Alternative payment methods (APMs) are fast becoming an indispensable strategy for eCommerce businesses looking to cater to the diverse purchase preferences of their global consumers. These payment options are an invaluable way for you to boost your conversions and revenue, as they provide a familiar and localised payment choice your customers trust at checkout.
In this article, we’ll look at what alternative payment solutions are and the vital ways you can leverage them to increase to increase revenue and build loyalty with consumers. We’ll also explore what is in store for alternative payment methods in the future.
What are alternative payment methods?
Alternative payment methods are any local and global payment option that does not involve payment by cash, or any of the major credit or debit card schemes like Mastercard, Visa, etc. Among the most frequently used local and global alternative payment options include:
- eWallets or digital wallets
- Buy Now Pay Later (BNPL) services
- Local payment cards
- Real-time bank transfers
- Direct debit
- Prepaid cards
- Peer-to-peer (P2P) payments
For more insights on alternative payment options, we’ve made a video for you, click the image to watch it here.
Why are local payment options so important for online businesses?
Local payment options are important eCommerce businesses. According to a McKinsey report, online shopping has become the global norm, due to significant and lasting shift in consumer behaviour. The changes saw global retail e-commerce sales reach an estimated US$5.8 trillion in 2023 and are projected to grow by 39% to over US$8 trillion by 2027 according to Statista.
However, this growth comes with a caveat: 26% of global consumers report they'll abandon their cart if their preferred payment method isn't offered. As digital payment methods continue to surge, it is paramount for merchants to adapt their payment mix to meet the shifting preferences of their consumers.
Top alternative payment methods
Consumer behaviour and preferences vary significantly across regions, and this impacts the choice of what alternative payments becomes their go to. In this section, we’ll look at the top alternative payment options merchants can make available to their customers with examples from different markets across the world.
eWallets or digital wallets
An eWallet or digital wallet is a software-based application that securely stores virtual versions of debit and credit cards. Digital wallet owners can complete purchases via Near-field communication (NFC) technology and their preferred payment method using their smartphone or another device where the digital wallet is installed. PayPal, Apple Pay, Google PayTM and Samsung Pay are popular digital wallet examples of digital wallets.
In Asia, eWallets are the payment method of choice for the majority (70%) of digital consumers, as of 2023. In fact, mobile wallets such as Alipay and WeChat Pay, a subset of eWallets faced widespread acceptance by over 80% of digital shoppers in China in 2023.
As eWallets are becoming a widespread option internationally, some regions like Latin America have started building their own local digital wallets. For example, Mercado Pago was used for payments by nearly 80% of Argentinian consumers in 2021 according to emerchantpay’s Global payments outlook report.
Buy Now Pay Later (BNPL) services
BNPL services are an alternative payment option where consumers can pay for products or services in instalments over an extended period. An example of this is PayPal’s Pay in 3, where customers can spread out the cost of their purchase into three payments. According to projections, there will be 900 million BNPL users worldwide, accounting for a whooping 157% increase from 2022.
Local payment cards
A local (or domestic) payment card is a card issued by a local card scheme (credit or debit) that operates exclusively within the country it is issued. This type of alternative payment option provides a localised alternative to major global card schemes like Mastercard and Visa among others.
As a merchant selling to Belgian consumers, Bancontact is a must-have local payment method. It accounted for 78% of all payment card brands as of 2022, with high levels of penetration in sectors such as travel, online retail and gambling. Additionally, Elo is another major local payment card for Brazilian consumers, representing 22% of the market share in the country in 2022, and it supports payment via credit or debit transactions.
Real-time bank transfers
Bank transfers describe the process where users send money from one bank account to another, usually electronically 24/7. According to our Global Payments Outlook 2024 report, bank transfers are a standard choice in Thailand (44.3%), Indonesia (30%) and Vietnam (28.4%).
