Payment method

The decision to operate in a foreign market also involves market research, as it is necessary to determine which payment methods are most commonly used in each market. This information then needs to be integrated into the payment system on our website, as different countries have different payment methods for online purchases.

Here is a brief list of various payment methods, from technologically primitive to currently most popular payment methods.

Cash on Delivery (COD)

With this method, the customer makes the payment upon the delivery of the items by the delivery service. This means that we do not receive payment for the order when it is placed on the online store but only upon the delivery of the package. In the case of our own package delivery, the customer makes the payment directly to the online store, while in the case of delivery by delivery services, the payment is usually made to their account, and the delivery services later transfer the funds to our account.

With cash on delivery, we need to be cautious about delayed receipt of funds, as there may be several days between the order and the receipt of funds. Payment usually takes at least one day, but it can take longer, especially for orders to remote addresses, which can take a week or two, depending on the delivery time.

For larger stock turnovers, especially for new stores, this payment method can tie up a significant portion of available funds.

We also need to be careful about uncollected packages, which are most common with this payment method. This happens mainly because customers have no obligation to collect the package since they have not yet made the payment. Additionally, customers may change their minds, especially for impulsive purchases.

Cash on delivery is more expensive due to the delivery process, as there are additional costs associated with it.

Bank Transfer

In this case, payment for the order is not made immediately. Upon placing an order, the user receives payment details and the order is dispatched after the payment is received. This payment method offers higher security in terms of receiving the items and causes fewer issues compared to cash on delivery.

However, payment by bank transfer presents a challenge to online stores due to the slightly different order processing procedure. First, we need to wait for the payment and then process it appropriately, which can result in a longer delivery time. We must check the payments with the bank and then send out the paid items. If the banks have external system connections, we can automate the entire process. Otherwise, we may need to manually review transfers, which can take additional time. In both cases, we need to ensure the use of references or reference numbers to track orders and received payments. It is common for customers to overlook this aspect, which leaves us with more research work to reconcile and deliver items correctly.

Pre-Paid Cards

Pre-paid cards can be purchased in stores, and many banks also offer them. These cards have a predetermined amount of money, and users can load them with funds whenever needed. Pre-paid cards provide a secure and excellent option for online payments, as the customer only has access to the funds available on the card. For more expensive orders, users may need multiple pre-paid cards. These cards are popular among customers who are concerned about online fraud and prefer not to use their personal bank cards for online transactions. Customers often use pre-paid cards because they know that they only have access to the funds available on the card, limiting the damage in case of card abuse.

Debit Cards

Debit cards are a common online payment method, as they are available to most users of banking services. They are typically used by customers who want to stay within their available financial means. Debit cards use the funds available in the user's transaction account, and the order amount is debited immediately, which is different from credit cards, where the amount is charged to the account at the end of the billing period.

Credit Cards

Credit cards are among the top global payment methods, especially for online orders. By offering the option to pay with credit cards, sellers can quickly expand their sales and reach a broad global audience. Using credit cards for online payments is straightforward, as customers only need to enter the card number, expiration date, and security code before making the payment.

The Card Verification Number (CVN) is the three-digit number on the back of the credit card, used for additional security against card abuse.

3-D Secure

With the help of the 3-D Secure security standard, you can provide customers with even better security by adding additional verification of the cardholder. This program reduces the risk of unauthorized card use by third parties, such as card thieves or individuals who have obtained card information without authorization.

3-D Secure requires customers to go through an additional step, which can be challenging for some who do not use payment cards frequently, and it may impact the success rate of payments. However, it significantly enhances payment security and reduces the risk of card abuse. Currently, 3-D Secure is available only for Mastercard and Visa credit cards.

Data Security and PCI Compliance

PCI DSS is a global security standard applied when handling personal data in an online store (e.g., debit and credit card numbers). This security standard is necessary for storing, transmitting, and processing card data because in case of misuse, the provider may cover the costs of misuse and may also be criminally liable for the misuse.

This standard represents a unified approach to protecting sensitive card data and preventing card abuse in the payment card industry. Implementing the standard provides a higher level of security, maintains trust, protects against misuse, and safeguards against financial losses and damage to reputation. It is designed for organizations that handle cardholder data, either directly or indirectly.

The standard's requirements include establishing and maintaining a secure network, protecting cardholder data, implementing a vulnerability management program, implementing access control measures, regular monitoring, network testing, and maintaining a security policy.

Achieving compliance can be a significant financial burden, so many smaller merchants choose to process cards through a payment provider, avoiding the need to handle credit card data and the need for PCI-compliant pages.

Installment Payments and Fast Financing

Due to the growing desire for shopping, installment payments and fast financing are also popular. In these cases, the customer does not need to pay the full amount of the online purchase immediately but can pay gradually or in installments. There are various ways to implement this type of payment, from more complex methods that require providing a lot of information and signing multiple contract copies to those that only require a tax number and agreement with the terms of the transaction. It depends on the type of system we implement, the level of payment protection, market development, etc. In general, installment payments work by the customer ordering the desired items from the merchant and arranging payment with an intermediary who approves the payment on behalf of the customer and then collects payments from the customer in agreed-upon installments.

Mobile Payments and E-Wallets

Mobile payment offerings are on the rise. Currently, most of them do not yet have widespread global adoption and a large user base, but the situation can change rapidly due to the popularity of such technologies, as technological giants are already offering or developing these payment methods.

Examples:

Alibaba - AliPay

Apple - Apple Pay

Google - Google Pay

The advantage of these systems is primarily enabling quick and easy payments across different systems. Additionally, with online wallets, there is no longer a need for physical money in the bank since we have it in the form of digital currency in our digital wallet, typically on our personal phone. Consequently, transactions are faster, and payments are not restricted by bank working hours.

The use of digital wallets has increased with the development of smart contracts and cryptocurrencies. Many cryptocurrencies aim to become one of the leading payment methods in the future.