Insights
Nov 19, 20184 min read

Why is payment the only non-personalized thing in online retail?

by Klarna.com

Today’s shoppers are given the opportunity to customize their retail experience in almost every conceivable way. Whether it’s through major brands such as Burberry and NIKEiD offering the opportunity to create bespoke products, or marketing e-mails and messages sent to customers by name, and with offers informed by purchase history and product preferences.

Today’s shoppers are given the opportunity to customize their retail experience in almost every conceivable way. Whether it’s through major brands such as Burberry and NIKEiD offering the opportunity to create bespoke products, or marketing e-mails and messages sent to customers by name, and with offers informed by purchase history and product preferences. Put together, it creates a picture of an online shopping environment dictated by companies taking advantage of data and technology to develop closer relationships with their customers and build brand loyalty. One in which everything is personalized.

Everything, that is, except payments.

Modern shopper expectations, old payment systems

Unfortunately, despite online retailers innovatively catering to the individual and specific needs and wants of shoppers, how their customers pay has remained relatively unchanged since the dawn of internet shopping itself. People are asked to go to the checkout, at which point they must enter their personal information and pay immediately.

The process not only gives customers the chance to reconsider their purchase, it also asks them for a lot of details – some of which they might not be able to find or might not want to share. As such, it’s no wonder that the payment window is precisely where so many online purchases fall through, and that cart abandonment is a problem for every online business.

The question is why has online payment been so resistant to change? Why do so many online retailers see it fit to retain their ‘one-size-fits-all’ payment solution?

Arguably it’s because payment is traditionally just a necessary part of retail, rather than an improvable or optional one. So, whereas offering shoppers the chance to stamp their initials on a handbag provides an extra service to choice-hungry shoppers, giving them options on how they pay for the handbag does not. In essence, the merchant mindset seems to be that if the customer wants the product enough, they have to pay for it in the way the retailer dictates.

Similarly, there is a case to say that as payment is a fairly complex entity, with many moving parts, the technical challenge of changing it is not something many E-commerce Managers would be minded to tackle. Instead, they focus innovation spend on the elements of their online business that make a difference to their target market when people arrive on site – such as ‘catwalk’ videos for clothing and 360° product views.

Both ways of thinking, however, are coming to an end.

Friction-free payment

Today, a better payment experience equates to a better buying experience. And retailers that give consumers the option to personalize how they pay (as well as making the act of doing so comparatively easier) have a tremendous opportunity to become preferred destinations in their markets.

Accordingly, retailers across the world are rapidly waking up to the idea of changing how their customers pay. Instead of asking them to enter their details every single time they make a transaction, they are utilising solutions that store card and personal details across devices and merchants. By doing so, they are ensuring that a large cause of ‘friction’ for shoppers is being removed from their payment systems, which in turn leads to fewer customers deciding to abandon their purchase over something as menial as a mislaid credit card. Then they are offering fundamentally different payment options, such as invoicing and monthly finance, to provide a greater degree of personalization in their online shopping environments.

This is good news for online retailers. Payment suddenly ceases to be the closure of a transaction (and, possibly, the end of that frustrated customer’s dealings with the business), and instead becomes another way in which a personalized, convenient service can be offered in a competitive marketplace. And, by bringing payment technologies into line with the rest of their online offer, any retailer can quickly boost customer satisfaction levels, gain trust and provide an experience, rather than just a process.