment gateway. The transaction is then authenticated, and funds are transferred from the buyer’s account to the seller’s account.
What are the types of online payments?
Several types of online payment methods cater to diverse consumer preferences and technological advancements, most notably:
Credit and debit cards
The most common form is widely accepted across various e-commerce websites. Payments via credit and debit cards work by transferring funds from the purchaser’s bank or credit card account to the merchant’s account.
Digital wallets
Solutions like Apple Pay and Google Pay offer convenience, eliminating the need to enter payment details for each transaction. Digital wallets, or sometimes e-wallets, are payment methods usually in the form of an app. They facilitate payments via a digital device that communicates stored credit cards or bank details to a POS system.
Mobile payments
Mobile payments allow users to make payments using their smartphones, an incredible development in modern payment that has drastically increased convenience.
Bank transfers
Also known as a one-off payment, involves the direct movement of money from one bank account to another online. This is a common payment method for invoices regarding goods or services with smaller businesses or paying other individuals.
Buy now, pay later services
A form of short-term financing that enables customers to make purchases and pay for them in instalments, offering greater flexibility. A buy now pay later company pays a retailer, to then be repaid by the customer later. Popular companies that facilitate these options include Klarna, Clearpay, and Laybuy.
Benefits of online payment methods
Here are the three most common benefits of enabling online payment methods for your growing business:
Convenience
The ability for your customers to make payments from anywhere with an Internet connection, on constantly at-hand devices like mobile phones, has revolutionised the shopping experience and more options mean more customers can find ways to make purchases.
Security
Advanced encryption and security measures protect both customers and businesses from fraud. The guarantee of secure payments increases customer confidence and complies with modern payment regulations.
Global reach
By incorporating various payment methods, businesses can cater to regional preferences, expanding their consumer base globally. This enables them to reach new markets, have a wider audience for niche products, and gain access to previously inaccessible opportunities.
Reduced costs
The ability to facilitate transactions without the necessity of employment is a massive reduction in business costs and means increased profits overall from sales. Merchants can set up payment systems without upfront costs and pay lower transaction fees.
Setup
Developing on that last point, the time spent on equipment, employment, and general setup for an in-store payment processing system is no longer relevant and instead streamlined into easily integrated payment gateways. There are extensive options for secure payment gateways throughout the industry. in-store.
Recurring Payments
Subscription models have been made infinitely easier to set up and facilitate as a result of online payments. Customers can now create an automated payment for subscriptions without the pressure of remembering regular payments or organising a standing order or direct debit with their bank. On the other hand, businesses can integrate an online payment platform with an AP automation tool to streamline payment processing.
Popular online payment methods in 2024
In 2024, online payment methods will continue to evolve, reflecting the dynamics between technology, consumer preferences, and economic trends.
Here are our predictions for the most popular online payment methods of the year. From established players to emerging technologies, these methods reshape how consumers and businesses engage in online financial transactions:
Mobile payments vs traditional cards
In 2024, the landscape of online payment methods will continue to evolve, supported by statistics on digital wallets and mobile payments gaining significant traction, with market shares expanding rapidly.
Looking back to 2022, approximately 50% of all global e-commerce payment transactions were conducted through mobile wallets, establishing them as the most widely used online payment method worldwide.
Predictions indicate that this dominance will grow, with mobile wallets expected to account for over 54% of the market by 2026. Meanwhile, while credit cards held a 20% market share in 2021, they are forecasted to decrease usage in the upcoming years.
Traditional methods like credit and debit cards are increasingly complemented by innovative solutions like biometric payments and blockchain-based transactions. These trends reflect a move towards greater convenience, security, and global accessibility.
Social commerce
This online commerce method harnesses the power of social networks to facilitate transactions, creating a seamless shopping experience directly within social media platforms. The growth of social commerce is propelled by the increasing number of social media users and their desire for convenient, accessible shopping experiences.
Globally, social commerce produced revenues of approximately $728 billion in 2022 and is anticipated to grow at a compound annual growth rate (CAGR) of 31.6% between 2023 and 2030.
Alternative payment methods (APMs)
Driven by the growing demand for more flexible and diverse payment options, APMs, which include digital wallets, bank transfers, mobile payments, and Buy Now, Pay Later schemes, cater to a wider range of consumer preferences.
The payments market is seeing a 42% increase in global cashless payment volumes, of which APMs account for a large proportion. This shift is largely attributed to the rising emphasis on convenience, security, and payment speed, alongside the growing inclination towards mobile commerce and e-commerce.
The suite of online payment methods is constantly evolving, reflecting the dynamic nature of eCommerce. The landscape in 2024 offers unparalleled convenience and security due to the ubiquity of credit and debit cards, as well as the rise of digital wallets and mobile payments. Through these innovations, businesses and consumers can bridge the gap between them.
The modern e-commerce sector has no shortage of payment providers, catering to the extensive landscape of modern payment methods. Businesses should have no difficulty securing the tools necessary to facilitate seamless online payments, and this article should have equipped readers with the information necessary to tackle the e-commerce landscape of 2024.
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