PAYMENT METHODS

What does "payment method" mean?

A payment method is a means that an online shop employs to allow its customers to pay for goods or services. The payment methods a shop offers will significantly impact a shopper's decision to buy, because shoppers usually choose their preferred payment method at checkout. The more payment methods an online shop offers, the higher the probability that your customers will check out. In this way, an ideal offering of payment methods can increase sales.

What are the most popular payment methods?

Most eCommerce customers choose payment methods that they trust. The most common payment methods for online retailer are purchase on account, purchase in instalments, and direct debit. Other important payment methods include credit cards, online bank transfers, or online payment solutions like PayPal.

What is a payment system?

Payment systems refer to all processes by which buyers enter the information necessary to make a payment. This may be a mobile or an Internet-based payment system. With a mobile payment system, customers can use their smartphone to pay the amount. Internet-based payment systems also support four other payment processes: the prepaid, postpaid, direct paid, and trustee methods. When using the prepaid method, online customers pay in advance, thus guaranteeing payment to the merchant. The postpaid method means the purchaser's account is only charged after the goods or services have been ordered, e.g. via a credit card account or electronic direct debit. The direct paid method allows the customer to pay right when they make an online purchase and initiate the payment directly via the PIN/TAN process. With the trustee method on the other hand, the money is transferred via a trustee. This method guarantees the merchant will be paid and the customer will receive their order.

CARD-BASED PAYMENT METHODS

What is a credit card?

Credit cards are primarily geared toward the consumer credit sector. Depending on the cardholder's credit rating, there may be a limit on the card. Outstanding amounts are generally deducted from the cardholder's account monthly.

What is a debit card?

Debit cards can be used wherever Visa or Mastercard are accepted. They are branded with a credit card logo. But unlike credit cards, transactions are deducted directly from the associated bank account.

What is a consumer card?

A consumer card is a credit that that belongs to a private person and is only for personal use.

What are commercial cards, corporate cards, or business cards?

Corporate cards are handed out to company employees to cover travel costs or other business expenses. This way, all costs are neatly outsourced to a cost center, which simplifies bookkeeping. Corporate cards or commercial cards are subject to higher interchanges fees charged to the retailer.

What is 3D Secure for merchants?

3D Secure is a process intended to increase the security of online credit card payments. Credit card schemes have their own 3D Secure processes, such as Verified by Visa, Mastercard Identity Check, Amex Safe Key, Diners Club Protect Buy, JCB J-Secure, etc. The process works by requiring shoppers to enter their personal PIN or TANS to reduce payment defaults due to card fraud. The implementation of Payment Services Directive 2 (PSD2) in September of 2019 extended the process to 3DS 2.0, requiring Strong Customer Authentication or "SCA" as an extra security measure.

DIGITAL WALLETS

What is an e-wallet or digital wallet?

E-wallets (sometimes also called cyberwallets or digital wallets) work like an electronic pocket book for digital payments. Popular examples of e-wallets include PayPal, Google Pay, and Apple Pay.

How do customers pay using an e-wallet?

Shoppers can use their e-wallet to pay in one of two ways. First, they can preload their wallet and use it until the funds run out. This is known as a prepaid e-wallet. Or customers can set up their e-wallt to use a reference account. When the e-wallet is used to make a purchase, the funds are debited from the account. This means the e-wallet is as "deep" as the funds on the reference account allows.

What are the benefits of e-wallets?

E-wallets make transactions much faster and easier than a standard bank transfer. And merchants often pay lower transaction fees than with credit card payments.

ALTERNATIVE PAYMEN METHODS – DIRECT TRANSFERS

What are alternative payment methods?

Alternative payment methods are based on future-oriented technologies. What all alternative payment methods have in common is that the payment process does not use a traditional payment instrument. Credit cards, direct transfer, or e-wallts are examples of alternative payment methods.

What is a payment triggering service?

Payment triggers services are online mechanisms that trigger a bank transfer. In this way, they enable direct transfer as a payment method.

Alternative payment methods: What's the point?

Alternative payment methods are supposed to make things as convenient as possible for consumers by making shopping and paying as quick and easy as possible. Another frequently touted benefit is the short wait time between a purchase and delivery of the goods: in online retail, payment and shipment are nearly simultaneous! Many providers also advertise the high degree of security and flexibility when settling bills that alternative payment methods offer.

PURCHASE ON ACCOUNT AND IN INSTALMENTS

What does "payment in instalments" mean?

Instalment purchases are a kind of agreement between the consumer and the merchant. The amount due is not paid right away all at once; instead the merchant allows the purchaser to pay in at least two instalments.

What are the benefits of instalment payments?

Paying in instalments frees up shoppers to purchase and use goods right way, although they are not fully paid for yet. This lets consumers finance larger purchases that would otherwise be outside their budget. For merchants and online shops, offering payment in instalments generates larger shopping carts. One potential downside is that purchasers may overestimate their own financial situation. But with secured instalment purchase solutions like Unzer instalment, payment defaults are a thing of the past.

What does "payment default" mean?

A payment default occurs when a consumer fails to meet their obligation to pay for a purchase. Payment protection can offer merchants a greater level of security against payment defaults.

SEPA DIRECT DEBIT AND PREPAYMENT

What is the SEPA Direct Debit scheme?

SEPA stands for the "Single Euro Payments Area", referring to a cross-border payments scheme that simplifies bank transfers in countries that use the euro. The SEPA Direct Debit scheme was first introduced in 2009 and was made fully operational in all Eurozone countries in 2014. The scheme uses the SEPA standards: IBANs to identify both the payer and payee accounts as well as the BIC code to designate the payment service provider.

How does payment by direct debit work?

When shopping online, shoppers can choose to make payment by direct debit by first choosing "SEPA Direct Debit" or "Direct debit authorization" as the payment method at checkout. Now the shopper enters their bank account details. The merchant uses this information to commission their own bank to withdraw the previously agreed purchase amount. The merchant's bank informs the customer's bank of the debit, and the latter then initiates the transaction.

What's the difference between direct debit returns and chargebacks?

Since banks have no real means to check whether a direct debit order is legitimate, they offer direct debit returns or chargebacks. There are multiple reasons why a direct debit return might be issued. Perhaps the payer's account has insufficient funds to cover the transaction or was closed. Chargebacks allow the payer to object to a transaction on their account and actively demand a refund. This too might happen for a number of reasons, for example, if the goods never arrived or were shipped damaged. In cases like this, the purchaser can withhold payment.

Index of abbreviations

Common abbreviations that Unzer uses