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APMs vs Local Payment Methods Australia

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Last editedDec 20222 min read

Most businesses take payments using a combination of payment methods, such as cash and cards. Two terms used to categorise payment types are alternative payment methods, or APMs, and local payment methods, or LPMs. In this guide, we’ll break down what these terms mean as well as give some insight into both alternative and local payment methods in Australia.

What are alternative payment methods (APMs)?

Alternative payment methods refer to any payment type that falls outside the traditional options of cash, cheques, and international credit cards. Today’s businesses have dozens of ways to take alternative payments, from digital wallets to cryptocurrency. Here are a few examples of alternative payment methods:

  • Bank-to-bank transfers powered with open banking

  • Direct debit payments taken from customer bank accounts

  • Digital wallets like Apple Pay and PayPal

  • Domestic card schemes specific to a region or country

  • Buy now pay later services like Klarna and Afterpay

What are local payment methods (LPMs)?

Local payment methods are a type of APM filtered by regional preferences or payment methods specific to a certain country. It’s beneficial for global businesses to understand these regional payment preferences to attract customers from that market. For example, shoppers in the Netherlands use the iDEAL account-to-account payment method for over half of all online transactions. For countries like Mexico with a significant unbanked population, e-cash solutions like OXXO are popular. China leads the world in mobile payments using digital wallet services like AliPay. Online shoppers in Poland use the Przelewy24 network, while here in Australia we have POLi. These are all just a few examples of local payment methods specific to each country or region.

What is the difference between local payment methods and alternative payment methods?

In a sense, local payment methods fall under the wider umbrella of alternative payment methods. While the terms are often used interchangeably, the key difference is that there’s a focus on regional payment preferences with LPMs.

When APMs are a clear regional preference or don’t exist in other countries, they qualify as LPMs instead. This is because each country has its own set of regulations, controls, licensing, and banking rails to consider.

Australians are ahead of the curve when it comes to online payments, and customers have embraced a wide range of alternative and local payment methods.

  • One example is Poli, an Australia-specific online banking service owned by Australia Post.

  • Eftpos is another popular local payment method. This alternative to traditional credit cards costs less for merchants and customers in terms of transaction fees.

  • Digital wallets like Apple Pay and Google Pay continue to grow in scope, particularly for in-store payments.

  • Buy now pay later has swiftly become a preferred payment method for online shoppers. In the 2020-2021 financial year, Australians spent nearly $12 billion using BNPL services like Afterpay and Zip.

How to choose the best payment method

How can your business leverage all these regional payment trends to offer your customers the best possible checkout experience? It’s important to look carefully at your target market to find out more about localised payment preferences. While Australian businesses will already know to offer local customers options like Poli, those facilitating cross-border transactions will need to do a little research. Our guide to consumer payment preferences is a great start.

Most payment gateways automatically include a variety of alternative payment methods in addition to the usual debit and credit card payments. Compare your options carefully to find the right fit, using multiple services as needed to put together the best package for your customers.

GoCardless enables businesses to receive international payments from over 30 countries by offering the local bank debit option. In other words, customers can pay in their own currency, and your business will receive funds in its own currency, all at the real exchange rates.

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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.

Over 85,000 businesses use GoCardless to get paid on time. Learn more about how you can improve payment processing at your business today.

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