Author: Elsa Martinez - Project Manager - OSF Digital.
Sound the alarms! Burn your wallets and purses! We’re moving towards a cashless society.
Ok. Let’s get serious now. When was the last time you pulled cash out to pay for something? This activity is only going to be even less common if the forecast made in the WorldPay Global Payment Report, 2017 turns out to be correct with their claim that by 2021, over half of all transactions taken online will be made using alternative payment methods (APMs).
This shift is pleasing for both consumers and merchants. Driven by Millennials and Asian consumers – two groups who are always setting the pace for any innovation seen within the online shopping space, alternative payment methods are catching on and offering significant benefits to both consumers and businesses alike. Shoppers are presented with the option to purchase using the most convenient method that works for their specific needs. They can buy on demand and enjoy a friction-free purchase process. Stores that leverage APMs are empowered to exceed their customer’s expectations and deliver an above average experience to shoppers. Loyalty is engendered, and there is a high return on investment seen when investing in alternative payment methods in one’s business. Fraud is curtailed as credit and debit cards weren’t designed with ecommerce transactions in mind and are easy to manipulate for criminal activities. These are but just a few benefits that are gained by both shoppers and merchants when it comes to APMs.
This article will present a variety of new alternative payment methods and detail what the situation is like in the United States, Europe, and APAC. You will discover why more than ever, companies absolutely must keep up with the innovations that have been seen from the move from traditional methods such as credit cards to digital payment processes like e-wallets and bank transfers.
Offering robust payment solutions to shoppers has always been important to merchants. Their goal in this is to provide their valued consumers with new methods to easily purchase products. There is a strong wish to deliver exceptional customer service as well as increase revenue. In the blink of an eye, alternative payment technology is innovating business as usual and moving everyone’s attention from traditional payment methods such as debit and credit cards.
Opportunities for eWallets, bank transfers and pre-paid cards among other options are becoming more the norm and taking their place as additional methods for consumers to purchase goods and services. The Asia Pacific region has been at the forefront of these bold moves as they have paid attention to the increased demands that shoppers are placing on merchants to innovate in this aspect of the buyer’s journey.
eWallets – This payment method is growing the fastest worldwide with expectations for it to make up to 46% of how shoppers will purchase items (up from 18% in 2016). eWallets or digital wallets are considered easy to use providing customers with the ability to either use pre-loaded funds or to use funds from another method such as a credit card. Examples of eWallets include Yandex, PayPal, Alipay or Qiwi.
Bank transfers – Expected to become the second popular payment method in the world by 2021 next to eWallets, real-time bank transfers allow customers to use the information corresponding to their bank accounts to make an immediate authorized payment. Examples of technology that empower money transfers of this nature include Trustly, Sofort, and IDEAL.
Mobile wallets – More and more providers are entering the scene to help shoppers pay for goods and services with a mobile wallet, many of which are specific to the customer’s region. The most popular solution for a mobile wallet solution that has emerged for use on a more mass scale is Apple Pay with Samsung Pay and Android Pay later entering the fold.
Pre-payment – Before completing a transaction, a shopper uses a pre-paid voucher or card as their selected payment method. There is usually little delay in the approval of this type of payment choice. Examples of pre-payment solutions include Postepay, Paysafecard, Neosurf, and AstroPay.
Post-payment – The opposite of the previous option, post-payment processes kick in after the consumer has completed the transaction and include cash on delivery, payment during the in-store pickup process and eInvoicing.
Consumer preferences differ based on the country they’re in, the demographic group they are a member of and the type of service or product they’re purchasing. It’s important to consider these details when you consider embarking on an APM strategy in your region or if you wish to expand to include one in a new area outside of your home base. It’s a major way to increase your conversions, encourage additional sales, expand your brand and move into new international markets. Here’s a quick overview of the most common currency types presently being used worldwide.
United States – While the United States represents the world’s second largest retail ecommerce market, it has been fairly slow in adopting APMs for use in commerce. The country is heavily reliant on the use of credit and debit cards (89% of all transactions used this method), with PayPal and Apple Pay being the only real options that are emerging as alternative solutions seeing traction currently within the market.
Europe – Just as the number of countries that make up this contentment are plentiful; the same can be said of the variety of payment opportunities that are available. Each country has its own preferred provider such as Carte Bancaire in France, SEPA, SOFORT and Giropay in Germany to name just a few.
APAC – This region is where the acceptance and use of APMs is the strongest with shoppers preferring to pay using methods like eWallets, bank transfers and cash on delivery. China, considered to be the world’s biggest market for online transactions sees 62% of consumers paying with an eWallet solution like WeChat Pay, Tenpay or Alipay. Credit cards are the second option preferred for online payment, with bank transfers hot on their heels and set to overtake this preferred method slightly in 2021. Hong Kong is similar to China with regards to its preference for eWallets and credit cards. Singapore is where movement towards selecting bank transfers and eWallets as the primary option is emerging in the coming years. Australia is seeing a similar move towards bank transfers, and India is also showing a decline in credit card payments.
Looking to the past is sometimes the best way to predict the future and if the past tells us anything, it’s that shoppers demand choice. This extends into their desire for a full selection of payment options. It doesn’t take a crystal ball to see that if your competitor is offering this up to consumers, well you need to be prepared to either say goodbye, or decide to embark on a path towards offering them a diverse set of options.
With technology innovation happening at breakneck speed, new methods and players are emerging on the scene faster than a blink of an eye. It’s clear that APAC region is considered the leader when it comes to establishing trends with regards to alternative payment methods so it’s wise to look at what’s happening in this area as a way to forecast the ripples that will be felt in other markets in the future. It’s wise to reflect on how companies in APAC are changing habits in Western countries. Knowing what the future holds for commerce and customer experience is as easy as looking to what our neighbors are already doing.
Companies who are looking to offer alternative payment methods to their customers or are looking to open up shop or expand their business into the APAC region are wise to work with an experienced partner who knows what’s on the horizon. A trusted advisor can recommend the most suitable path forward as you consider expanding your offering to ensure you’re providing existing and new consumers with an experience that encourages return visits. It’s important to consider that solution providers who are already operating and working with clients within this area have the upper hand as they have demonstrated experience in integrating these new technologies and are able to testify to their adoption within the specific market you’re interested in.