How To Determine The Right Mix Of Payment Methods For Your Platform?

By Author: Sahil Verma
Total Articles: 160
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To ensure a smooth and secure experience on your platform, users must be able to select the payment method that is most appealing to them. How do you know which payment methods are best suited to your community?

To create the optimal payment method mix, consider the various characteristics of your users as well as the products/services traded on your platform. These are the factors to consider when determining the best payment method mix for your platform:

Geography

Different payment methods and online payment gateway are available in different regions (and other legal requirements). Furthermore, payment behaviour varies greatly by country or region.

Type of sellers

You can't accept every payment method if the sellers on your platform are consumers. Not all (local) schemes accept consumers as sellers, and some have additional restrictions. Furthermore, when a payout is made to a consumer seller, the possibility of a refund is limited, particularly with low volume sellers.

Amount of the transactions

Some payment methods (as well as banks) have ...
... dollar limits. Because of anti-fraud or AML (Anti-Money Laundering) measures, the Payment Service Provider (PSP) may also impose limits on the amounts that can be paid using a payment method.

Type of products sold

Payment methods may be restricted depending on the type of products or services sold. It may also result in increased fees for payment methods or risk assessments. A high payment for a used car, for example, is more expensive than a low payment in a transaction for a used book.

Limitations payment methods

Just because you've looked into these characteristics doesn't mean your work is done. The fact is that some payment methods have specific limitations that must also be considered. For example, the exclusion of certain product or service categories, which means they cannot be included in your mix.

Type of buyers

If your platform only sells business-to-business products or services, the payment methods used are likely to be different from those used by consumer buyers. Consumer buyers, for example, prefer to use local payment methods, whereas businesses do not allow these methods for their employees and instead prefer to work with a company credit card or SEPA bank transfer.

Guarantee payment

Some payment methods directly guarantee the transfer of funds, while others may take some time. If direct confirmation is required on the platform, you should use guaranteed payment methods like the best payment gateway so that users can be confident that the transaction was successful.

Chargeback possibilities

Some payment methods allow purchasers to request a chargeback (to refund the money to the buyer). This can sometimes be done without any feedback from the platform or seller, and other times there is a feedback loop.
Whether or not you can stop the chargeback is determined by the platform's configuration and whether or not the product or service was delivered or provided correctly. Because the platform is not a part of the transaction, providing the requested proof can be difficult. If the money has already been paid to the seller, recovering it from the (consumer) seller may be difficult (or impossible).

Pricing

Some payment methods are significantly less expensive than others. A credit card or PayPal transaction takes a percentage of the amount when the cost of a Payment Initiation (Open banking) is already as low as 15 cents. This is already 15-30 times higher for a payment of 100 rupees, let alone for larger amounts. This has a significant impact on the platform's business model as well, because it is illegal to charge the buyer more for a credit card transaction than for an open banking transaction (surcharging).

But what if the perfect mix is not available or too expensive?
It goes without saying that determining the right mix necessitates a significant amount of effort and research. You may also discover that you've chosen the right mix but are stymied by payment methods that aren't available in your area or are prohibitively expensive.

We conducted extensive research on the effect of payment mix because we have seen many platforms struggle with their payment mix. We conducted a couple of 'fake-door' tests with some partners. This is a test in which you provide a buyer with multiple payment options on the platform, though not all of them are actually available. This allows you to learn about the buyer's preferred payment method.

Fake-door test

The buyer will first select his preferred payment method by clicking on it. When it is not available, the test will display a message about it and offer the buyer the payment methods that are actually available.

This will result in information about:

The buyer's preferred method of payment

The number of transactions that are still being completed (paid) using a payment method other than the preferred one.
By running this test in an A-B split, you can also see if you are actually losing transactions because the preferred payment method is not available.

The results

All tests show that even if the preferred payment method is not available, the buyer will still make the payment using another payment method in more than 99.8 percent of the cases (second choice). This was true even when the preferred payment method, if it was available in the payment mix, would take a large percentage of the payments.