Long gone are the days where debit and credit card where the only payment methods used by customers to make a purchase. The digitalisation in payments has seen the rise of alternative payment methods which offer the level of convenience, speed and ease that customers are looking for. In this article, we explore what are alternative payment methods, their popularity and the benefits of supporting alternative payment methods for your business.
The designation of “alternative payment methods” can be quite subjective. However, it tends to include all payment methods that aren’t cash or a majorly used and more traditional debit/credit card. For instance, we are experiencing the rise of digital wallets, that allow users to make NFC contactless payments using their mobile devices. Vouchers and more niche card payment methods (local brands) are also included in the list.
Note that “alternative” doesn’t necessarily mean that they are used by few. In fact, alternative payment methods are becoming more easily adopted across the globe. In countries like Germany, for instance, 57% of residents actually prefer using PayPal for online shopping (Checkout.com report).
Digital wallets– a digital wallet or e-wallet is a software application that stores bank details and enables users to make payments through their mobile phones. Customer can use their digital wallet to pay for items online or in-store via contactless. Some of the most popular digital wallets include PayPal Apple Pay, Google Pay, Samsung Pay, Alipay and WeChat (the latest two only available in China).
E-invoices- Invoices are a request for payment that companies action to their customers once a service/product is ordered. Rather than receiving a physical or PDF invoice via email, customers may be sent an electronical invoice that they can access directly. Merchants are able to store and manage their invoices all electronically.
Vouchers/Pre-paid cards– Customers can make purchases using vouchers or cards that they have previously topped up. The voucher or prepaid card holds a certain amount of money that customers can use to pay for goods in selected stores. Some prepaid cards allow usage in various stores, whilst others only work for individual brands (e.g., an Amazon gift card has to be used on Amazon).
Bank transfer- customers can pay for items using their online banking app instead of a physical debit/credit card. Bank transfers may be used for online purchases where customers are redirected to the bank’s page to proceed with the payment.
BNPL– BNPL stands for “Buy Now, Pay Later” and it is a service that enables customers to pay in instalments. There are various companies providing this service, one of the most popular being Swedish company Klarna. BNPL providers divide the costs of a purchase into, for instance, three instalments and customers must pay it over a set period of time.
Crypto wallets- Much like a digital wallet, crypto wallets hold the user’s cryptocurrencies and can be used to pay at specific stores. However, their usage is still very limited.
Alternative payment methods are becoming hugely popular across the globe, and a common preference amongst customers. In Europe, for instance, it was reported that between 25 and 50% of residents where already using some type of APM in 2018 (McKinsey study). In the APAC region, more than half of the population use APMs and in North America, the percentages are similar.
There is now a wide base of customers who choose to pay with APM, and this base is likely to grow over the years. Therefore, it is crucial for companies to listen to their customers and adapt to their preferences. Offering APMs enables businesses to reach more customers, improve conversion rates, customer service and satisfaction and, ultimately, optimise profit.
Imburse is a cloud-based middleware connecting large enterprises to the payments ecosystem, regardless of their existing IT infrastructure. Through a single connection to Imburse, enterprises can collect or pay out using a variety of payment technologies and providers around the globe.
In a world where consumers payment preferences and technologies are ever-evolving, Imburse works with insurers to future-proof their payment requirements. Regardless of the business area, market, or requirements, Imburse will connect you to your choice of technology and provider.
Reach out to our team below should you want to discuss how Imburse can help you. Our team is happy to show you what our platform can do for your business and offer you a free demo.