What are Alternative Payments?
Alternative means not the mainstream. In the case of payments, it refers to transaction methods that are not cash or credit cards from major brands. So, they cover any cashless or careless payment method. Mobile payments, direct bank transfers, prepaid cards, and digital wallets are some examples. Alternative payments contribute to over half the transactions. Less than a decade ago, alternative payment methods (APMs) were a fad. It seemed impossible that consumers would favor anything other than credit cards. However, APMs have become crucial in the payment ecosystem. The payment options are designed to fill the gaps that cash, debit cards, and credit cards can’t. In this guide, we explore several alternative payments and their place in the business environment.
Types of Alternative Payment Methods
Increased internet access is one of the main drivers of the growth of alternative payments. As consumers make most of their purchases online, it became necessary to offer other solutions besides credit card transactions. For this reason, most alternative payment methods cater to online use. They make it easy for businesses to sell online, offering various benefits over cash, debit cards, and credit cards. Merchants also have several cashless payment options for in-person transactions. Adopting another payment method other than cash or cards can give your business a competitive edge. For that, though, it’s important to know the different types of alternative payments.
Real-Time bank transfers
With this payment method, customers can pay for online purchases straight from their bank accounts. Bank transfers are leading local payment trends in some regions because they cost less than credit cards. Online transfer services have made bank transfers uncomplicated. All a customer has to do is link a bank account to an online transfer service to enjoy real-time payments. Therefore, buyers don’t have to attach their credit card information, which offers some level of security. Sofort and iDeal are some of the top options for direct bank transfers. Note that bank transfer services can be specific to certain areas.
Direct Debit
If a business provides subscription-based services, then the direct debit is one of the best alternative payment methods. Direct debit works for recurring payments. A merchant gets access to charge a buyer’s bank account every time payment is necessary. Therefore, a customer doesn’t have to provide the same data repeatedly. Setting up direct debit payments has large upfront costs. However, merchants can work with direct debit providers to eliminate the costs of buying Bacs software. Direct debit transactions serve many industries, including magazine subscriptions, TV streaming services, and gyms.
Digital wallets
Electronic, virtual, or digital wallets provide a way to store funds online. Wallet holders have to load funds through bank transfers, prepaid cards, debit cards, or credit cards before using them. As online shopping gained more popularity over the years, e-wallets became some of the most convenient ways to pay. Since the merchant doesn’t require the customer’s bank or credit card details, virtual wallets improve safety when paying online. Digital wallets can be used in cross-border, person-to-person, and in-store transactions. They are also suitable for funding other payment methods, such as money orders, prepaid cards, and mobile wallets. PayPal, Skrill, and Neteller are the most popular e-wallets. Some services provide local payment solutions like WebMoney in Russia and Klarna in Sweden.
Online banking
Bank transfers remain popular payment solutions globally. The difference now, though, is that customers have the choice of approving transactions online. Almost every bank has online banking services that allow account holders to authorize transfers from almost anywhere. Whether on desktop or mobile devices, customers can send and receive payments. The advantage of this alternative payment method for merchants is the low chargeback rate. Online banking also has low fees. Merchants can access cross-border payments without worrying about incurring exorbitant rates.
Mobile payments
Other alternative payments that have become dramatically popular involve the use of mobile devices. Mobile technology made it easier to bring payment solutions to the consumer. Through mobile wallets, buyers can pay for goods and services in a few seconds. A user can fund a wallet through a mobile carrier, credit card, debit card, digital wallet, or bank transfer. Some mobile payments have near-field communication functionalities, which facilitate contactless transactions at a POS. This method facilitates transactions through a contactless interface, SMS, or QR code. Apple Pay, Samsung Pay, and Google Pay are top mobile payment options.
Cryptocurrencies
Although cryptocurrencies are relatively new, they are growing into viable payment options. Digital currency is decentralized with no regulation from governments or banks. For these reasons, cryptocurrency offers unique benefits like lightning-fast transactions, anonymity, and low to no fees. Bitcoin is the most popular digital coin, but the current market provides many other alternatives, called altcoins. Ripple, Dogecoin, and Ethereum are examples. Merchants in high-risk sectors are the biggest beneficiaries of cryptocurrency payments because they eliminate chargebacks.
Benefits
Providing customers with what they need is one of the most effective conversion tactics. When a buyer comes to your store or logs into your site and finds a preferred payment method, then he or she won’t have a problem paying. Therefore, adopting alternative payment methods can boost your sales by converting leads. You can offer anything, including direct debit, money orders, and direct bank transfers. Different alternative payments have individual advantages that business owners can leverage. However, merchants must first know what value to expect.nsactions. For this reason, most alternative payment methods cater to online use. They make it easy for businesses to sell online, offering various benefits over cash, debit cards, and credit cards. Merchants also have several cashless payment options for in-person transactions. Adopting another payment method other than cash or cards can give your business a competitive edge. For that, though, it’s important to know the different types of alternative payments.
Easy integration
Whether you intend to accept prepaid cards, debit cards, or mobile payments, alternative payments come with easy integration. Merchants don’t have to put in a lot of work, which saves money, time, and effort. For example, with PayPal, you only have to register a business account. Third-party services handle a big part of the integration process, thus, making it easier for small enterprises to adopt various payment methods. Businesses that require complex payment solutions can have providers manage the bulk of the service. The uncomplicated integration of alternative payments methods means that merchants with limited budgets can get the necessary services.
More new customers
A significant advantage of adding alternative payment methods is the chance to reach new markets. Thanks to rapid adaption, these payment methods have spread worldwide. So, businesses looking to cater to international markets only have to provide local payment solutions. For instance, in Africa, mobile payments are the most prominent. In China, Alipay leads the charge. On the other hand, methods like Apple Pay, Google, and PayPal enjoy broad adoption. Hence, merchants need adequate information about how to serve certain customers. consumer. Through mobile wallets, buyers can pay for goods and services in a few seconds. A user can fund a wallet through a mobile carrier, credit card, debit card, digital wallet, or bank transfer. Some mobile payments have near-field communication functionalities, which facilitate contactless transactions at a POS. This method facilitates transactions through a contactless interface, SMS, or QR code. Apple Pay, Samsung Pay, and Google Pay are top mobile payment options.
Which Alternative Payments are Right for My Business?
Deciding whether to accept money orders, prepaid cards or mobile payments can be challenging, especially for a new merchant. Business owners must know what to look for in an alternative payment service. For one, decide what features you require. Do you intend to charge payments directly from a customer’s bank account? Are your services cross-border? A suitable payment solution should cater to your specific requirements without costing extra. Alternative payment methods are flexible compared to cash or cards. Thus, ensure that bank transfers, money orders, digital wallets, or whatever methods you select afford customers some flexibility.
Final Thoughts
The business environment is expanding rapidly with evolving consumer demands. Alternative payments are a result of shifting trends. Today’s business owners can process all types of transactions thanks to alternative payment methods. The convenience of these transactions gives enterprises a competitive edge because they attract more customers. Merchants that offer in-store or online services can find appropriate solutions that align with local payment tendencies. Although credit cards remain popular, alternative payments look like the future of transactions.
FAQ
Yes. Alternative payment methods make cross-border transactions easy and enable you to tap into new markets.
A suitable alternative payment method should match your business model; whether based online or offline. It should also be secure, flexible, and affordable.
These are payment options that provide other transactions apart from debit cards, credit cards, or cash. A business can add these methods for e-commerce and in-person transactions.