Payment Options for E-Commerce Businesses in Singapore
Singapore’s e-commerce market is slowly positioning itself as a key player in the country’s retail industry. E-commerce is expected to make up 6.7 per cent of all retail sales in the city-state come 2025, triple that of the 2.1 per cent figure in 2015. The net worth of the e-commerce industry was estimated to reach more than US$5.4 billion (S$7.46 billion) in the next seven years, according to a 2017 financial report by Google and investment firm Temasek Holdings.
If you are interested in getting a slice of Singapore’s vibrant e-commerce pie, an essential factor you have to consider before setting up your e-commerce business is your choice of payment option. This choice is crucial to the actual online sales that you make.
As customers become increasingly accustomed to making online payments, their expectations for smooth online transactions and a secure payment option also increase. Your site may drive an impressive amount of traffic every day, but if the payment option you use does not meet your consumers’ needs, there is a high possibility that they will abandon their shopping carts and cancel their transaction. The better you are at understanding these needs, the better your e-commerce sales will be.
Investing money into your site’s user interface and user experience (UI/UX) design and online marketing is essential. A customer’s first interaction with your online store is through the optimization of these factors. But how they purchase the items you sell is dependent on the payment processing tools that you use.
The payment options available for e-commerce businesses in Singapore largely depend on payment gateways. Knowing how to choose a suitable payment gateway to integrate into your website is necessary for your business operations. Moreover, it is important to understand what a payment gateway is and how crucial it is to your site’s payment process.
What is a Payment Gateway?
A payment gateway is an e-commerce service that processes the credit or debit card payments that customers make when they purchase items online. It is responsible for authorising and facilitating the payment transaction through the transfer of credit or debit information between an online store and the acquiring bank.
A payment gateway’s role in the payment process is important to ensure the transaction is authentic and secure from possible fraud before an online payment can be finalized. The 1997 financial crisis in the Southeast Asian region created widespread consumer mistrust for B2C online payment transactions due to the prevalence of online fraud and data compromise issues. Payment gateways served as essential tools in the re-establishment of e-commerce business operations in the region and the gradual elimination of consumer mistrust and reluctance.
Factors to Consider When Choosing a Payment Gateway
There are specific factors you have to consider when choosing a payment gateway. The three most crucial ones are listed below:
1. Transaction fees
Every time a payment gateway processes a payment transaction on your site, its service provider demands a fee from you in exchange for allowing you to use their application. Most payment gateway service providers in Singapore charge based on a fixed percentage and a flat fee rate per successful transaction. There can also be other service charges such as set-up, monthly, and annual fees. Set-up fees are usually charged as one-time payments while monthly and annual fees are only incurred when you avail of their subscription plans. Some service providers estimate fees based on your monthly sales volume (e.g., PayPal and Stripe). You should determine which fees are the most cost-effective for your enterprise before you decide which payment gateway to use.
2. Accepted Payment Methods
Accepting payment online is an integral part of your business. You need to examine the online payment methods that your target audience prefers. Unsurprisingly, credit cards dominate in this aspect at 74%, with Visa having the majority share at 57.2%. But a considerable number of customers choose alternative payment methods, such as direct debit, bank transfer, and cash-on-delivery. If you also want to cater to their needs to increase sales, you would need a payment gateway that supports these payment methods.
3. Ease of Technical Integration and User Experience
The amount of time it takes for a payment gateway to be wholly integrated on your website largely depends on the degree of user experience and customisation that you anticipate it to provide. It is important to test its technical integration vigorously to avoid unnecessary payment problems that may cause your customers to cancel the transactions they intend to make. You can choose between a hosted payment gateway and an integrated payment gateway.
A hosted payment gateway redirects your customers from your checkout page to the website platform of your selected payment processor (e.g., PayPal) where they provide their credit card information and confirm their transaction. An integrated payment gateway, on the other hand, connects to your website through its application program interface (API), so customers do not need to leave your site to make payments.
A hosted payment gateway is ideal for new e-commerce businesses because it is easier to set-up and the service provider will be the one responsible for meeting all data security requirements and legal compliance methods. But unlike an integrated payment gateway, it offers limited customisation options. This may come as an issue to you especially when you make updates on your website’s UI/UX design.