Configuring the methods of payment that are available for customers to use is often one of the last tasks when it comes to launching an e-commerce shop.
The options that we provide to pay may seem like something trivial, but it can mean the difference between success and failure in an online shop.
PayPal, Stripe, your bank’s payment gateway… Which to choose?
A customer might decide not to make a purchase if they option they prefer isn’t offered. Can you imagine losing sales just because they don’t have a way to pay?
It’d make you want to pull your hair out!
That’s why in this article we are going to tell you each and every possible payment method to offer your customers.
To start, remember this sentence:
For the customer that wants to pay, even having all the options isn’t enough.
Let’s get started.
What is a method of payment and why are they so important?
If you have an e-commerce shop, you already know how difficult it is to make sales, just as you’ll have experienced the pleasure of receiving a confirmation email when a purchase is made.
It’s great, right?
However, that blissful moment can be cut short in many ways, one of which is by not offering customers a satisfactory solution to send their money to you.
A payment gateway, as its name suggests, is the means by which we allow customers to transfer us money.
But beyond the definition, the important thing is for it to be a quick, comfortable, and painless experience.
If we don’t provide the best process, we will be wasting all the hard work put into marketing and conversions. Each sale is the culmination of work that was done, the final objective, the goal that we most desire to celebrate.
E-commerce payment methods: how to help your clients pay you safely and comfortably
These are the options and tools that we are going to tell you about to make sure you don’t lose even a single sale.
It’s been around on the Internet since 1998 and, though it wasn’t easy in some countries, it has become a 100% trusted payment platform for online buyers.
Trust is the key factor. While it’s been a slow process, little by little Internet users are losing their fear of making online payments. Users have to be completely sure that their money is in a safe place.
PayPal has worked hard at that and is now considered to be an almost compulsory payment method in any e-commerce shop.
A. Advantages of using PayPal as a form of payment
Let’s take a look at the benefits that using PayPal can bring you:
- Very well known: its nearly 10 billion annual transactions and more than 200 million users can testify to that.
- It transmits trust: the average user knows PayPal, has an account and knows that it is a 100% safe and comfortable payment method.
- Easy to set up: integrating PayPal into a CMS, whether it be WordPress, PrestaShop, Magento, or Shopify, or into your own custom development, is within reach for anyone even without any coding knowledge.
- Immediate access to funds: after logging into your merchant account, you can transfer money to your bank or use it to make online payments with just a few clicks.
- Recurring payments: if your business charges customers on a monthly basis, PayPal can carry out a subscription payment.
The ease and trust it offers users are, without a doubt, its main appeal.
There’s no doubt that it’s a winner from the point of view of the purchaser, but is that the case for the seller?
These are some of the reasons that could make you doubt:
- Commissions: PayPal isn’t the cheapest payment method, there’s no doubt about that—particularly if you invoice a relatively low amount, which is when you’ll pay the highest commissions. This is what they charge:
- If you invoice less than €2,500 per month: 4% + €0.35 per transaction.
- If you invoice between €2,500 and €10,000 per month: 2.9% + €0.35.
- If you invoice between €10,000 and €50,000: 2.7% + €0.35.
- More than €50,000: 2.4% + €0.35.
- The payment is made off of your site: when the user clicks “pay”, they are redirected to the PayPal page to log in and complete the purchase. That may seem like a trifle, but anything that means adding another step to the process and making the customer leave your site is not a positive thing since you can’t monitor what happens there.
- Disputes: in the case of a complaint lodged by a customer, PayPal tends to agree with them by default. There are many cases where e-commerce shops have felt defenseless against the arbitrary decisions made my PayPal. It won’t happen if you do everything correctly, but they do have the ability to freeze your money without much explanation.
That brings us to the big question…
C. Is using PayPal worth it?
Our vote says yes, at least when your e-commerce doesn’t boast the age and authority for buyers to trust the brand itself.
If that’s the case, PayPal helps transmit its authority, and that comes at a price.
D. BrainTree vs PayPal
If your business has a lot of international transactions with currency exchanges, take a look at Braintree.
It’s owned by PayPal, but is geared toward larger clients with bigger volumes throughout the world. It’s the payment gateway used by Uber and AirBnB, for example.
It’s also recommended if you want to accept bitcoin as a form of payment.
