For generations conventional wisdom has told us that cash is king. But in this age of digitally facilitated transactions (Never mind the COVID pandemic), businesses need to explore a wider range of options than cash and credit cards. If your business has yet to embrace alternative payment methods, you may unknowingly be erecting barriers to sales.
Alternative payment methods can benefit your business and your customers. They are also a crucial tool in helping you to grow your business on a local, national or global scale. The digital age affords us a wealth of alternative payment methods that offer convenience and security to consumers. In an increasingly cashless marketplace, businesses that fail to embrace alternative payment methods could get left behind.
What are alternative payment methods?
Alternative payment methods (APMs) is a term used to describe digital payment methods outside conventional payment methods like cash or credit and debit cards. It can refer to everything from digital wallets to mobile payment options like Apple and Google Pay, and even cryptocurrency.
The global pandemic has hastened an inevitable shift among consumers towards alternative payment methods. Digital wallet use alone is expected to increase by 83% by 2025. APMs are here to stay. And if you don’t try to accommodate them, you could risk alienating the consumers who use them.
How can alternative payment methods benefit your business?
Alternative payment methods are characterised by security, speed and ease of use, so it’s easy to see why they’re appealing to consumers. But how could they benefit your SME?
Frictionless payments can increase sales
By making transactions quick, easy and secure, alternative payment methods remove barriers to sales. Studies indicate that over 60% of consumers abandon online shopping baskets due to friction experienced during the transaction process. Alternative payment methods help to make payments more frictionless and prevent your business from losing sales.
Some APMs enable customers to buy now and pay later, and have boomed in popularity in recent years. So a temporary cash flow crisis at home needn’t prevent customers from clicking the “Buy Now” icon on your product pages.
Save on credit card processing fees
APMS also represent potential savings for small businesses on credit card transaction fees. Over the past 10 years, these have more than doubled. While they are a necessary evil for merchants, they still represent a potential drain on your profit margins. Average fees typically range between 1.43% (Visa) and 3.5% (American Express). When you consider how many transactions per year are made via credit card, this adds up pretty quickly.
As more and more of your customers flock to using alternative payment methods, you can expect the amount of your margin that you sacrifice to credit card fees to decline.
Associate your brand with peace of mind
Building and growing your brand is all about creating positive associations for the customer that incentivise them to come back to you. APMs assure the customer they can pay in ways that are quick, easy and convenient for them. And they also provide peace of mind when it comes to security. Greater encryption and tokenisation mean that APMs are secure to use both online and on the premises. What’s more, the biometric authentication measures required by mobile payments such as fingerprint authorisation make APMs even more secure than chip and PIN transactions.
We can help
If you’re interested in discovering more about alternative payment methods, or any aspect of managing your business finances, then get in touch with our financial experts. Find out how GoCardless can help you with ad hoc payments or recurring payments.