All You Need to Know About Alternative Payment Methods

Alternative Payment Methods

It should not be a surprise that the payments market has evolved at breakneck speed since the COVID-19 pandemic.

Small business owners previously interested in credit card alternatives are now even more interested in mobile payment methods that can keep their businesses running remotely.

Alternative payment methods (APMs) or local payment methods contribute to making more services and products available to more people worldwide in an increasingly connected world.

Many businesses are now more willing to accept non-cash or non-credit card payments. If you are tired of cash-only or card-only transactions and need help finding alternative payment methods that will work for you, look no further.

Read on to discover all you need to know about the alternative payment methods dominating the payments landscape in 2022.

Definition of alternative payment method

Alternative payment methods include cashless and cardless fund transfers. These payment methods include bank transfers, mobile transfers, digital wallets, and others.

Usually processed by technology companies process transactions made via alternative payment methods instead of banks or card networks. Cryptocurrencies, loyalty points, and money orders are also examples of cashless payment methods.

Benefits of alternative payment methods

APMs can benefit more than just consumers. Businesses of all scales and types can benefit from such payment methods. Explained below are five key benefits of APMs:

1. Enables substantial cost savings

Credit card processing fees can quickly add up and eat into your profit margins. Businesses can eliminate or reduce usage costs with APMs. Customers can also save money on transaction fees when they use their credit or debit cards.  

2. Boosts sales

You reduce the risk of cart abandonment by allowing customers to select the method they want to use for their purchases. You can also collect payments from international customers using APMs.

3. Simplifies checkout process

If there are problems at any step of the transaction process, customers may be demotivated from completing their purchases. APMs can help to simplify payment processes, allowing consumers to complete transactions with fewer obstacles.

4. Improved customer service

Alternative payment methods allow consumers to pay for the things they want without needing to use credit or debit cards for costlier purchases. APMs, such as Paytm Postpaid, offer customers affordable financing for their shopping with just a few clicks.

5. Extra robust security for the business

Payment security issues are among the main reasons why buyers abandon their carts. Some APMs add another layer of security by demanding shoppers to enter their passwords and usernames. Face ID or touch ID, as used in APMs and digital wallets, could reduce the risk of payment fraud.

Recommended Read: Perks of Supporting Multiple Payment Methods to Receive Online Payments

Top alternative payment methods

Checkout technology has advanced significantly, making alternative payment methods remarkably safer and more convenient for merchants and consumers.

Each alternative payment method has its reasons for popularity among shoppers but for many, convenience is the key factor. Let us learn more about the most popular alternative payment methods:

1. Online banking

Online banking is a preferred payment method that does not involve the input of credit or debit card information, and the transaction is initiated from a bank account.

2. Electronic wallets (e-wallets)

Electronic wallets, also known as digital wallets, are online payment instruments that typically take the form of an app. Customers load funds into their e-wallets via bank transfer, card, or cash and utilise them to make payments online, offline, person-to-person, and cross-border.

The e-wallet safely stores virtual versions of the debit and credit cards, allowing shoppers to make payments without entering debit or credit card information or carrying a physical card. E-wallets can also store and save digital tickets and e-vouchers, allowing users to keep crucial documents on hand.

3. Mobile wallets

Mobile wallets are a kind of digital wallet used for making non-contact mobile payments instead of using a credit card or cash.

Mobile wallets, such as Apple Pay, Google Pay, and Samsung Pay, are accessible via applications installed in a smartphone. In addition to enabling payments with a single click, these wallets can be loaded with concert tickets, travel passes, loyalty cards, or anything else that can be kept in a physical wallet.

Digital wallets provide an additional layer of safety and security. Physical cards and cash are easily misplaced or stolen.

Electronic information is password-protected, with an additional biometric layer of protection and other features such as:

  • Tokenisation: It allows you to process payments without sharing your credit card information because the digits are encrypted and replaced with a token.
  • Remote data erasure: If your phone is stolen, you can delete your mobile wallet data with Samsung, Apple, or Google accounts, remotely.

