Fixing the Online Checkout

E-commerce checkouts are still too clunky. Now, efforts by payments experts and at least one new network may at last solve that problem.

In the battle for the e-commerce checkout—with a successful sale counting as a win—the accelerated checkout is gaining favor. One contender that’s not even available yet may have a jump on others.

In the e-commerce arena, friction is the big no-no, the one element not to introduce, strengthen, or ignore. It’s the element that keeps conversion rates—the percentage of site visitors who purchase from an online store—low and can disrupt the consumer’s checkout experience.

But, new advances and approaches to the online checkout are diligently cutting away at checkout friction, and payments providers are helping. With the 2023 holiday-shopping season peaking, merchants and consumers are hoping for easy checkouts and little disruption to transactions.

With an average e-commerce conversion rate ranging from 2.5% to 3%, according to Shopify Inc., online retailers look to the checkout flow to capture more sales and not impede purchases. As e-commerce sales picked up during the pandemic, especially among those who had not shopped online before and among those using their smart phones more often, the impetus for a better checkout experience ballooned.

The goal has been to increase the conversion rate and thereby boost revenue. Among the approaches many retailers and e-commerce platform providers have taken is to reduce surprises and widen customer choices among payment methods. The goal is to eliminate as many disruptions as possible in the checkout process.

One tactic along these lines is to implement accelerated checkouts. Think Apple Pay, Google Pay, or PayPal, where not only is the payment information stored, but shipping details, too. Accelerated checkout is already a trend, but will gain even broader use, says Alex Hoffman, senior vice president of payments at BigCommerce Pty. Ltd. “It’s really happening,” he says.

‘Delightful And Secure’

An expected new entrant hopes to tap that trend toward speed.

Paze, the upcoming digital wallet from Early Warning Services LLC, is another accelerated-checkout example. Though Hoffman has no announcement regarding Paze and BigCommerce, he calls the new wallet the equivalent of Zelle for e-commerce. Scottsdale, Ariz.-based Early Warning also created Zelle, the person-to-person payment service.

Announced in March, Paze is a multi-bank wallet that could have as many as 150 million credit and debit cards automatically eligible for inclusion when it launches, which it is expected to do in 2024. Paze is now in testing. It could have the crucial element of critical mass by the time it hits the market, observers says.

Aimed at easing online checkout and lowering cart abandonment, Paze would eliminate manual card entry, still a frequent checkout requirement for many consumers.

“This reliance on manual input not only introduced the potential for errors but also results in abandoned carts and lost sales, all of which drives the need for a smoother and better-engineered checkout process,” says James Anderson, managing director of Paze.

“Manual card entry at guest checkout must become a thing of the past,” he adds. “Unfortunately, it’s still very much an option that consumers end up using, despite the fact it is loaded with friction. It forces consumers to have their physical card close by and leaves room for errors. It also relies on static data. which is intrinsically less secure.”

“Concurrently, merchants face their own set of hurdles in this fragmented e-commerce payments system,” Anderson continues. “They’ve struggled to validate consumers effectively, relying on static data from physical cards. This approach harms the customer experience and causes missed revenue opportunities.

“Finally, financial institutions [are] extremely limited [in authorizing] e-commerce transactions, relying on the limited information they receive for card authorization,” Anderson adds. That “limited information, he says, consists of the transaction amount and merchant name.

Anderson says Paze could be an ideal checkout service. “We think the answer to achieving the ideal checkout is a digital payment method embedded in the merchant’s checkout, offered to consumers by the banks and credit unions they already trust,” he says.

Paze’s network of financial institutions and merchants—Omaha Steaks is an early partner, as is GoDaddy Inc., which is testing a simple integration for small businesses—will help ease e-commerce checkout, Anderson says.

“With the scale we have on the financial-institution side, at our launch in the first half of next year we will bring more than 150 million e-commerce active consumer credit and debit cards to the online checkout of participating merchants. Our goal is a ubiquitous, delightful, and secure checkout solution available to all consumers and merchants in the United States,” he says.

“The Paze vision is ubiquity across merchants and the financial institution sides,” says Matt Miller, Paze’s vice president of product. “This is about addressing a problem in e-commerce that’s existed since the early days.”

No Manual Keying

Consumers, long accustomed to speedy online shopping, want the same sense of quickness when checking out, and merchants want to make it easier for them to do so. When it’s not speedy, a sale is typically lost and the merchant’s conversion rate takes a beating.

Paze’s backers say it was designed to help alleviate that issue. Because the participating issuing banks—all Mastercard or Visa issuers in the United States—already have established relationships with consumers through their card products, card data and billing-address information will be available in the digital wallet without the consumer having to type out anything but the email address associated with the card account. “We get away from this idea of manually keying in everything,” Miller says.

