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Payment Method Breakdown for Digital Commerce

Many of the questions we get asked about online billing are focused on how prevalent certain payment methods are and which ones our merchants should offer for their customers.

As our CEO discussed in his last webinar (Innovation in Business Models), the overall breakdown for payments by type across all ecommerce is summarized below with information from Javelin Research:

  • Debit & credit cards: 71%
  • Other: 29%

The 29% labeled “other” consists of everything from bank transfers (ACH / ECP), PayPal, mobile SMS billing and additional alternative payment methods such as BillMeLater. As this breakdown is measured across all ecommerce, the results are skewed towards internet retailers such as Amazon.com, Ticketmaster and airlines. For digital commerce (merchants only offering digital goods and services and driving revenue with subscriptions, virtual goods or virtual currencies), the results are even more biased towards payment cards. Also, the mix of alternative payments will be different with the most common ones being prepaid cards, PayPal, and SMS billing.

However, not all payment card brands are created equal – while we were digging through the mountains of data handled by CashBox recently, we found a nice high-level summary for the breakdown of the payment cards brands (credit & debit) that passed through our systems last year.

  • Visa: 63%
  • MasterCard: 26%
  • American Express: 9%
  • Discover: 2%

As you can see, the overwhelming majority belongs to Visa, with Mastercard making up just over a quarter of card-based transactions. The other card brands (Carte Bleu, JCB, Diner’s) make up a negligible percent of transactions. Admittedly, this is skewed towards the US, as over 2/3 of our merchant’s customers pay in US Dollars. Combining this with the ecommerce statistic, this means that Visa is responsible for almost 45% of all transactions on the internet.

As always, your mileage may vary with customer demographic and product uniqueness, but the key takeaway for merchants should be to focus on the big 2 or 3 brands and think about reducing the number of payment card choices on your buy page.

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