Furthermore, our report found out that Europe is another market where bank transfers are flourishing. Precisely, Nordic countries recorded a high use of bank transfers, including Sweden (25.5%), Finland (25.5%), Norway (20.8%) and Denmark (20%).
Direct debit payments
With direct debit payments, your consumer instructs their bank to authorise the collection and processing of payments from their account when they are due. Direct debit payments are a go-to option for German consumers, totalling a market share of 48% in 2023.
SEPA Direct Debit (SDD) is a popular payment method used across the EU, developed by the European Payments Council. It allows your customers to make direct debit payments securely and conveniently in Europe via a unified market for euro-denominated transactions.
Prepaid cards
Prepaid cards (vouchers) are also a regional favourite in Europe, with more than one in three (32%) of Italian buyers using them to pay for their online purchases. Such cards have a balance loaded which acts as the user's spending limit. Once the balance is spent, the card becomes unusable until money is added to it.
Neosurf is a well-known voucher which is available in over 100,000 stores worldwide. With Neosurf, users can redeem the ten-digit voucher online and pay for their purchases, while any remaining funds will be retained for future use.
Paysafecard is another widely used voucher where shoppers can make online transactions using a 16-digit PIN purchased in over 650,000 points of sale across more than 50 countries. It should be noted that both Paysafecard and Neosurf offer a wallet account to their users which they can top up with the voucher or other payment solutions and use to pay like with any other wallet.
Peer-to-peer payments
According to Precedence Research, P2P payments is expected to hit around USD 11.62 trillion by 2032, growing at a CAGR of 18.10% for a forecast period 2023 to 2032. Peer-to-peer (P2P) payments are digital transactions systems that facilitate money transfers between people typically through a website or mobile app. Peer-to-peer (P2P) payments are digital transactions systems that facilitate money transfers between people typically through a website or mobile app.
In our Global Payments Outlook 2024 report, peer to peer transactions were highly desirable among Middle Eastern and North African (MENA) consumers. Nations such as Lebanon ranked (53%), Bahrain (52%), Jordan (50%), Kuwait (44%), Qatar (43%) and Egypt (41%) in the adoption of P2P payments.
P2P platforms aim to simplify financial transactions for users by enabling them to send or receive money directly to and from another person's account. They offer a fast, convenient way to transfer funds.
What are the benefits of accepting consumers’ preferred payment methods locally?
Decreased cart abandonment
Adopting local alternative payment options helps merchants reduce cart abandonment, convert more prospects and boost sales. In a survey released in 2023 by PayPal, 59% of consumers abandoned their carts when their favourite payment method was unavailable. By tailoring checkout offerings to specific markets, merchants can effectively mitigate cart abandonment rates and boost conversions.
Reduced risk of fraud
Several APMs come with built-in security features such as new models of authentication that aim to maximise security and by extension, enable a safer and more seamless checkout experience for their customers. Biometrics — such as face and eye scans or fingerprint analysis among others — is one such example.
Biometrics is also aligned with Strong Customer Authentication’s (SCA) mandate for two-factor authentication (2FA) as part of the revised Payment Service Directive (PSD2). The aim is to speed up purchasing processes for consumers while increasing security against online fraud. Similarly, eWallets employ tokenisation to maintain security without sacrificing consumer convenience.
Increased reach and brand loyalty
Recent data shows that 70% of consumers consider the availability of their preferred payment method to be extremely influential when selecting an online store to shop at. By integrating your prospects preferred alternative payment solutions, your eCommerce business can tap into a broader pool of potential customers who favour such alternative payment option. This inclusive approach not only fosters trust among consumers but also enhances the overall shopping experience, leading to increased brand loyalty.
Competitive advantage
Offering a diverse range of payments methods can set your business part from competition in a global marketplace. Offering your consumers their preferred payments options demonstrate your commitment to customer convenience and an understanding of their needs.
By leveraging these benefits, merchants can create a more robust, customer-centric payment strategy that drives growth, reduces costs and enhances security existing or new markets. The key is to carefully select and implement APMs that align with your target market(s) and business goals.
