New Zealand may once have lagged behind the rest of the world in the rise of e-commerce, but that is no longer the case. In 2018, local online shopping growth vastly outpaced in-store shopping by 14%, according to an NZ Post report, with 1.8 million Kiwis spending a collective $4.2 billion on online goods.
Entrepreneurs are taking notice of our positive outlook on online shopping and are rushing to meet this demand. One of the most important decisions you as an online retailer need to make is deciding on what payment options to offer your customers.
This post will walk you through the main steps to consider when choosing a secure online payment method, as well as the top eight service providers in New Zealand to help you work out which is best for you.
Step 1: Don’t leave this decision until the last minute
The biggest mistake new business owners make is to put off making a decision about which online payment solution to use until the last minute. You need to think about this topic before your e-commerce website is anywhere close to being launched, as it can take a long time to get the facilities in place.
Also, when it comes to accepting credit cards, your bank may not be willing to give you a facility for online payments at all.
The biggest mistake you could make is putting off the decision about which online payment solution to use until the last minute.
Step 2: Identify how you want customers to pay you for your products/services
What kind of customers do you want to target? Consumers have different levels of comfort with shopping online, particularly when it comes to parting with their money.
Are your customers accustomed to using a credit card to buy things, or might they be happier with a direct bank transfer (a behaviour heavily influenced by being brought up on TradeMe)?
Then of course there is the issue of accessibility. found that nearly 50% of Generation Z Kiwis have never owned a credit card. This is in addition to 19% of Millennials, and 7.5% of both Gen X-ers and Baby Boomers. To avoid missing out on a lot of potential custom, you must ensure you offer a range of payment methods that cover both credit and debit options.
It’s the modern age. People want choice. The retailers who offer this choice stand to win.
Step 3: Consider your online payment options
Broadly speaking, your online payment options include:
- Accepting credit card payments online via a payment gateway.
- Accepting credit card payments online via PayPal.
- Accepting payments direct from your customers’ bank accounts.
The specific options you’ll see will seem endless – scheme credit and debit, direct bank transfer, gift cards, prepaid cards, Q Card, Prezzy cards. Here’s a little more detail about some of their broad categories:
Credit cards
To accept credit card payments online, you will need a merchant account from your bank. Note – your bank may not be willing to provide you with this, and you can’t use some payment gateways without one. For this to work, you’ll also need a relationship with a payment gateway provider, who needs to integrate with your website.
What is a payment gateway?
A service that connects all participants in a transaction together and facilitates the online payment. A gateway can either be hosted by the provider (customer checks out their shopping cart, is redirected to another website, types in their credit card details) or integrated with the merchant (no redirect necessary).
Alternatively, you can offer your customers credit card options via PayPal, but this is more expensive and your customers will need to be diverted to the PayPal environment. PayPal rose to fame thanks to eBay, which is perhaps one reason it’s not as popular in New Zealand as other parts of the world.
Are there fees involved?
Yes. There are a few fees that you should be aware of when considering offering credit card payments online. Your bank will charge you a merchant service fee (MSF), which is typically a percentage of the transaction value (anywhere from 1-4%, but typically around the 2-3% mark for a startup business in a low-risk category).
Your payment gateway provider will also charge fees. Usually there’s a startup fee involved, as well as transaction fees – these are sometimes a percentage, and sometimes a flat rate. Some providers also charge a monthly fee with transactions bundled in. In short, it can be confusing.
Direct bank transfers
For your customers who don’t possess credit cards, you can offer them to pay you online via their internet banking service – which will require you to provide them with your bank details. The downside of this is it’s not very elegant. Cart conversion will be terrible, and the payment reference errors will drive you crazy.
The solution? Direct bank transfer specialist systems such as POLi. These systems both utilise the customers’ internet banking to enable them to make instant payments online, but don’t require the customer to actively leave your website and go to their bank’s.
Everything else
Outside of bank transfers and credit cards, you could consider all the other card schemes – loyalty, Prezzy, Q Card, etc. To be honest, though, most NZ retailers would consider these to be pretty low down the list of priorities.
Eight online payment providers in New Zealand
One thing to note before we start our list: The main NZ banks often have a branded payment gateway offering of their own (e.g. BNZ Buy-line+ or ANZ eGate). However, this is usually the same system as one of the main payment gateway providers, but rebranded to look like the bank’s own service.
