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While credit and debit card payments have long been standard for ecommerce businesses, there’s a growing wealth of alternatives to consider. Giving shoppers more choice lends a competitive edge to online stores, not to mention the benefit of lower processing fees. We’ll describe six of the most popular alternative payment methods in ecommerce below, so you can choose the best combination for your customers.
What are alternative payment methods?
Alternative payment methods in ecommerce include any form of payment apart from cash and major credit/debit cards. Examples include things like money orders, prepaid and gift cards, and cryptocurrencies. It also includes any payment made electronically including bank transfers and mobile payments.
Six alternative forms of payment
The sky’s the limit when it comes to alternative payment methods, but what are the payment options for ecommerce? Here are six of the best options.
1. Electronic wallets
Also called digital wallets, these online payment tools typically take the form of an app that stores virtual versions of the cards in your physical wallet. You can make electronic payments using your stored debit or credit card details, without any need to present the physical card. E-wallets also store electronic vouchers and gift cards for easy online payments.
2. Mobile payments
Like digital wallets, mobile payments enable contactless transactions as an alternative to traditional cash and credit cards. Examples include mobile wallets like Apple Pay, Samsung Pay, and Google Pay. You can make a payment with a single tap or connect to an ecommerce site via your mobile app. Additional payment apps like Xoom and Square Cash let you top up your account and pay by QR code or SMS.
Cryptocurrency has become an increasingly popular alternative payment method. There are thousands of cryptocurrencies out there, many of which are quite volatile and not accepted by major ecommerce stores. However, the tried and trusted names like Bitcoin are becoming ubiquitous, supported by platforms like PayPal.
4. Buy now, pay later (BNPL) services
Alternative payment methods like Klarna and Afterpay are examples of BNPL, or buy now, pay later. These allow your customers to spread an item’s cost out over a series of instalments without paying interest. The merchant receives full payment at the time of checkout, with the BNPL provider in charge of collecting payments on instalment.
5. Direct debit payments
Bank transfers are a safe, low-cost alternative to card payments, particularly for subscription-based businesses. Services like GoCardless pull direct debit payments directly from customer bank accounts with consent. This helps with maintaining full control over payment timing and amounts while reducing involuntary churn and processing fees.
6. Real-time payments
While direct debit payments are convenient and low in cost, they can take a few days to settle into your merchant account. Real-time payments speed up the process with instant confirmation and settlement. An example is Australia’s new PayTo system, an innovation from the New Payments Platform and fintech industries. PayTo lets customers link bank accounts directly to BNPL, subscription, payment apps, and other services for 24/7 real-time processing.
What is the most popular alternative payment method?
Payment preferences vary widely by region. For example, although cards are widely preferred in the United States and Europe, alternative payment options like digital wallets are picking up steam. So, what is the most popular alternative payment method in Australia?
According to a J.P. Morgan global insight report from 2019, 22% of Australian ecommerce shoppers paid by digital wallet, and 13% by bank transfer. The pandemic has accelerated this trend with amore recent report showing that 47% of shoppers reported digital wallets as a payment preference.
The benefits of accepting alternative forms of payment
If you’re only accepting card payments, there are numerous reasons to branch out into alternative payment methods for your ecommerce business. Here are a few of the benefits:
Lower fees in comparison to credit card processing
A better checkout experience for your customers
Increased sales by meeting your customer payment preferences
Extra layers of security with biometric features and encryption
By introducing new methods like direct debit, real-time PayTo payments, and others, you’ll create a frictionless checkout experience. This ultimately translates into increased conversions and greater customer satisfaction, a win-win for you and your customers.
We can help
GoCardless is a global payments solution that helps you automate payment collection, cutting down on the amount of financial admin your team needs to deal with. Find out how GoCardless can help you with one-off or recurring payments.