Alternative Payment Methods: a must or an advantage?
Off-hand spoiler: according to the World Payments Report 2020, the rise in eCommerce and alternative payment methods is expected. The world economy is steadily driving towards the cashless model. Sure, the COVID-19 pandemic deserves a separate focus in this matter. Due to the pandemic crisis, cashless payments became a must for market competitiveness. Although debit and credit cards still stand at the head of popular online shopping tools, alternative payment methods are starting to outperform. Users prefer to pay easily and quickly, so digital wallets, QR-codes, mobile apps, prepaid cards, etc., have become widespread. Intensive growth in the number of consumers who prefer to use mobile devices for shopping on the Internet, instead of traditional online shopping, using a computer or laptop, also fueled this trend.
Alternative payment methods: types and the concept explained
Alternative payment methods (APM) represent any form of payment that is not any major credit/debit card scheme or cash. Simply put, it’s an ability to pay for goods and services in other ways than traditional ones. New technologies allow customers to take advantage of existing online banking, digital wallets, and even smartphones to make payments using biometric data, which increases the popularity of APM.
The APMs can be roughly divided into 3 groups:
Wallet-based solutions. These are mobile transactions and e-wallets for online payments (e.g. PayPal, Alipay). Electronic wallets are really convenient and offer shoppers the secure storage of funds. You can replenish your wallet in various ways. Almost any person now uses a mobile device, which basically becomes a wallet. Such payment methods are gaining popularity due to their convenience and ease of use.
Bank transfer (also known as wire transfer or credit transfer). This is when money moves from one entity or person to another. Payments via bank transfer require buyers to confirm the transaction with the online bank. The popularity of bank transfers is growing at almost the same rate as the popularity of e-wallets.
Cash-in. There are two types of cash-in: prepaid cards, which run on traditional platforms such as Visa and Mastercard, and prepaid accounts, which work the same as prepaid cards but operate outside the credit card system. The cash-in card must be replenished in advance to make a payment, and the available funds on the card are actually the spending limit.
Choosing payment methods: new consumer behaviour trends
According to the survey of Capgemini (as of August 2020), the world pandemic recalibrated the consumers’ behaviour in the matter of payment method choice.
- 41% of cash users tried a contactless card;
- 35% of card owners added it to a digital wallet (the reasons for that are speed, convenience, and ease);
- 27% of customers experimented with QR-code payments (2 out of 5 people were aged above 40).
The top two factors that motivated users to opt for QR codes or digital wallets are the speed of transaction and the convenience of paying anytime and anywhere.
Alternative Payment Methods Leading Regions
- Asia-Pacific region — 58%
- Europe, the Middle East, and Africa — 49%
Accepting alternative payments
Customers tend to use alternative methods to pay for purchases online quite often. For instance, alternative payments make 49% of total annual volume in Europe, the Middle East, and Africa and about 58% in the Asia-Pacific region. That is if merchants do not offer their clients alternative payment solutions, they might lose from 20% to 30% of sales. Supporting alternative payment methods is an essential advantage for those who plan to expand business abroad.
The tricky thing about alternative payment methods is that they tend to be local. So, it would be just perfect if you offer your clients their preferred ones. Here’s the list of the most used payment methods in the world.
|Asia Pacific||North America||Europe||Latin America|
|Bank transfer||American Express||Online banking||Elo|
|Alipay||Interact Debit||Klarna||American Express|
|WeChat Pay||Interac Online Payments||Giropay||SafetyPay|
|Visa||Interac in-app||SEPA Direct Debit||OXXO|
|Mastercard||7 Eleven||QIWI||Astropay Card|
|eWallets||Western Union||Digital wallets||Discover|
Choosing alternative payment methods for your business
Accepting alternative payment methods is an opportunity to grow your sales and gain more customers. So, it would help if you were conscientious about choosing the right ones to provide the smoothest online shopping for your customers. Here are the steps you can take right now.
Step 1. Define, if your business requires it
Here are the market segments requiring alternative payment methods the most — check if your business is among them.
- Forex, binary options
- Gambling, betting
- SMM agencies
- Digital goods & Video games
- Game marketplaces
- Dating websites
- Freelancers, web-design studios, IT teams
- Professional service
- Info business, training
If the answer is “yes”, move to the next step.
Step 2. Consider these criteria, while choosing what methods to support
To decide what payment methods suit your business best, answer the following questions:
- Is this method as affordable as beneficial?
- Will the clients’ data remain secure?
- Is it easily accessible to your target market?
- What about the contract term?
- Is it easy to use?
- Does it have proper feedback and online reviews?
Alternative payment methods represent a bridge between an online-business and a certain group of its consumers. And they are all about the ease of use, functionality, and benefits for both sellers and buyers. If your online store doesn’t accommodate any APM, you’re bound to miss out on important sales. If the target audience of your business’ often opts for certain methods, accepting payments in them might help you expand your sales. So, alternative payment methods are rather an advantage for your store or website than a must.
We at Corefy are on the outlook for modern eCommerce trends — our payment orchestration platform allows merchants to accept the most sought-after payment methods. We are constantly expanding the list of methods, trying to make accepting payments in online stores, websites, services, and mobile applications even more convenient. If you are about to boost your local sales and expand abroad, we’ll be excited to help you optimise your business opportunities and start accepting alternative payment methods quickly and hassle-freely.