As of 2022, 89% of payments are made digitally, and 62% are made using multiple modes, according to a McKinsey report. This trend is predicted to continue in 2023 and beyond.
As digital commerce evolves, alternative payment methods (APMs) have gained prominence. With the rise of digital technologies and shifting consumer preferences, the world of transactions has rapidly expanded beyond traditional credit cards. This article explores alternative payments and how they’re changing business transactions for the better.
The most popular eCommerce alternative payment methods
Recent statistics indicate that PayPal, Alipay, and WeChat Pay are among the most widely used alternative payment methods. Online wallets had the highest market share in the Asia-Pacific Region, accounting for almost 70% of eCommerce payments, according to Statista.
Closer to home, based on research from Marqeta, about 77% of UK shoppers now use digital wallets and mobile payment systems for their purchases. Among these methods, PayPal stands out as one of the preferred options in the UK.
Their popularity can be attributed to several factors:
User experience
These platforms provide a seamless and user-friendly transaction experience. Quick QR code scans or simple login details can complete payments.
Global reach
Especially in the case of PayPal, the ability to transact across borders without the complexities of currency conversion has drawn a global user base.
Integration with other service
WeChat Pay and Alipay, popular in China, are part of larger social and messaging apps, making it convenient for users to pay without leaving their favourite platforms.
Trust is also paramount in the world of digital transactions, as consumers gravitate towards familiar names and brands. This explains why well-established companies like Apple and Google have ventured into the payments sector with Apple Pay and Google Pay, respectively. By leveraging their brand equity, these companies ensured higher adoption rates for their payment platforms, as consumers generally trust familiar names with their financial information.
Going beyond Visa and Mastercard
While Visa and Mastercard remain dominant players in the payment ecosystem, confining business transactions solely to them could limit a company’s growth potential. Here’s why:
Fees
Traditional credit card companies often charge merchants a percentage of the transaction, affecting profit margins, especially for small businesses.
International expansion
In many regions, especially Asia, local APM reign supreme. A business must offer the preferred local payment options if it wants to tap into these markets.
Diversification
Relying on one or two payment methods makes businesses vulnerable to any disruptions or changes in those platforms. Diversifying payment options is a good risk management strategy.
Global trends in digital and alternative payments
According to Statista, the total transaction value in the digital payments market is projected to reach US$9tn in 2023. The largest portion of this comes from digital wallet volumes.
Rapid technological adoption, especially in regions like Asia-Pacific, combined with the convenience of having all payment options and cards in one digital place, has bolstered this growth.
As more consumers become comfortable with technology and as more regions improve their digital infrastructure, the reliance on digital wallets is predicted to increase even further.
The main use cases for alternative payment methods can be found in:
Retail
They facilitate online shopping, allowing customers to complete purchases without traditional credit cards. E-commerce giants like Alibaba and Amazon are continually integrating new APM options to cater to global audiences.
B2B transactions
Helping businesses streamline their transaction processes, reduce fees, and expedite payment clearance. APMs, especially blockchain-based solutions, are emerging as viable solutions.
Consumer money transfer
Remittance and peer-to-peer money transfers have been revolutionised by apps that offer quick, low-cost international transfers, much to the delight of consumers.
Your checklist for adopting APMs and growing your business
- Understand your market: If your business caters to a global audience, research which APMs are popular in the target regions.
- Security: Ensure that the APMs you integrate have robust security measures in place.
- Ease of integration: Opt for APMs that provide easy integration with your existing systems. Many APMs offer plug-and-play solutions for popular e-commerce platforms.
- Educate your audience: While introducing new payment methods, ensure that you educate your customers about their advantages, usage, and security features.
- Monitor and adapt: Regularly review the performance of adopted APMs. Be ready to adapt and change according to shifting trends and customer preferences.
- Choose the right payment provider: The ideal choice is a provider that supports a wide range of payment methods to ensure you never miss out on a payment.
The growth of APMs isn’t just a fleeting trend but a paradigm shift in how businesses and consumers view transactions. Businesses that quickly adapt and evolve with these changes will likely thrive in this new digital era.
Ensure maximum client reach with a payment solution designed for the global business. Reach out to our team and learn more about diversifying your payment options.
