Choosing an online method of payment
Simply go onto any e-commerce site and you’ll realise that there are several types of payment now. Gone were the days where cash and card were the only methods of payment available! These various types of payments make it easier for customers to check out their carts.
However, not all types of online payment may be suitable for you. If you are setting up shop and aren’t sure what type of payment will be suitable for you, read on to find out more.
Methods of online payment
Debit and credit cards
Debit and credit cards are the basics of online payment. The number of online stores that don’t offer this payment method is probably just a handful. Despite the increasing use of digital wallets, credit and debit card payments remain one of the most popular today.
This method of payment does come with its own set of pros and cons. One of the biggest pros is that it’ll give you access to more customers, especially if you’re going to venture into the international market. However, security and fraud risks are also high since everything is conducted over the internet.
Visa and MasterCard are the two top credit and debit cards used in Singapore. As of 2018, Visa has 3.3 billion cards in circulation worldwide. It is also accepted in many physical stores all over the world, other than Singapore. Though MasterCard’s circulation numbers are slightly lower at 2.3 billion as of 2020, it is still accepted by many merchants globally as well.
Most popular banks in Singapore including POSB, HSBC, Maybank, Citibank and OCBC all have debit cards that offer either Visa and or MasterCard. They also have merchant accounts specialised for business owners.
Digital and mobile wallets
Most smartphone users in Singapore today would be familiar with PayLah! and PayNow, two of the most popular digital wallets these days. These digital wallets allow the user to store, send and receive money for purchases made online. Other digital wallets we have around include Google Pay and Apple Pay.
Many users are attracted to digital wallets by available promotions, rebates and reward programs that are offered on these platforms. Using these payment methods will allow you to respond to your customers’ preferences while providing a smooth process as well.
However, you may want to reconsider opening up a digital wallet if you have plans to go global. Most digital wallets have a high degree of localisation, which means that you will need to accept the e-wallet most used by your target market.
Direct debits are popular among services that require recurring bills such as subscriptions or memberships. How this works is that the amount spent by the customer is deducted directly from their account to yours. Merchants are given their customer’s bank account information to deduct an amount at a specific time each week, month or year.
Most sellers will send a confirmation message or email to the customer to inform them of the deducted amount, though debits have been pre-authorized. The most prominent direct debit payment that we have in Singapore is GIRO, which is mostly used to pay bills to government agencies.
Direct bank debits are beneficial to merchants as they offer both on-time billing and less admin work. It also makes it convenient for customers as they only have to settle payment details once and not have to worry about it again.
However, there are some cons that you should consider before jumping into direct debit. Some of the more prominent ones include longer settlement periods as it takes around 5 days to pull money out of customers’ accounts.
Another thing to consider would be the different rules and regulations in each country. Merchants should be familiar with the standards that are specific to their geographical area.
Similar to bank debits, bank redirects allow customers to pay online using their bank account. However, they have an additional step of verification that requires users to go to their online banking or payment gateway page to authorize the payment.
There are several types of bank redirects. Hosted payment gateways direct customers away from your website’s checkout page to the Payment Service Provider’s (PSP) page to confirm payment details.
Self-hosted payment gateways allow customers to make payments on the merchants’ websites themselves. Payment details that are entered by the customers are sent to the payment gateway’s URL directly. This allows merchants to have control over the whole payment experience as it is all on the same website.
However, merchants will need to be familiar with the technology to work around possible hiccups in the system. If you would like to use this method, it is recommended that you hire technical support to help you with your payment gateway.
API-hosted payment gateways process payments using an API or HTTPS after customers enter their credit or debit card information. These allow integration with mobile devices for a smoother user experience and also give the merchant full control over the user interface and shopping experience.
The only downside to this method is that merchants are required to be compliant with additional PCI DSS regulations and are required to have SSL certification.
Some of the top bank redirects in Singapore include eNets and PayPal. The latter is one of the most popular and accessible payment gateways, boasting 377 million active users and merchants.
Buy now, pay later (BNPL)
The BNPL model is a credit payment option that customers can use. Instead of paying everything at one shot, payments are split into instalments, usually interest-free. These days, the BNPL model can be found for many small purchases as well, not only big-ticket items like branded goods.
This method allows merchants to have access to a wider range of audiences by offering instalments. It makes expensive items more affordable, especially for younger people. However, this model encourages consumer debt, which can affect shoppers mentally and emotionally.
Some popular BNPL providers in Singapore today include Rely and Hoolah. Hoolah splits the price of the product into three interest-free instalments for customers, but allow merchants to receive full payment within 4 days. It also allows merchants to integrate Hoolah into their site seamlessly.
Though most people in Singapore now own bank accounts, there is still a minority that does not. These cash-based vouchers accommodate such individuals who don’t own bank accounts and allows them to shop on e-commerce sites such as Qoo10.
These cash-based vouchers allow customers to make payments at convenience stores, supermarkets, ATMs and banks in cash. Merchants issue a transaction reference number and a scannable voucher that is used for their in-person purchases.
However, there are some cons that you will need to take note of for cash-based vouchers, including potential system glitches at in-person payment stores that could be out of your control.
Cryptocurrencies are not physical coins or cash, but digital tokens that are decentralised digital currencies with no central authority or government to regulate them. These cryptocurrencies can be traded or used to buy goods and services. The price for such cryptocurrency is set by the market’s demand and supply and there is no standard value for it.
So far, the top cryptocurrency payment gateway in Singapore is Triple-A. It is compliant with the Monetary Authority of Singapore with no chargeback and no risk of fraud. It is also easy to integrate this with platform plugins or APIs.
What type of payment to use
Now that we’ve gone through the various types of payments you can use, we hope that you have a better idea of which model will be suited for your company. Remember that each type has costs involved as well, so be sure to weigh the pros and cons before committing.
If you have any other concerns with accounting and other paperwork, be sure to reach out to us for assistance too.
It can get confusing to decide what type of payment method you should adopt for your online store. Check out our latest article to see some of the options available to you.