Power of Payments Ep. 19: Stripe’s Josh Ackerman on the changing nature of online checkout

Welcome back to the Power of Payments podcast. I’m your host Ismail Umar, and in today’s episode, I’m joined by Josh Ackerman, Product Lead at Stripe.

Josh leads a team of product managers that are constantly building and improving Stripe’s core payment products, which include Stripe Checkout, Stripe Payment Links, and Stripe Elements. His team creates APIs that allow startups, growth-stage companies, and larger enterprises to accept online payments. These products are used by millions of merchants and billions of end customers in different parts of the world.

Josh joins me today to discuss the key findings from Stripe’s recent State of Checkouts report. He talks about the existing gaps between consumer expectations from online checkout and what most merchants currently offer, as well as how the checkout experience has evolved over the years.

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The following excerpts were edited for clarity.

My name is Josh Ackerman, and I’m a Product Lead at Stripe. I specifically focus on our core payment products: Stripe Elements, Stripe Checkout, and Stripe Payment Links. At Stripe, we're building financial infrastructure for the internet, and millions of companies of all sizes – from startups to Fortune 500s – use our software and our APIs to accept payments, send payouts, and manage their businesses online. My team and I specifically focus on how we can enable merchants to build the most seamless checkout flows on the internet, and ensure that their consumers have the best experience when coming to their websites and using their products.

Can you tell us why it's so important for a business to offer a smooth online checkout experience?

Absolutely. Well, I guess to start, the first thing that I want to acknowledge is that the checkout flow is probably the most important part of your business. It’s the last step – at that moment, you as a company have worked so diligently to showcase to a consumer all the value that your product or service will offer. And at the end of the day, you want that consumer to click the ‘buy’ button on their checkout flow, and to be able to do so without hesitation and with confidence that they're making a purchase, and are able to do so successfully. One of the things that's really striking is that my colleagues and I at Stripe recently published the 2022 State of Checkouts Report, and we saw a dramatic number of discrepancies between how merchants are currently presenting payment details via their checkout flow, and what consumers want and need.

Can you elaborate on that? What kind of gaps do you see between what online shoppers demand from their checkout experience and what is being currently offered by most ecommerce websites?

As part of the report, we analyzed the checkout flows of 1,600 ecommerce websites globally. And we also surveyed 1,600 consumers to see how checkout flows were matching up to their expectations. One of our first big findings was around payment methods. Consumers expect websites to offer their preferred payment methods, and 85% of consumers said they would abandon a checkout flow that didn't have a preferred payment method that they know and have used before. In North America, specifically, 51% of customers are more likely to complete a purchase if a Buy Now, Pay Later payment method is offered, yet only 33% of websites actually provide that. This is just a quick example of the discrepancy between what consumers are asking for versus what merchants are offering.

Another big learning that we had coming out of this report was around how the speed of checkout impacts customer spending. Online shoppers just want the checkout process to be fast, and frankly, they’ll leave when it's not. 60% of shoppers said they would abandon a purchase if the checkout process took two minutes. Yet, in reality, the average checkout flow takes more than three minutes. In addition, we saw that 95% of ecommerce sites make five or more of what we consider to be basic errors that slow down the checkout process. And there are small things that companies can do to really make a bigger impact. A nice example of this, beyond showing payment methods, is when a consumer has to punch in, let’s say, a postal code number, showing a numeric keypad instead of an alpha keypad on mobile is critically important. Or even enabling consumers to use digital wallets is also critically important. And yet, far too few merchants actually offer these options.

I think it would also be interesting to talk about regional differences. I believe the report looked at businesses in North America, Europe, and Asia Pacific. So, I was wondering if you came across any interesting differences in checkout-related problems with businesses in these different regions, and whether any of the issues are specific to US businesses?

As part of our State of Checkouts report, we analyzed a number of different sites globally, and also talked to global consumers. We analyzed the top 217 global B2C subscription websites that offer digital content and physical goods based on website traffic that we gathered from Crunchbase. And so, we took a look at sites across media and streaming, file-sharing, fitness apps, food delivery, e-learning, and news. We also surveyed a ton of consumers to uncover insights around their shopping behavior and trends, payment preferences, and factors that affect their checkout experience. Some examples that we heard of things that consumers are demanding include, let's say, when we're talking about global consumers, people in Poland want to see a payment method like BLIK, that they know and are familiar with. Same thing with Japanese consumers preferring Konbini. And here in the US, consumers want to see a BNPL method like Affirm or Afterpay.

One of the things that we've done at Stripe is, we have spent a tremendous amount of time and energy optimizing our products like Stripe Checkout and Stripe Payment Element to support all of these regional differences and nuances, including 25 different payment methods through a single integration. And what we saw actually, in doing so, and in optimizing these products globally for our merchants and for their customers, is that we actually were able to increase checkout conversion holistically by 3%. And when you think about that, across all of the millions of merchants that Stripe supports, that's actually a really massive conversion boost.

Can you elaborate more on that? How does Stripe plan to use the insights that it's gained from this report to resolve the checkout-related issues that companies currently face?

