Although PayPal has been heralded as an easy-to-use payment service with a high adoption rate among merchants and consumers alike, the platform’s users have a 14 percent lower conversion rate on mobile than those who pay by credit card, suggesting that retailers are using the wrong approach.

Analysis by Moovweb shows that while PayPal dominates the mobile payments space, the service is alienating some consumers by adding another step to the already-fickle checkout process on smartphones. Retailers also have not tested PayPal checkouts as readily as they have credit card checkouts, meaning they might be unaware of issues plaguing the user experience.

“There is no doubt that mobile sales are crucial for ecommerce retailers and online shopping carts,” said Haresh Kumar, vice president of marketing at Moovweb. “Converting user influx into paid customers requires not only a smooth and intuitive mobile browsing experience, but a clearly defined, no-hassle mobile checkout.

“Today, there is no clear standard for payment methods and PayPal certainly has a huge opportunity to expand its brand as the default mobile payments provider,” he said. “What we found in our analysis is that smartphone users have a 14 percent lower conversion rate through PayPal’s Express Checkout product than by entering traditional credit card information.

“PayPal’s conversion rates are lower because in many retailers’ cases, it adds more steps to the process rather than simplifying it. Key challenge here is to get retailers’ buy-in to adopt the payment processor and integrate it such that it adds value to the customer experience.”

Conversion rate challenges
Moovweb conducted its analysis based on two million page views gleaned from more than 750,000 smartphone shoppers. The company discovered that mobile users who completed checkout with PayPal had a 14 percent lower conversion rate than individuals who opted to pay via credit card.

These statistics may seem surprising, especially since PayPal enjoys eight times as many customers as Apple Pay, another big player in the payment sector. It also overshadows Google Wallet in terms of usage.

Seventy-two percent of the nation’s largest online retailers allow shoppers to check out via PayPal, meaning that many are likely experiencing some of the challenges the platform poses.

For new users in particular, PayPal adds another step to the payment process, as shoppers must leave the retail site and load the PayPal site before returning to the mobile checkout. These steps have the potential to be more time-consuming than entering credit card details.

Additionally, retailers have been found to be less likely to test PayPal experiences, and more likely to hone in on credit card checkouts. Consequently, bugs and other user experience problems are more common for PayPal users.

Although only 20 percent of mobile shoppers use PayPal in lieu of a credit card, it is still paramount for ecommerce companies to provide a seamless process, regardless of which payment channel customers are using.

“PayPal is still used overwhelmingly more frequently with mobile consumers than other online payment services like Apple Pay or Google Wallet, but mobile customers are more fickle and abandonment rates are higher,” said Kendra Cook, senior analyst at Moovweb. “The key issue is less with PayPal Express Checkout and more with how retailers are implementing it for mobile.

“Retailers need to constantly think about ways to delight their customers through the mobile experience and ensure all integrated technologies work just as smoothly as their homegrown technologies,” she said. “How PayPal works is not a given. The issue is that it’s not looked at in the same detail.

“Retailers just assume it’s right without taking so many new issues into account. Is the mobile experience as clear as on your Web site? Everything you do to make your site more complex adds latency, and you need to think it through and test it.”

Other potential challenges include PayPal requiring a log-in and unclear order submissions.

Looking ahead
Despite its pitfalls, PayPal should not be eliminated as a payment option for retailers’ customers. One in five shoppers already choose PayPal during their transactions, with that number expected to increase as mobile payment usage receives wider adoption.

The platform has also been moving forward with one-touch commerce services.

PayPal’s multichannel payment solution One Touch has generated more than 10 million users in its first eight months, alluding to a potentially promising future as a mobile payment competitor (see story).

Ultimately, merchants must ensure that their PayPal-enabled checkouts are fully optimized and tested.

“Today’s consumers have become accustomed to immediacy in all aspects of their lives: instant search results, music downloads, email messages, digital photos and streaming video, to name a few,” Mr. Kumar said. “As the pace of daily life continues to accelerate, consumers will expect their payments to keep up.

“Customers want immediacy, convenience, control, relevance and security, and they will use technologies that make their lives easier,” he said. “We still see that the majority of mobile commerce is conducted on mobile sites and not on the apps.

“Payment services like Apple Pay and Android Pay are still very app-focused. Their mobile site payment solution has to be simple and value-added for both ecommerce retailers and consumers.”