Previous ArticleGain millions of new customers in Germany, by offering online cash payments with Paysafecash!Next ArticlePayPoint and Paysafecash bring online cash payments to the UK

Could online cash eliminate card declines?

Credit cards may be over a century old — the first ‘credit cards’, which customers could use to buy on credit from shops on an approved list, were issued by the Provident Clothing Company in 1880 — but they’re still massively popular.

Credit cards may be over a century old — the first ‘credit cards’, which customers could use to buy on credit from shops on an approved list, were issued by the Provident Clothing Company in 1880 — but they’re still massively popular. In 2018, 43% of consumers told us they’d paid for an online purchase with their credit card within the previous month. And a further 33% had paid with their debit card.

This isn’t surprising. As our Lost in Transaction research shows, consumers like using payment methods they know and trust and tend to shun those they perceive as being too new or unknown. So, it makes sense that they’d favour cards, a payment method most of us have grown up with. 

It also helps that cards are widely accepted. With 84% of online merchants accepting credit cards and 73% accepting debit cards, it’s safe to say that cards are a ubiquitous form of online payment.

The flipside is that one in ten online card payments are declined. And while a 9% decline rate might not look particularly shocking on paper, it’s a big enough number that 57% of merchants think it’s having a negative impact on their bottom line.

The need for alternative payment methods

While card declines remain a challenge, it’s not all doom and gloom. 65% of merchants say that consumers who have their payment declined go on to try a different payment method, rather than abandoning the transaction altogether.

The upshot is that a card decline isn’t automatically a lost transaction. That said, this statistic also shows how important it is for merchants to have payment alternatives in place if they’re to keep their cart abandonment rates as low as possible.

Automatically offering an alternative when a payment is declined is a widespread practice in many specialised industries. That said, deciding which payment method to deploy first as an alternative when cards are declined isn’t straightforward. Lack of a preferred payment method accounted for 19% of all abandoned carts in 2017. So, picking the wrong alternative could make customers abandon a transaction instead of encouraging them to complete it.

So how do you pick the right payment alternative?

Beyond credit cards

The average consumer owns more than one card. But it doesn’t follow that prompting consumers to try another card when their first payment attempt fails would solve the issue of card declines.

To begin with, this discounts those who only own one card or none at all. This group is much larger than you’d think. For example, according to 2017 World Bank data only 53% of consumers in Germany and 47% of consumers in Austria have a credit card. Penetration rates are even lower in Eastern Europe; according to 2019 data credit card penetration in Poland is 17%, and is lower still in Bulgaria (14%), Hungary (13%), and Romania (12%).  

More to the point, far from facilitating the transaction, requiring consumers to input new card details after a decline may cause more friction. Some may want payment to be taken from a specific account. And others may be wary of giving away a new set of financial details.

Other payment methods, while possibly avoiding the need to give merchants new financial details, are yet to enjoy widespread acceptance.

The case for online cash as the first alternative when cards are declined

Offline, cash is often customers’ fallback when a card is declined. In fact, despite the rise of contactless and other cashless payment methods, 87% of consumers still pay for goods in cash. And, 83% visit ATMs at least once a month. 

Clearly, cash is far from being dead. Rather, our Lost in Transaction research shows that the appetite for paying in cash is increasingly making its way online.

This makes perfect sense, because online cash replacement systems hit all the right notes:

  • Cash is universally accessible, including by the 31% of adults who still don’t have access to a bank account. With Paysafecash, for instance, the customer simply scans a barcode and pays in cash at the nearest payment point.
  • It’s private and secure. Paying with cash means consumers don’t have to give out their financial details over the internet.
  • From a merchant’s perspective, cash means 100% payment guarantee, with no risk of chargebacks.

To date, only 30% of merchants accept online cash replacement systems. But 56% believe a significant number of consumers want to pay with cash online. So much so, that the number of merchants that accept online cash payments is expected to increase by 50% before the end of 2020.

For those merchants who do start accepting online cash payments, the benefits are clear. Cash payments aren’t only secure for consumers, they also guarantee merchants get paid.

But, more importantly, accepting online cash means merchants can reach new customers and make more sales.

And, in an increasingly complex and competitive landscape, that could give them an invaluable edge.

Want to start accepting online cash?

With direct integration through our API, a verified shop plug-in or indirect integration through one of our verified PSPs, Paysafecash makes offering your customers the option of paying in cash online quick and easy.

Get in touch to discuss your needs.

Recommended Articles

eCash and mCommerce: A perfect match for Gen Z consumers?

Jul 23, 2020 - Almost 50% of Generation Z (Gen Z) consumers, aged 16-24, now shop more on mobile than on any other device, making them the leading adopters of mCommerce. With that trend expected to grow, how can businesses better respond to their shopping needs?

Read more

Almost 50% of Generation Z (Gen Z) consumers, aged 16-24, now shop more on mobile than on any other device, making them the leading adopters of mCommerce. With that trend expected to grow, how can businesses better respond to their shopping needs?

Read more

2021 predictions: Four trends for the payment industry in Germany and Austria

Dec 17, 2020 - It has been an unexpected year in so many ways, not least how people have had to rethink how they spend money and interact with businesses. COVID-19 changed our industry in ways we could not have imagined it would in 2020, and will continue to be an influence on payment trends for many months to come. With that in mind, here are four trends we expect to carry over from 2020 and play a big role in shaping the online payments in the next 12 months.

Read more

It has been an unexpected year in so many ways, not least how people have had to rethink how they spend money and interact with businesses. COVID-19 changed our industry in ways we could not have imagined it would in 2020, and will continue to be an influence on payment trends for many months to come. With that in mind, here are four trends we expect to carry over from 2020 and play a big role in shaping the online payments in the next 12 months.

Read more

Will payment methods be a way people use to track their spending more accurately...

Nov 10, 2020 - As we discovered when we asked consumers[1], COVID-19 and the social distancing measures many countries have put into place to combat the virus has impacted the when, where, and importantly how they are spending money. The shift to eCommerce is one clear and potentially unsurprising consequence; many people (42%) are shopping online more frequently and a significant percentage (18%) of consumers have shopped online for the first time since the COVID-19 outbreak, and this is in turn is affecting the payments methods they use. But there are other reasons habits are changing.

Read more

As we discovered when we asked consumers[1], COVID-19 and the social distancing measures many countries have put into place to combat the virus has impacted the when, where, and importantly how they are spending money. The shift to eCommerce is one clear and potentially unsurprising consequence; many people (42%) are shopping online more frequently and a significant percentage (18%) of consumers have shopped online for the first time since the COVID-19 outbreak, and this is in turn is affecting the payments methods they use. But there are other reasons habits are changing.

Read more