If you want to generate more sales, it starts with your payment —and the more accessible, the better. More regions, means more customers and can often mean the need to offer more payment methods. It’s that simple.
However, to achieve flexibility for your payments stack, it is essential to identify and activate the local payment methods and alternative payment methods which are in the most demand with your target customers. Let’s take a closer look at how you can enhance your payment system with LPMs and APMs:
What’s the difference between traditional payment methods and APMs?
Traditional payment methods include cash, debit card, and credit card payments — all of which involve an intermediary (such as a bank) to process and approve the transaction.
On the other hand, local payment methods (LPMs), also referred to as alternative payment methods (APMs), are non-traditional payments which help customers and businesses bypass banking intermediaries. The result? More options for your customers which can lead to more sales.
What are LPMs?
Local Payment Methods (LPMs) is a catch-all phrase that includes payment types like digital wallets, Buy Now Pay Later, account to account, or banking payments, including open banking, cash voucher payments, and crypto.
3 Key Ways LPMs & APMs Impact Payment Flexibility
Optimizing for flexibility in your payment system is crucial, especially for businesses that make most of their money from online and digital sales. That’s because your checkout experience is only ever as good as your options—and if customers can’t use their preferred payment method, they’re unlikely to be a buyer. That means that businesses with robust payment systems can activate many new growth opportunities for online or digital-first businesses like merchants, merchant aggregators, and fintechs.
Here are three key ways LMPs and APMs can positively impact payment flexibility:
1. Global Accessibility
First and foremost, LPMs open doors. Catering your payment experience to the payment types which are utilized by your customer allows for greater access to global markets.
Consider one popular APM: digital wallets. They provide customers with the ability to make online and mobile payments for all types of purchases, both domestic and international. They’re also very popular because of their accessibility.
The Global Alternative Online Payment Methods 2022 report reveals that nearly half of the online merchants that do not currently accept digital wallet payments plan to do so in the coming year.
Though digital wallets are an increasingly popular payment method around the globe, the ability to accept LPMs is easily one of the most crucial factors that make APMs so beneficial.
When taking a big picture ‘world vision’ of your payments infrastructure, LPMs might seem lower value, since they may be utilized only for a specific customer segment or perhaps within a specific region. However, for businesses planning to expand into these regions, the ability to accept a local payment method becomes considerably more important for building business connections and winning new customers.
In Brazil, for instance, the Central Bank of Brazil established an instant online payment system called Pix. As of August 2022, roughly 119 million people in Brazil have used Pix to receive money, while around 115 million people used Pix to send money. That means that more than half of Brazil has used Pix to send or receive a payment.
This is just one of many examples showing the growth of LPMs. For businesses to succeed in their global expansion efforts, it is critical to offer the preferred payment methods of customers in their target region.
2. Enhanced Customer Experience
Activating LPMs can greatly enhance the checkout experience for certain customers, which translates to closing more sales and winning customer loyalty.
Understanding and offering customers the option to pay in their preferred payment methods is crucial for global expansion. Likewise, it is equally important when it comes to building customer loyalty in a particular region.
In a September 2022 PYMNTS report, three factors are identified as key considerations for merchants trying to improve their overall customer experience:
- A broad range of customer shopping activities
- A mashup of online channels (websites, eCommerce stores, mobile apps, etc.)
- Variance in customer preferences from market to market
The report further remarks that:
“One lesson is that no two markets are really the same. What works in the U.K. might not work in the UAE. But regardless of country or markets, it is imperative that merchants be finely attuned to payment preferences among their existing and would-be customers.”
As a merchant continues to grow their business, it is vital to activate the right local payment methods to answer customer needs.
3. Fewer Third-Parties & Fees
Credit cards are easily one of the most popular traditional payment methods. These cards are quick to use and convenient for the customer, with many big-name cards being accepted around the globe.
However, for merchants, credit cards can complicate payments and drive up costs through transaction fees.
For example, let’s imagine a merchant is based in the U.S. but offers products and services to people living in Europe. Not only will that merchant have to contend with the credit card processing fees from both regions, but the merchant might incur additional local fees from the buyer’s country.
Moreover, international credit card transactions can accrue additional fees, such as the foreign transaction fee that covers the costs of exchanging one currency for another.
All-in-all, traditional card payments can result in a lengthy and inflexible payment process when merchants begin expanding into new global regions. APMs and LPMs offer merchants the ability to avoid some of these costs, as well as reduce the number of third parties involved.
Final Thoughts: Payment Orchestration is Key for Activating LPMs & APMs
Understanding which payment methods are used and desired by your customers is essential to boosting loyalty and revenue. But once you know which payment methods you’d like to activate, then what?
Well, you’ll probably turn to a payments orchestration system like Spreedly.
At Spreedly, we connect your payment stack to a massive ecosystem of payment services, all through a single API. Our payment orchestration platform enables you to choose the right mix of payment services needed to enable your target LPMs and APMs, such as payment gateways and fraud prevention tools.
Contact the Spreedly team today to learn more about our Payments Orchestration solutions for merchants, merchant aggregators, and fintechs.