Trends in local and global payment methods
Payments are anything but a static sector; innovation is constantly evolving to meet changes in customer behaviour, regulation and other global innovation trends. How people transact today isn't necessarily how they'll pay tomorrow. Below are the key trends shaping alternative payment methods in several markets.
Hyper-localisation is crucial for cross-border payments
The hyper-localisation of alternative payment methods (APMs) plays a pivotal role in bolstering the expansion of cross-border payments. To illustrate this, cross-border payments are set to reach US$3.3 trillion globally in 2028 – up from US$1.6 trillion in 2023.
As global eCommerce continues its upward trajectory, merchants must adapt and tailor their payment offerings to meet the payment preferences of specific countries and markets. For example, consider including Pix for Brazilian consumers and SEPA Direct Debit for payments within the European Union. By aligning your payment strategy with hyper-localised APMs which address the unique demands of their consumers, merchants can elevate their payment experience and maximise conversions.
The surge of mobile payments
The widespread adoption of smartphones and digital channels has facilitated a surge in mobile payments worldwide. This has reshaped consumer expectations towards prioritising convenience and speed in transactions. In response, digital wallets have emerged as a versatile solution, seamlessly integrating with mobile platforms to meet these demands.
A recent study from Juniper Research testifies to this, as it projects that this payment solution will witness growth in users by 53% — reaching 5.2 billion users globally in 2026. Furthermore, merchants can embrace digital wallets to meet evolving customer needs and enhance the payment experience.
Growth of biometric payment solutions
The payment solutions consumers globally prefer are evolving fast and so too are the ways they authenticate their transactions. New models of authentication aim to maximise security and, by extension, enable merchants to design safer and more seamless checkout experiences for their customers. Biometrics — such as face and eye scans or fingerprint analysis among others — is one such example. Biometric approval of transactions is common practice for anybody using a digital wallet such as Apple Pay or Google Pay™.
Estimates from Research Nester expect the biometric payments market worldwide to hit a CAGR of 49% by 2027. Biometrics is also aligned with Payment Services Directive 2 (PSD2)’s Strong Customer Authentication (SCA) requirement, which aims to provide additional fraud protection for online payments. Using a smartphone’s biometric authentication when asked to authorise a payment is easier and faster than having to remember and input a password or search text messages for a PIN, supporting a frictionless and secure payment experience.
Popular alternative payment method around the world
To help you navigate the diverse payment landscapes around the world, we've prepared in-depth guides for popular alterative payment methods around the world. These guides offer valuable insights into the most popular and effective alternative payment solutions, ways to tailor them to the unique preferences of your consumers and how to start accepting payments in these markets. See the most popular APMs in these two regions below.
Alternative payment options for Europe
Europe stands at the forefront of payment innovation, our European APM guide delves into frictionless transaction options across the Eurozone like SEPA, debit cards, and other widely used bank transfer payment options. Click the image below to learn more.
Alternative payment solutions for LATAM markets
As seen in some examples above, Latin America's eCommerce scene is booming, driven by the rapid adoption of innovative payment solutions like real-time bank transfers to other diverse online payment methods. Let's explore the region's unique purchasing habits to help you enhance your payment strategy for this market. Click the image below to learn more.
Unlock your global e-Commerce growth with emerchantpay
As an online merchant wishing to expand your customer base and market share, it is only wise to optimise your payment offering and include alternative payment methods. Working with a trusted and knowledgeable payment partner can facilitate this.
At emerchantpay, we pride ourselves on providing local payment expertise, with teams who deeply understand the payment nuances of specific sought-after markets like Europe and LATAM. With extensive knowledge of regional trends and ever-evolving regulatory standards, our two-fold approach provides you with strategic advisory and the payment technology to design an optimised payment journey.
Maximise your payment acceptance and profitability, tap into our 60+ local and global payment methods. Speak to our payment specialist today and find out how to tailor your alternative payments strategy.