- Paystation
Paystation, a TradeMe company, is a local business (formed in Palmerston North) used by thousands of New Zealanders. It offers both hosted and integrated payment gateway options, which in short means you can either cut the IT requirements on your end by letting Paystation host your gateway, or you can keep it all in-house (which does come with it extra bank and security requirements). - Windcave (formerly Payment Express)
Regular online purchasers in NZ will have encountered Payment Express, now Windcave, at some point in their lives. Its prolific throughout the country, supporting a variety of payment brands (Visa, Mastercard, Apple Pay, Q Card, Account2Account, to name a few) and integrating with all major e-commerce platforms, like Shopify or Magento. - Bambora (owned by ingenico – the largest payment company in the world)
Bambora, formerly IP Payments, bills itself as an online payment solution built to grow businesses from the inside out. For those who already have an internet merchant account with their bank, Bambora can integrate into your system to offer its payment solutions to your customers. Don’t have a merchant account? With Bambora, you don’t need one. - Stripe
The Stripe payment platform is used around the world, and by some big names – Kickstarter, for example. It’s a developer-centric platform, claiming to be quick to integrate and regularly updated with new features. - PayPal
PayPal is your option if you can’t (or don’t want to) get a merchant account from your bank. Getting set up on PayPal is relatively simple, hence its popularity with small businesses, but the transaction fees can be steep – which may eat into your profit margins over time.
Direct bank transfers
- POLi
POLi has been allowing customers with New Zealand bank accounts to make purchases without using a credit card since 2007. It offers a seamless experience delivered via the customer’s online banking service. All they have to do is log in to their bank account via the POLi portal and confirm the payment.POLi’s service is extremely secure, simple to use, and above all else, allows people to shop through a familiar platform – their online banking account. It’s an attractive selling point for online shoppers and could well increase your online sales with fewer transactions dropped during checkout.Ease of use and familiarity are great allies of e-commerce since there’s still a bit of caution coming from Kiwis when it comes to shopping over the internet. Letting people operate from a familiar territory significantly helps bridge this trust gap. - Account2Account
Account2Account (owned by Windcave, formally Payment Express) offers a similar service to POLi, but given it hasn’t been around for quite as long, it hasn’t been as exposed to local consumers as POLi. Account2Account’s fees are a little different too – for example, they charge a monthly fee.
Buy Now Pay Later
‘Buy Now Pay Later’ has risen in popularity in New Zealand over the last few years. Buy Now Pay Later are websites or apps that allow customers to purchase a product online and now without having to front up the full price. The service provider, such as Afterpay, pays the retailer the full price and the consumer pays the service provider back in installments.
This could be very attractive for customers who can’t afford, or don’t want, to pay the full price straight away. And, unlike credit card payments, you don’t pay interest on the installments.
However, whilst you don’t pay interest on the payments, some service providers do charge additional fees (such as for late payment). Read this comparison by Interest.co.nz for comparison of each provider (from August 2019).
All information below is taken from each provider’s website.
- AfterPay
AfterPay allows you to ‘Buy what you want today, pay for it in four equal installments, interest-free.’Details
- 4 equal payments, 2 weeks apart
- The first payment is due at the time of purchase
- No interest charged on payments
- There is an $8 late payment fee if payments are not made on time (capped at $40 or 25% whichever is the highest)
- Humm
Humm also slices up purchases into equal repayments, but the timing of these depends whether you made a large or small purchase.
Details
- For small purchases (up to $1,000), choose either five fortnightly or 10 weekly payments.
- For large purchases (up to $10,000), payments are sliced into fortnights.
- 20% of the total is due at time of purchase for either payment plan.
- No interest is charged on payments.
- Fees do apply – a $10 late fee for either payment plan, and a $20 establishment fee for ‘big things’ purchases, in addition to a $2.50 monthly fee.
- Genoapay
Pay 10% upfront and the rest in 9 weekly automatic payments.Details
- 10% upfront payment with the rest split into equal 9 weekly payments.
- No interest charged on payments
- There is a $10 late payment fee which is rises to $30 after 7 days (capped at $30 per card)
- Ziip (previously PartPay)
As with AfterPay, you make a purchase and then pay it off over 4 equal installments without incurring interest.Details
- 4 equal payments, 2 weeks apart
- 25% due at the time of purchase
- No interest charged on payments
- There is a $8 late payment fee and a further $8 for every week it is outstanding
- Laybuy
Details
- 6 equal payments, paid weekly
- First installment of 6% is payable at the time of purchase
- No interest charged on payments
- There is a $10 late payment fee for each payment not made on time (capped at $20 for missed payments)
Conclusion: Choose your online payment solution wisely
As you can see, there’s a lot to consider when it comes to choosing the perfect online payment method for your e-commerce business. Depending on which segment of the market you want to target, your long-term business plans, the state of your finances, and your functionality preferences, your vision of ‘ideal’ will vary.
All of the above-mentioned solutions are reliable and tested, but it’s up to you to make the final call when it comes to picking the one that works for you. Finding that ideal fit when it comes to payment methods is something you can’t get any other way.
We hope this article helped you make the right decision!
What are your thoughts on the best online payment methods in New Zealand? Let me know in the comments below!
Until next time.
Jeff Skidmore
Director, POLi