2. Payments with Stripe
In a market that was dominated by PayPal, a new online payment service has emerged with a vengeance, and there’s no surprise there.
Stripe is a payment method that is being installed more and more and that you should know about, value, and probably include as a payment option.
Unlike PayPal, users don’t need to have an account with Stripe since it only offers the option to pay with the most common cards: Visa, Mastercard, American Express…
A. Advantages of using Stripe
These are the reasons that we like it, and we like it a lot!
- Easy: this tool is developed so well that it’s a delight for anyone installing it. Furthermore, working with its API is incredibly painless.
- It integrates with your website: no more sending users to another URL. The whole payment process takes places inside without even reloading the page—perfect for one-page checkouts.
- Clean design: it adapts 100% to your website’s style. Nobody will think that it’s a third-party service.
- Cheap: its fees are lower than the competition:
- European cards: 4% + €0.25 per transaction.
- Non-european cards: 9% + €0.25 per transaction.
- Security: in order to use Stripe, it is essential for your website to have an SSL certificate installed, which is to say, your URL must begin with httpS.
You don’t have to scroll back up to compare rates between Stripe and PayPal. For the minimum sales volume it’s 1.4% + €0.25 with Stripe and 3.4% + €0.35 with PayPal.
They also accept recurring payments by subscription.
B. Disadvantages of Stripe
Is it all rainbows and unicorns? That depends…
- Advanced uses: it’s a very powerful tool for big e-commerces and marketplaces. If you want to get the most out of the API, you’ll need programming knowledge or help from a developer.
- Still a third-party tool: that means being exposed to its possible instability, rate changes…
- Not as popular as PayPal: users don’t know the upside to Stripe compared to PayPal and many continue to trust the payment platform founded by Elon Musk, now owned by eBay.
- No immediate access to funds: Stripe processes the payment and sends the money to a linked bank account a few days later.
Now we’re going to take a look at the third most important option in terms of number of installations.
3. Virtual POS
This form of payment is the one offered by banks in order to directly send payments to your bank account.
The payment is made in the same way as when a customer is in a physical shop and pays with their card, except without the card reader.
In other countries, each bank has its own payment gateway, but in Spain there are two main options:
- Redsys: for Servired, 4B, and Cajas Rural banks.
- Ceca: for savings banks.
The main inconvenience, aside from the payment being made off of your website, is the commission.
They normally charge you a minimum, which is typically quite high, just for having a POS. If you don’t invoice enough to start making up for that fixed payment, stick with other services that don’t come with any minimums.
4. Other forms of online payments
There’s more out there than what we’ve covered. These are the ideal complementary services to make sure not a single customer escapes because of a lack of options:
- Cash on delivery: years ago it was essential because of the lack of trust online. It’s starting to disappear now.
- Check: the truth is that it’s not really understood why WooCommerce and others continue accepting checks. It’s typically done for verification purposes.
- Transfer: for those who are still reluctant to give their card info, this is a good alternative. It gives them a 4-5 day window for you to receive the money before sending the product.
Too many options?
You’ve already seen the huge amount of variety, which is exactly why it’s so important to see which of them most suit you.
Which payment method to choose?
It’s important to offer a variety, but it’s also important to avoid overwhelming customers with too many payment options. Having too many options can be counter-productive.
Our recommendation is to include, no matter way, a card payment option; whether it’s through Stripe or a virtual POS. You also need to include PayPal (and put up with their high commissions because of their huge number of users).
Lastly, add a third option like bank transfer for the most untrusting of your customers.
More doubts? Let’s do a few comparisons.
1. Stripe or Virtual POS?
This all depends on what you are able to negotiate with your bank. If you can reach the fixed invoicing amount that they require, the POS is a good option.
However, if you are going to pay a high fixed monthly rate, it’s better to go with Stripe’s variable rate.
2. PayPal or Stripe?
With a strong e-commerce that is lucky enough to already have complete buyer confidence, perhaps you could eliminate PayPal. On the other hand, if that’s the case and you have very high sales volumes (more than 100,000 per month), the PayPal commission is nearly the same as that of Stripe.
In any other case, we recommend using both payment methods.
Do you already understand the importance of offering different payment gateways?
Whether it’s already up and running or you are just launching your online shop, don’t breeze past this point.
It is vital for users to feel secure and for the process to be simple.
Anything else means losing sales.