Feb 4, 201910 min read

A Guide to Choosing the Best Payment Solution for Your Online Store.

Kristian Borglund headshot

by Kristian Borglund

Choosing a payment solution for your online store is an important decision that will affect your growth. This guide walks you through some different criteria you should consider before making a choice for your online business.

Making the wrong choice of payment solution is likely to lead to regret, whereas selecting the right one will help you to grow your business faster, increase revenue more easily, improve your brand and scale when you are ready.

So what do you need to look out for?

There are several aspects that are critical since they are directly linked to bottom-line results in your business.

1. A Fast and Easy Checkout Process

Does the payment provider speed up the checkout process for your customers in your store or does it slow things down?

You want shoppers to go from the “I want that” stage to “Now it’s mine” seamlessly, without unnecessary steps. Fact: the longer it takes for a shopper to complete a payment process the higher the chance they’ll have second thoughts, or postpone the purchase for “later”  (and we all know what “I’ll come back later” means). If they have to fill out too many fields, they may sigh quietly to themselves, wondering why your store demands so much of their time. They are used to Amazon’s 1-click to buy and other fast and easy checkouts – where information is pre-filled – and expect the same from you.

Consider a payment solution that reduces friction for the customer. Friction leads to cart abandonment. Removing friction means you can expect more completed purchases and increased revenue.

Let’s say that your potential customer is cosying up on their sofa at home as they shop in your store. Are you going to ask them to get up to find their debit/credit card to complete their purchase (friction), or will you make it easy for them (less friction)? Choose a payment solution where customers have the option to complete purchases on the fly, without the need for a card.

If the payment provider can enable one-click shopping across its entire merchant network, that’s really helpful for both your customer and your business.

2. Relevant Presentation of Payment Options

People are more likely to buy from you if they immediately realise they can use their preferred payment method in your store. Every customer and purchase is different. Some customers always pay with a card if they can, others choose invoice (Pay later in full). A payment method that’s rapidly growing in popularity is interest-free installments (Klarna calls it Pay in parts) which allows people to spread their cost over time. For example, a pair of $100 jeans can be paid with four $25 installments, which benefits both the customer and the merchant.

  • 68 percent of merchants see an increase in average order value from shoppers paying with installments.
  • 44 percent of users would have abandoned their purchase if Pay later wasn’t available, according to a Klarna consumer survey.

Choose a payment provider that can predict and pre-select the preferred payment choice for each customer (as well as their preferred delivery method and delivery address) based on customer recognition and insights about your particular industry. That causes less friction, less cart abandonment and more sales – both in the short and long term. Why? Because once customers have experienced how smoooth it is to buy from you, they are more likely to come back for more.

Read more about why you shouldn’t distract your customers with irrelevant payment options here.

3. Profitability vs Pricing

Different payment providers charge different amounts in payment processing fees. Like in so many other cases, you get what you pay for. Many less experienced online businesses look blindly at the fees, but in doing so hinder their chances of growth. They see payments as a transactional necessity only; one that costs money. Smart online businesses, on the other hand, make their payment solution a tool for growth and customer-centric value creation.

Let’s bring up an example. Say provider (A) charges 1 percent in fees, while provider (B) charges 4 percent. Is (A) a better option? It may seem so. But what if option B will convert 10 percent better? The online marketplace Fyndiq experienced boosted conversion by 11 percent simply by upgrading to a revenue- and customer-centred payment solution. Mobile conversions leapt up by 13 percent, and new customers by 21 percent. And there is more to it that adds to the bottom line. The smoooth, personalised shopping experience entices customers to come back, and to continue doing so well into the future. In short, do you want your payment solution to be just an added cost, or a marketing tool that benefits your profitability?

4. After-Purchase Experience: Returns and Customer Service

Your customer may ask for a refund, or won’t pay at all, or may contact customer support asking to defer their payment. All that takes time and resources from you. A great payment provider takes care of all that for you, 24/7, so that your own customer support team can focus on growing your business by answering product questions and making suggestions for customers who need guidance, rather than responding to “I returned the product, where is my refund?” and other types of payment issues.

When it comes to returns and refunds, your payment solution can be a pain for customers – or a reason to buy from you again and again. According to our recent beauty survey, 78 percent of beauty shoppers are more likely to buy if they can opt to see the items in real-life before parting with their cash. If the payment provider makes it easy for customers to pay only for what they keep, they are not only more likely to buy in the first place, but also to buy something else after a return. If they need to wait for a refund to be processed, on the other hand, it’s a different story. There’s a psychological brake in customers’ minds that holds them back from placing new orders from your online store while they are waiting for a refund, causing you to miss out on sales.

5. Fraud protection

Fraud is a real threat – and it can hurt your store beyond your worst imagination. You need a payment provider with solid fraud protection. Here are some questions you can ask to check what you’re getting:

  • Do you prevent a person from making multiple orders within a short time-frame?
  • Do you detect if I receive orders from an IP address that just made 20 other purchases elsewhere?
  • Do you detect if the person placing the order is using a fake email address, or an address from a suspicious domain?
  • Do you detect if the email address has been used by multiple customers?
  • Do you detect if the same phone number has been used for multiple shipping addresses?
  • Do you detect if a person has a history of changing the shipping address after orders have been sent out?
  • Do you detect if a new customer in my store has a track record of not paying bills in other stores?

You want suspicious activities to be flagged quickly, especially if you sell goods in high-risk categories like electronics, tech, travel, perfume, designer bags, branded shoes or concert tickets. For more information, read our article “How easily can your products be stolen?”. (No longer available)

6. Recurring Payments

The trend of selling products and services that are paid with a monthly or yearly subscription is picking up speed. If your business hasn’t added any recurring revenue streams yet, it’s likely it will in the future. Anyway, make sure your payment provider also includes a feature for automatic billing.

Also, make sure those transactions won’t become a hassle for you. Many e-commerce businesses experience problems because of the natural churn of credit/debit cards, where they either don’t get paid or get calls to customer support to sort out an interrupted service. Nowadays, there are better solutions where the payment provider takes care of that headache altogether – to make sure you get paid, without messy interruptions.

7. Administration

We know you hate administration, so we’ll keep this short.

Consider choosing a payment solution that integrates several payment options into one, instead of having three or more different systems to deal with (which just multiplies the amount of admin work). With one easy solution, you can cut the required resources by a third.

8. Scalability – With Optimisation for Different Markets

Maybe you are not ready for scaling yet. However, when you are, you will certainly thank yourself for thinking long-term when choosing a payment solution. Some e-commerce businesses don’t, and they end up with a whole lot of extra work, time delays and additional investments to make it happen.

With the right payment solution, you can roll out payment processing in those new markets overnight, without worrying about customisations for each country. Choose a payment provider that takes care of that for you automatically, so that the most popular payment options in each country are available in your cart. Just think about it. Would you promote card payments in Germany where just 9 percent prefer that option? Likely not, so choose a payment provider that optimises your cart for the local market – without any extra work on your part. Another example: 67 percent of e-commerce transactions in the Netherlands are made via direct bank transfer through iDEAL. If you’re not offering that specific payment method, how many sales are you going to miss out on?

And don’t forget about laws and regulations. Of course, you have to comply with the law in each country. Did you know can get in trouble for highlighting part-payment alternatives in the Netherlands, for example? Make it easy for yourself. Choose a payment provider that takes care of all that for you, and has already mastered each country’s intricacies.


We hope that this guide was useful for you. If you want to know more about the payment solutions Klarna offers, learn more here!