Consumers will be able to add different shipping addresses and store them in Paze, too. The wallet also features a card-updater capability. The issuer can send a notice in the Paze wallet asking the consumer to update the expired card, after verification with a one-time password and supplying a card-security code.

Merchants choosing to adopt Paze will pay no fees for the service, Miller says, though typical card-processing fees will still apply. To help avoid too many wallet options on the checkout page, Paze will use an auto-appearing feature after the consumer enters an email address on the page, even if the shopper uses guest checkout.

A nearly instant connection from the merchant to Paze’s network will generate the option to use Paze for checkout if the address is recognized, Miller says. Merchants will have the capability to display a persistent Paze checkout button if they choose.

As with any card-based payment product, banks, consumers, and merchants will have to want to use Paze. With the bank part solidified, merchants, followed by consumers, will be next for recruitment.

With several channels to reach merchants, one potential Paze selling point could be that expected improvement in conversion rates. It may help capture online sales that consumers might have abandoned.

As for consumers, participating banks will likely launch marketing materials for Paze, Miller says, including in the online and mobile-banking channels. At the 2017 launch of Zelle, Early Warning’s first consumer-facing payment product, the new network conducted a brand-awareness campaign.

“Issuers will be a key channel because they are trusted by consumers,” Miller says. Chase already is sending emails touting Paze as secure and convenient.

From there, much like expedited online-checkout services from Apple Pay, Google Pay, and PayPal, Paze will present its page to confirm the transaction with the card data and address already filled in. Miller says Paze will not obstruct any other option a consumer wants to use.

No Surprises

While online checkout is generally in a better state today than in the past, improvements such as accelerated checkout are needed, Hoffman says. “For the consumers, shopping is fun. Payments is not.”

That doesn’t mean payments providers haven’t been working on improving their part of the checkout experience. “Today, we have excellent core payment providers,” Hoffman says. Also important in smoothing checkout, he says, is offering
alternative payment methods. This is “not a new development, but continues to be super important,” he says. Another big change affecting the checkout is the advent of buy now, pay later options, he adds.

Alternative payment methods—think Apple Pay or PayPal—have the benefit of already being trusted by consumers who load their payment details and shipping addresses into them.

They can be used in some instances in a one-page checkout.  The goal of a one-page checkout is closely tied to accelerated checkout use. How effective might this be? In a BigCommerce conversion report released in July, a test group of sites that offered both PayPal and Apple Pay had a conversion rate of 61.9%.

Accelerated checkout allows consumers to be recognized by their emails or phone numbers, even as a guest on a Web site they haven’t shopped at before, Hoffman says. Using this checkout option enables consumers to select their payment and shipping information in a single step, reducing keystrokes and the number of pages they must use.

“We want to get rid of surprises,” he says. That could be a fee that was explained only prior to the checkout or shipping costs and taxes unmentioned early in the checkout process. The online shopping process should be very transparent by the time the consumer arrives at the checkout page so she can use her preferred payment method without thinking about it, he says.

“The ideal online checkout combines simplicity with efficiency, minimizing typing, clicks, and decisions,” says Tom Wall, founder of TheModernBack.com, a Sarasota, Fla.-based massage and related chair retailer. “Thus, discouraging factors like complex forms or confusing navigation should be eliminated for a smooth transaction.”

‘Quick And Simplified’

Another key piece of the ideal online checkout is offering embedded payments, says Mark Bishopp, senior vice president of embedded commerce and partnerships at Fortis Payment Systems LLC, Novi, Mich. “Consumers want quick, easy, frictionless payment options, and embedded payments are key getting there,” Bishopp says.

As Alex Kantor, owner of Perfect Plants Nursery of Monticello, Fla., sees it, the ideal online checkout consists of the product page, the shopping cart, and then the checkout phase. “This traditional flow has proven effective in guiding customers through the checkout process,” Kantor says.

The checkout should include express payment methods, Kantor says, though merchants may prefer that customers complete the checkout within their platforms so the merchant can obtain proper tracking data.

And there are yet other ways payments companies can contribute to better checkout experiences, says Jared Drieling, chief innovation officer at TSG, an Omaha, Neb.-based payments advisory. Some basic support could help, whether providing a little education or providing advice for those merchants, he says.

Some of that may have to do with teaching them about the role of artificial intelligence in e-commerce. As Hoffman says, the challenges of personalization, that is, adapting Web page content to each customer’s unique interests, may be aided by AI.

For example, an AI-assisted checkout page might be able to present two or three payment options based on the customer’s past use without overwhelming the customer with checkout options. Someone shopping using an Apple computer might be presented with an Apple Pay checkout option, for example.

The checkout of today and those coming tomorrow are striving toward eliminating surprises and giving consumers choice of payment methods. As Kantor says, “The future of online checkout will likely revolve around the continued popularity of express payment methods, which provide a quick and simplified experience for consumers.”