The impact of payment methods on e-commerce conversion rates in the Philippines: key factors and optimisation strategies

Introduction: the centrality of the payment experience in e-commerce success

In the Philippines' fast-growing e-commerce market, the choice of payment method has a direct impact on consumers' purchasing decisions and eventual conversion rates. As one of the fastest-growing digital economies in Southeast Asia, the Philippines is expected to surpass $24 billion in e-commerce transactions in 2023, but the average conversion rate is still significantly lower than the global leader. Research shows that more than 60% of Filipino online shoppers have abandoned their shopping carts due to payment inconveniences. This paper will provide an in-depth analysis of how mainstream payment methods influence users' purchasing behaviour, explore the comparative advantages and disadvantages of various payment types, reveal payment combination strategies for high conversion rates, and provide actionable optimisation recommendations.

I. Analysis of mainstream electronic payment methods and their characteristics in the Philippines

1.1 Dominance of bank transfers and e-wallets

GCash and PayMaya, two homegrown e-wallets, have reached 75% of the adult population, and their "cash-in" feature addresses the low penetration of bank cards (only 35% adults have bank accounts). According to the data, the order fulfilment rate of these two types of payment reaches 68%, which is much higher than that of international credit cards (52%), featuring the support of small amount of secret payment and mobile phone top-up credit, which is especially suitable for impulse spending of less than 2,000 pesos (about 35 US dollars).

1.2 The double-edged sword effect of COD cash on delivery

While cash on delivery still accounts for 28% of transactions (source: Statista2023), its actual conversion costs are high - an average rejection rate of 15-20% and additional logistics management expenditures reduce merchant profits by 8-12 percentage points. Notably COD usage in Tier 2 and Tier 3 cities reaches 47%, reflecting differences in trust mechanisms in the inertia of the cash economy.

1.3 Limitations of credit cards and international payments

Visa/Mastercard maintains a 17% share of usage and a higher average price per customer of 83% in the premium segment, but the 23% skip rate due to 3D Secure authentication is a bottleneck. Cross-border consumers are particularly affected by this - each additional step in the checkout process results in the loss of 11-15% of users (Baymard Institute research data).

Table: Comparison of the performance of major payment methods
| norm | electronic wallet (e.g. for money) | bank transfer | COD | credit cards |
|———-|————-|————-|———|————|
| site coverage |78% (Adult) |64% (Adult) |National Accessibility |<25% (Cardholder)|
| conversion rate |72±5% |68±7% |- |- |
| *Refund/Rejection|- |- |>18%- |

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Second, how payment methods affect the key dimensions of e-commerce conversion rates

2.1 Frictional cost analysis of the checkout process

Filipino consumers are extremely sensitive to payment efficiency, which results from each additional verification step:

• SMS CAPTCHA: churn increased by 12%
• OTP confirmed: churn rate plummets 18-22%
• KYC Identity: direct abandonment rate of 34%

E-wallets have the advantage of pre-stored user information, with an average of 2.3 steps to pay (vs. 4.7 for credit cards.) The ShopeePay case study shows that moving the "click to pay" button from the secondary page to the shopping cart page resulted in an increase in mobile conversions of 271 TP3T.

2.2 Psychological thresholds for fee structures

When the platform charges an additional payment processing fee:

• ≤11 TP3T rates: only 31 TP3T users will abandon their purchase
• 1-31 TP3T rate: abandonment rate of 111 TP3T

• 3% Rate: 24% users turn to other channels

Lazada's "Zero Fee Promotion Day" strategy, which resulted in a 40% surge in GMV in a single day, proved that price sensitivity is particularly strong in the Philippine market.

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III. Payment Preferences and Conversion Characteristics of Different Customer Groups

3.1 Manifestation of Geographical Differences

• Metro Manila: E-wallet usage of 821 TP3T (GCash accounts for 631 TP3T), average conversion rate of 711 TP3T
• Visayas: COD accounted for 541 TP3T, but the rejection rate was as high as 281 TP3T
• Mindanao region:: Bank transfer usage rate of 47%, with a completion cycle of up to 3-5 working days

3.2 Behavioural differentiation by age group

Data source: 2023 Central Bank of the Philippines Digital Payments Survey Report

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