The payments landscape is changing at a rapid rate, and it’s very important for merchants to understand the impact of alternative payment methods (APMs) on the global payments space. Let’s begin with a simple question: what are alternative payment methods?
What are alternative payment methods?
Simply put, an “alternative payment method” refers to any form of payment that isn’t cash or a major credit/debit card scheme. Some of the most widely used alternative payment methods include mobile payments, bank transfers, prepaid cards, and digital wallets, but there are many other types of APM, including money orders and cryptocurrencies.
The history of alternative payment methods
In many ways, the rise of alternative payment methods began with PayPal, a transfer service allowing people to send low-cost international payments. This led to an explosion of alternative payment methods, with major players like Alipay, Apple Pay, and Stripe taking an increasingly large role in the international payments space.
There are many reasons why alternative payment methods have become so popular in recent years. One of the key causes of the expansion is the fact that shopper’s payment habits are changing. They no longer wish to be restricted by traditional forms of payment, desiring a convenient, hassle-free payment experience. Furthermore, checkout technology has become much more sophisticated, making the implementation of alternative payment methods significantly easier for merchants.
Why are alternative payment methods important?
In short, alternative payment methods provide customers with the convenience and choice they’re looking for. They enable people to pay in a way that suits them, so as a merchant, it’s especially important that you’re able to offer a broad range of payment options at the checkout point. That way, you can gain an edge on your competitors, who may only offer traditional forms of payment.
Alternative payment methods can also be beneficial for companies that wish to enable seamless cross-border payments. While many countries will be well served by traditional credit cards, you may need to offer alternative payment methods to reach global customers, particularly those in emerging regions of the world.
Put simply, customers want a payment experience that’s as frictionless as possible. By offering alternative payment methods, that’s what you’re providing. This is especially important for merchants pursuing global expansion, ensuring that you have the opportunity to connect with as many potential customers as possible, on an international scale.
Alternative payment methods in more detail
Now, let’s look at some of the different alternative payment methods in a little more detail:
Online banking – First off, there’s online banking. This refers to any payment made from a bank account where you don’t need to enter your credit card information.
Direct Debit – It’s also worth remembering that Direct Debit is an alternative payment method favored by many subscription-based businesses. Working with a payment service like GoCardless, Direct Debit is a great way to accept recurring payments while reducing your susceptibility to involuntary customer churn.
Digital wallets – One of the most popular alternative payment methods are digital wallets, which are essentially prepaid accounts where you can store money for future transactions. Examples of digital wallets include PayPal, Paysafe, and Neteller.
Bank transfers – Also referred to as wire transfers, a bank transfer is a direct transfer of money from a customer’s bank account to a business’s bank account.
Mobile payments – Mobile payments are exactly what they sound like; payments made using your phone. Two of the most popular examples include Apple Pay and Samsung Pay.
Cryptocurrencies – Another, more recent addition to the alternative payment method stable are cryptocurrencies. You’re probably familiar with Bitcoin, but there are vast numbers of cryptocurrencies (over 2,000 as of January 2020) to explore. While many cryptocurrencies are volatile and may be difficult to actually use to make transactions, they’re sure to be an important part of the payments space in the future.
The future of alternative payment methods
The market has rapidly expanded, and many experts believe that alternative payment methods will shape the future of global e-commerce for years to come. In Africa, for example, mobile payment users outnumber bank account holders, while in China, Alipay is by far the most popular payment method. Although credit cards are still popular throughout the world, particularly in the United Kingdom, many countries are flocking to alternative payment methods in far greater numbers than traditional payment methods.
We can help
GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.