In order to classify a payment method, it is necessary to consider which points are particularly decisive for users, merchants and banks. We provide clarity.
There are many different payment methods these days — not only at the point of sale but also for online purchases. What is noticeable when you look at the different payment methods is that wallets, in particular, have become very popular in recent years. However, these third-party providers do not only offer advantages.
Payment methods: these points should be met
To classify a payment method, it is first necessary to consider which points are particularly important for users, merchants, and banks.
For a payment method to be successful, it must be used by many customers at the end of the day. Accordingly, user-friendliness should be the top priority here. This can be measured by factors such as simplicity or accessibility. However, aspects such as (data) security also play an important role for most users. Therefore, the payment method’s security should be guaranteed in the best possible way. On the customer side, options such as “buy now, pay later” or installment payments also affect user-friendliness.
The cost factor is often a decisive factor for merchants. Both credit cards and third-party payment options incur costs for online merchants, the so-called transaction fees. These often ensure that merchants do not offer certain payment options or pay a high price for them. But user or customer adoption is also crucial. A payment option that appears so unattractive to customers that they refrain from purchasing is a risk that must be urgently avoided. Therefore, the product and the associated user-friendliness play a major role for customers and retailers. In addition, there is often the factor of security.
Depending on the industry, issues such as payout speed and the handling of refunds are also very important for many merchants.
For banks, the focus is often on the transaction itself. This includes issues such as transaction speed and transaction costs. International acceptance is also relevant so that payments are not limited to one country but can be made throughout the EU or even worldwide. But points relevant for users and merchants, such as user-friendliness and the system’s security, are also included here.
Overall, some points recur repeatedly and are also relevant for all parties. User-friendliness, (data) security, and the cost factor stand out. It makes sense to take a closer look at these three points to understand better what exactly is behind them.
User-friendliness of payment methods — that’s what matters
The term user-friendliness can be defined based on many different factors. User-friendliness can include accessibility, an intuitive design, a search function, and technical factors such as loading time. At the end of the day, user-friendliness determines how well customers adopt a payment method and whether it can exist alongside other options. Therefore, many points that improve user-friendliness are not just “nice to have”, but crucial for the product.
At the end of the day, banks and merchants also benefit from optimal user-friendliness, as in the best-case scenario, users will have fewer questions and errors when using the product, which means that resources for troubleshooting or customer service can be reduced.
Payment methods and (data) security
There are few areas in which data security plays such an important role as in the financial sector. The fact that customers can suffer real economic damage if this is not the case ensures that particular attention is paid to this. Factors that contribute to security include secure payment gateways and two-factor authentication. You should be particularly wary of payment methods from abroad or third-party providers. As a rule, the safest way to pay is via your bank or credit card, as all security regulations and guidelines for other banking transactions also apply here.
Costs for a payment method
The costs for payment methods are usually not even noticed by end consumers – but are all the more important for merchants. We are talking here about transaction fees. These are incurred by the merchant when a transaction is made and can vary from payment method to payment method. Third-party providers, in particular, are usually relatively expensive. To minimize costs, it is logical that merchants would prefer payment methods with low transaction fees. This would also have advantages for customers. Although the transaction fees are not visible to customers at first glance, these costs have to be compensated for by merchants somehow, usually at the customer’s expense.
When all the important points and factors for banks, merchants, and customers are considered, the question inevitably arises as to which payment method combines all the requirements.
Which payment method offers the most advantages?
If you look at the most common payment methods in online stores, it quickly becomes clear that there is hardly an option with no shortcomings. Either the user-friendliness is insufficient, or the transaction fees are too high.
One payment method that aims to solve all these problems and offers advantages for all parties over existing payment methods is request-to-pay. Request-to-pay is a payment process in which a payment request is sent. Specifically, if the buyer opts for this payment method, they receive a payment request in which data such as the amount, the intended use, or the recipient is already filled in. The buyer can then confirm or reject this payment request in their banking app, which is already pre-installed on the mobile device, or pay later. They are then redirected back to the e-commerce provider’s website. The advantages here are obvious:
- Familiar user interface: The customer pays with their banking app and is seamlessly forwarded between the store and the app
- Security: This payment method offers all the security provided by the house bank
- Reconciliation rate: The reconciliation rate here is 100%, as the data is already set and entered, and the buyer only has to confirm it
- No additional accounts: Users do not have to register with a third-party provider or create additional accounts for this purpose
- Flexibility: The payment request can be paid immediately, after some time or not at all
- Overview: The amounts are immediately visible in the banking app’s balance sheet. This gives the customer an overview of their spending in real-time
- Payout speed: funds flow directly from account to account
Overall, it is very clear that a lot is possible in payment methods and that there are already options, such as request-to-pay, that offer many advantages. The aim should always be to find a payment option that suits customers, merchants and banks alike to succeed in the long term.