Totally. We loved partnering with Edgar, Dunn & Company to actually build the report, because, you know, at Stripe, if we can figure out ways to optimize checkout experiences, ultimately what that means is that we can take that burden off of our merchants. So, our merchants who are using Stripe just don't have to think as much about their purchase flows, and can instead focus on building their core products and services and their core business. What we’re doing is, we’re building products like Stripe Checkout and the Stripe Payment Element, and I'll tell you quickly about both of those. Stripe Checkout is a pre-built Stripe-hosted experience that businesses can use and customize their brand on it. Businesses that want a more bespoke payment flow can then use Stripe Payment Element, which is a set of pre-built components that merchants can insert into their own checkout pages and customize to their liking. Now, both Checkout and Elements make it really easy for businesses to provide customers with a friction-free checkout experience. Everything from the different payment methods that I referenced to supporting 135 currencies to supporting fully localized experiences in the native language of the consumer when they're coming to your checkout flow. So, for example, if there is a consumer in France who lands on a Stripe Checkout website, we’ll be localizing that page in French and providing French payment methods directly to the consumer. Lastly, we're also building and launching a one-click payment method called Link. This is a payment method that's actually shared across the Stripe network. And it's really powerful, because when a consumer joins the Link network, their one-click checkout flow actually will cascade to all of their merchants that use Stripe. And so, we're building Link and investing in Link, because we know it will support merchants in enabling them to see higher conversion gains. And it'll also support consumers who frankly don't want to type in their payment instrument details on every single merchant website. And so, we're really excited about many of these improvements that we're bringing to Stripe as a result of our State of Checkouts report.

I would also like to talk about the evolution of online checkout. How would you say the online checkout experience has evolved over the years? What kind of improvements have been made over time? Where do you see room for improvement, and how do you see the future of this space?

We’ve seen a ton of evolution in checkout flow over the course of the past decade, I would say, potentially the biggest transition is merchants waking up and having a much clearer understanding of just how complex payments are. And in learning about the nuances and complexity of the payments landscape, merchants have quite often decided to hand payments off to a provider like Stripe, who can support them. And ultimately, we have especially seen this trend, not just from our smallest startups who are coming to Stripe, but even from some of our largest Fortune 500 enterprises that are looking to focus on their core product, without having to worry about all of the overhead associated with building the right payments experience. We’ve seen that consumer trends in payments, not only as we've talked quite a bit about today, are localized on a per region basis. But they're also changing over time, with the proliferation of new payment methods, with the proliferation of new delivery services for physical goods and ecommerce, the proliferation of new ways of distributing digital content, and we really want to try and support merchants so they can take a step back and focus on their core product, without having to worry about the payments pieces.

And so, a lot of times, we've seen that merchants come to Stripe, and they take pieces of Stripe’s infrastructure, and they just insert them directly into their business. And that's really exciting for us, because we obviously love partnering with businesses to do just that, but the second piece is that it makes it so seamless for a merchant to be able to kind of take this really big, gnarly world of payments, fraud, tax, and decide, I'm going to hand that over to Stripe, and I'm not going to worry about it. One of my favorite quotes, from a business that I've worked really closely with, is: “Josh, because we use Stripe Checkout, our engineering team just sleeps better at night, knowing that it’s one less thing that we have to think about.” And that really made my day when I heard it, because it's almost like we at Stripe are part of the internal team of that business, and we’re supporting their team in being able to focus on their core product, and ideally get a little bit more sleep, too.

Now, maybe we can look into the future at Stripe. Can you give me an idea about the future plans you have at Stripe? What can we expect? What’s on the horizon?

At Stripe, we are just committed to building the best-in-class financial infrastructure for the internet. And so, when it comes to online payments and checkout flows, we really want to continue to optimize our products so that they're the most seamless, and the strongest products on the market for businesses of all sizes, and for consumers as well, who are seeing these checkout flows in the wild. But I think when it comes to where we're going, you know, we're thinking a lot, not just about building and optimizing that core checkout flow, we're also thinking about how to better take Stripe global, and accept payments from anyone all over the world, and support merchants globally as well. We're thinking a ton about how we can improve payments for platforms and marketplaces, as well as subscription management and invoices. And then we’re also dedicating a ton of time and energy to building a whole suite of revenue and financial management products, to help merchants automate their revenue collection and their financials. And lastly, we have invested a tremendous amount of energy over the past few years in our Banking-as-a-Service products. So, what might it look like for you to be able to embed financial services directly in your platform or in your product, which is where we've invested in products like Stripe Capital, Stripe Issuing, and Stripe Treasury. You're gonna see a lot more from us in these three domains: global payments, revenue and financial management, and Banking-as-a-Service. And we're excited to continue working to support a range of different use cases across all of these three domains globally.

If there's one thing that you take away from our conversation today, as you're thinking about bringing payments to your business and optimizing your business’s experience, I hope that you really think about putting yourself in the shoes of your consumers, and thinking about, if you jumped onto your website and didn't know very much about your business, would you go through and actually purchase the product or service that you're selling? In putting yourself in the shoes of your consumer, hopefully you'll be able to see a little bit more clearly, some ways that you can optimize your checkout flows and make payments even more seamless, so that when your consumer gets to that very last stage, they don't have any hesitation about clicking ‘yes’ and converting from a prospect to a paying customer. Now, as we've talked quite a bit about today, unfortunately, 95% of ecommerce sites, as we learned through the State of Checkouts report, make a number of basic errors that just slow down the checkout process for your customers. And we’re hopeful that you'll check out the report, learn a little bit about how you can streamline payments, and optimize your checkout flows to make them a little bit more seamless. And hopefully, you'll see stronger conversion and better retaining customers as a result.