4. Buy-now-pay-later (BNPL)

BNPL is a popular payment method as it allows customers to pay in full later or spread the cost of a product over several monthly payments, usually without paying interest or processing fees. The majority of purchases are funded by a bank account, credit card, or debit card.

5. Direct debit

Direct debit is a popular alternative payment method commonly used by subscription-based businesses to transfer funds straight from a customer’s bank account to the business bank account.

Direct debit is an excellent method for accepting recurring payments while minimising your vulnerability to involuntary customer churn.

6. Bank transfers

Bank transfers, also known as wire transfers, transfer money directly from a customer’s bank account to a business’s bank account. While this alternative payment method is becoming more popular, it does carry some risks.

Sometimes, payments can be misdirected, and if this is due to a manual error on the part of the customer, the possibilities of recovering any losses are minimal.

Additionally, conmen and fraudsters use this payment method to steal money by selling tangible products without providing a money-back guarantee.

7. Prepaid cards

Some businesses, such as retailers and utility providers, provide cards on which to store funds to make payments instead of using bank transfers or direct debits.

These cards are essentially prepaid accounts that can have money deposited or transferred online and utilised to pay for goods and services.

8. Real-time payments

Real-time payments, also known as instant or immediate payments (IP), is another alternative payment method that is changing the financial landscape worldwide.

Real-time payments enable individuals, businesses, and governments to transfer funds locally or internationally, making those funds available to the payee instantaneously and with instant confirmation.

When compared to some legacy payment methods, which can take days to reach a recipient, real-time payments are faster and more consistent.

This newer, more seamless method of conducting financial transactions will have a social and economic impact on consumers, businesses, and world governments.

Recommended Read: Types of Digital Payment Methods and How Businesses Can Efficiently Use Them

How to leverage alternative payment methods to enhance business operations

With so many different payment methods to choose from, how do you know which one is best for your company? Consider factors such as price, security, features, and functionality when looking for APMs to offer.

1. Know who your customers are, particularly if you are working in a new region.

Bear in mind that customer preferences vary across territories, even when working in the same region. Utilise data and local knowledge and expertise to unearth relevant insights for a specific region.

2. Be aware of customer expectations.

Prioritise learning what your consumers expect from payment methods. Would your target market prefer to pay for purchases in instalments or have access to seamless checkout methods via e-wallets?

3. Understand your business.

Just because there are various APMs available does not imply that all of them will be suitable for your company, industry, and needs. Consider your consumer base, the nature of their transactions, and your budget when selecting APMs for your business.

Some APMs may have higher transaction costs that could affect your bottom line. Remember that while APMs provide greater flexibility and convenience they do not always guarantee that your company will be free of customer churn.

The benefit of APMs is that you can use more than one payment method for your business.

Frequently asked questions (FAQs)

Q1. How did APMs emerge?

The term ‘alternative payment methods’ was first used to explain payments not made with cash or a credit card. The advent of the internet opened the door for new financial technologies and technology companies to create platforms that allow consumers to pay in other convenient ways.

Q2. What types of businesses require alternative payment methods?

Any company that wants to succeed in any market, whether it’s selling across borders or establishing a local affiliate, must accept alternative payments.

Cart abandonment rates can increase if you do not provide a payment method that customers know and trust. Merchants should provide preferred alternative payment methods for every country to reduce cart abandonment.

Q3. What are the fees for accepting alternative payment methods?

Alternative payment method merchant fees vary. However, they are typically much less than the charges levied by popular payment methods.

On a concluding note

The payment environment is changing. New payment methods are often more handy and secure than traditional methods and are here to stay. APMs are giving today’s merchants and consumers more power. APMs give consumers the ability to choose the payment method they prefer to pay.

If you want your business to expand locally or globally, you should consider accepting alternative payment methods. It can help you increase sales, reduce fraud, make your company more trustworthy, and meet consumers’ changing demands and expectations.

Paytm also offers popular alternate payment methods, such as the Paytm Wallet and Paytm Postpaid. These methods can help you reduce checkout abandonment and boost sales. So wait no further –

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