An essential guide to alternative payment methods
Alternative payment methods allow businesses to expand their payment options. Explore types of APMs, the benefits, and how to accept them.
Alternative payment methods (APMs) allow businesses to expand their payment options beyond cards and cash. This blog explores different types of APMs, the benefits, and how to accept them.
What are alternative payment methods?
An alternative payment method (APM) is a broad term for payment methods other than credit and debit cards. Although cards and cash remain the most popular modes of payment worldwide, APMs have grown in popularity due to the rise in smartphone use, making digital payments more accessible.
Accepting APMs offers several benefits for merchants, such as increased conversions and expanded geographical reach. As such, it’s important for businesses to understand the APMs available and their advantages.
Types of alternative payment methods
Businesses can accept various types of APMs, depending on factors such as location and customer preferences.
Digital wallets
Digital wallets such as Apple Pay or Google Pay facilitate seamless online and contactless payments via a customer’s phone. With no cash or card details exchanged, digital wallets offer both security and convenience. However, their use may be limited to certain regions, such as Venmo in the US or Alipay in China. Discover Paysafe’s branded digital wallets with Skrill and Neteller.
Prepaid cards
Prepaid cards must be pre-loaded with funds before they can be used to pay. Prepaid cards may be linked to one of the card networks, such as Visa, facilitating widespread acceptance.
Real-time payments
Real-time payments allow funds to be sent between a business and its customers around the clock, thanks to services such as Mastercard Send or Visa Direct. Paysafe’s real-time payments enable money to be transferred domestically or cross-border, making it available to the recipient within minutes. Learn more about real-time payments with Paysafe.
Bank transfers
Bank transfers allow payments to be sent from one bank account to another via ACH (automated clearing house) or other transfer networks. Customers may prefer this option to pay using their existing bank balance, but without using a physical card. Discover more about Paysafe’s rapid bank transfers with over 3,000 banks worldwide.
Cryptocurrency
Some customers may wish to pay using cryptocurrencies such as Bitcoin, which enable direct transfers with rapid settlement. However, accepting crypto payments directly comes with challenges such as volatility or managing cryptocurrency wallets, which merchants may wish to avoid.
Many payment service providers offer merchant solutions for accepting crypto payments that help merchants avoid such challenges.
BNPL
Buy-now-pay-later (BNPL) services allow customers to spread payments over an agreed payment schedule. The BNPL provider manages the debt, while the merchant receives payment in the same way as a regular purchase.
Paysafe integrates with several BNPL and other providers of local payment methods.
Advantages of accepting alternative payment methods
Accepting alternative payment methods offers important benefits for businesses.
Increased sales
Alternative payment methods can help boost sales. If a customer reaches checkout and doesn’t see their preferred payment method, they may abandon their purchase. By accepting alternative payment methods such as digital wallets or BNPL, a business can reduce cart abandonment, increase conversion rate, and expand its reach into new client segments.
Global reach
Alternative payment methods, such as digital wallets and cryptocurrencies, facilitate faster, more convenient cross-border payments. As such, accepting alternative and local payment methods can help merchants expand into new markets and regions using preferred payment options as a growth enabler.
On the flipside, a business that doesn’t accept a popular local payment method may find that it negatively impacts sales, as it could indicate a lack of understanding of local markets.
Reduced processing fees
Some APMs may offer lower processing fees than traditional card payments, resulting in cost savings with each transaction. Such cost savings can be passed on to customers to ensure competitive pricing or fed into the bottom line to improve profitability.
One example of an APM with lower costs is cash, which effectively has zero transaction fees. However, it may incur indirect processing overheads (such as staff time spent counting and reconciling) or security considerations.
Enhanced security
Many APMs offer enhanced security, making them even safer and more convenient than card transactions. For instance, digital wallets and cryptocurrencies use features such as encryption, tokenization, and biometric authentication, which may be more complex to defraud than card security technologies like PINs. As such, APMs may improve fraud protection and, in turn, increase customer trust.
How to accept alternative payment methods
Just as there are advantages to accepting alternative payment methods, there are also risks in not accepting them. Our recent report, The evolving world of wallets, showed that 43% of shoppers will abandon a purchase if their preferred payment method isn’t available. So, it’s critical for merchants to work with a payment processor that supports a variety of alternative payment methods and accepts transactions from digital wallets, bank transfers, cryptocurrency addresses, and more.
Paysafe supports a wide array of alternative and local payment solutions, including regional digital wallets like Alipay and Venmo, banking networks like ACH or SEPA, BNPL services like Klarna, cash, cryptocurrencies, and more. Discover more about alternative and local payment solutions with Paysafe.
FAQs
What is the most popular alternative payment method?
The most popular alternative payment method is digital wallets, which have gained popularity over recent years due to the rise of smartphones and online connectivity. Digital wallets allow customers to pay securely via their smartphone or connected wallet account, without needing a physical card or cash, offering a combination of speed, convenience, and security.
Why is it increasingly important for businesses to accept Alternative Payment Methods?
Accepting Alternative Payment Methods is crucial for businesses looking to thrive in the modern payment landscape. With the rise of smartphone usage and digital payments, customers increasingly expect to pay with their preferred APMs. Not offering these options can lead to higher cart abandonment rates and missed sales opportunities, as a significant portion of shoppers will not complete a purchase if their preferred method isn't available. Embracing APMs allows businesses to meet customer expectations, expand their market reach, and stay competitive in a rapidly evolving global economy.
Are Alternative Payment Methods more secure than traditional payments?
Many Alternative Payment Methods offer enhanced security features that can surpass traditional card payments. Digital wallets and cryptocurrencies, for instance, often leverage advanced technologies like encryption, tokenization, and biometric authentication (e.g., fingerprint or facial recognition). These features can make transactions more difficult to defraud and provide a higher level of protection against sensitive data exposure, thereby increasing customer trust and reducing the risk of fraud for merchants.