Will adding payment options REALLY help your conversion rate?

You guys are the best readers in the world. Seriously. And here’s why. You all know how much I love data. And you know how important it is to have the data to back up your beliefs. Well, I’m thrilled that someone holds me to that same standard. After reporting that offering more payment options aids conversion in my look at Amazon’s PayPhrase service, Trace Johnson threw down the gauntlet on Twitter,

“Any data on more payment options improving conversion?”

Then he said, “Well, tough guy, where’s your data?” (OK, he didn’t really say that, but you get the idea).

As ever, thinks is up to the challenge. You want data? As we say in Jersey, I got yer data right here:

• The first – and by far, most widely reported – study to look at payment options and conversion goes all the way back to 1994. CyberSource found back then that sites offering 4 payment types had a higher conversion rate than those who offered only one. While CyberSource sells credit card processing services for e-commerce and their data is getting a little long in the tooth, it still offers sound evidence for increasing your payment options.
• Microsoft may trust the CyberSource data, too, apparently citing it on their Small Business Center. While they don’t reference their source, their message sounds strikingly similar to CyberSource’s:
  

  “Do you offer multiple payment options? Studies have shown that sites with as many as four or more payment options experience higher conversions.

  As you prepare for the upcoming holiday sales season, look for ways to reduce cart abandonment and increase conversions by adding additional payment methods.”

• According to an Internet Retailer article, “Ritz Interactive credits a promotion that offered 10% off when paying with PayPal for helping to boost holiday sales about 20%.” Of course, I suspect the 10% discount may have helped. But it shows customers do use alternative payment types, something we’ll come back to in a bit.
• The best data I’ve seen comes from this year’s eTail conference. Multichannel Merchant reports that the following came up during one of the panels:
  

  “…[eTail conference] panelists said the use of non-credit card payments are up as consumers change their spending ways. In fact, Tim Engel, vice president of strategic initiatives for jewelry seller JTV.com, says his company no longer considers those types of payments to be alternative.”

  He continues, “Engel said that between 15% and 30% of its customers are using alternative payments on its site. That includes PayPal, Bill Me Later, and a private-label credit card JTV.com set up through Bill Me Later called JTV Preferred Account.” (Emphasis mine).

  Linda Bustos follows this thread in more detail and discovers that deferred payment may be preferred in a slow economy. Now how cool is that?

• Finally, it’s worth looking at real-life experience. The consensus from this thread on Webmaster World seems to favor multiple payment options. And while I can’t disclose numbers, my own experience supports the notion that additional payment types can help your conversion.

Is all this information definitive? No. Does it guarantee a jump in conversion for your site? ‘Fraid not. But consider this: Many customers may only have one payment option available to them. When you don’t accept that option, you don’t accept that customer. And that’s never going to help your conversion.

What do you think? Do the downsides of accepting alternative payments outweigh their value? Or should you accept additional forms of payment? Tell us what you think in the comments.

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Image credit: Andres Rueda via Flickr using Creative Commons Attribution 2.0 Generic.

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