Alternative payment methods offer customers and merchants greater convenience, flexibility, and cost-effectiveness when it comes to transactions — but which of these payment methods is the most beneficial for online merchants to activate?
What is an Alternative Payment Method?
Traditional payment methods refer to cash, credit cards, and debit cards used to pay for a variety of goods, services, bills, and more.
Comparatively, an alternative payment method is a type of payment that does not involve the use of traditional payment methods, such as major credit card companies like Visa or Mastercard.
Instead, alternative payment methods — also called APMs — tend to utilize payment technology to offer innovative substitutes for traditional methods.
Why Does Activating Alternative Payment Methods Matter?
The advantages of activating APMs include the following:
- Increased Customer Accessibility: Traditional cash and card payments may work well for domestic, in-person transactions, but they can inhibit online merchants from expanding their business globally. With APMs, online merchants can access more customers, offer them the payment methods they prefer, and provide better accessibility to their products and services for any customers who may not have access to traditional payment methods.
- Lower Fees & Costs: Online merchants are no strangers to the hefty transaction and processing fees associated with traditional credit card payments. Many APMs offer online merchants the opportunity to reduce these fees or even avoid them altogether. In turn, online merchants can also offer greater affordability to customers who utilize APMs in the checkout process, incentivizing them to opt for the less costly option.
- Improved Checkout Experiences: APMs enable an enhanced and seamless checkout experience for customers, allowing them to pay in their preferred ways. Certain APMs — such as digital wallets — even allow customers to store their card or payment information securely, allowing them to checkout instantly with just the click of a button.
Four Key APMs to Be Aware of as an eCommerce Merchant
Though there are many different types of alternative payment methods for online merchants to select from, a few key APMs are especially important to activate due to their increasing popularity.
Here are four useful alternative payment methods for online merchants to familiarize themselves with:
1. Money Management Platforms
Money management platforms are often referred to as “all-in-one” payment solutions. Along with facilitating same-day payments, these platforms also allow for money transfers, fund storage, invoicing, and more.
Most money management platforms enable customers to store card and bank information, making it easy to carry out a transaction without having to re-enter their banking information every time. These platforms offer what many consider to be a safer payment method, as the merchant receiving the payment is not responsible for handling or storing the cardholder's information.
A great example of a money management platform is PayPal. Several essential tasks can be achieved through PayPal including sending money, receiving money, and making online purchases. PayPal can also serve as a digital wallet product.
To activate PayPal, merchants must visit the PayPal website and create a business account.
2. Digital & Mobile Wallets
Digital and mobile wallets have grown immensely in popularity, with two of the most widely used being Apple Pay and Google Pay.
Apple Pay is a mobile payment service that is enabled through the Apple Wallet. In the Wallet, users can store their card information for easy access. Once Apple Pay is enabled and activated, they can then shop online and pay for goods and services directly through the application.
Cardholder information is securely stored in the Apple Wallet and is never shared with merchants, offering a highly secure alternative payment method.
Google Pay works in a similar manner to Apple Pay, except it is activated via a Google account rather than an Apple account. Through the Google Pay app, users can save and store money and pay for goods and services sold by merchants with Google Pay activated.
To activate Apple Pay, merchants must register with Apple Pay and apply to use the API. For Google Pay, merchants must sign up for Google Pay for Business. Both processes require additional steps, such as verifying bank information and merchant IDs.
3. Direct Online Bank Transfers
A direct online bank transfer is a type of payment method in which money is transferred directly from a customer’s bank account to a merchant’s account. Direct bank transfers are widely considered to be one of the safest APMs available, making them a great option for merchants.
Some bank transfer solutions are available internationally, while others are available only in specific regions. The availability of these bank transfer solutions depends on various banking networks and regulatory restrictions found around the world.
Here is a breakdown of four popular direct transfer solutions and how they work:
- iDEAL: Based in the Netherlands, iDEAL is an APM that allows for direct bank transfers through an online banking environment. This environment requires payment authentication via a second factor of authentication, providing immediate notification of the success or failure of a transaction. For merchants interested in this APM, check out the webpages on integrating iDEAL and iDEAL availability.
- SEPA: Single Euro Payments Area — or SEPA for short — refers to a transactional system in which European customers, businesses, merchants, and others in the region can make direct bank transfers to each other’s accounts. Setting up SEPA payments requires the International Bank Account Number (IBAN) of the accounts money is being sent or received.
- PIX: PIX is a system created by the Brazilian Central Bank in which instant payments are facilitated through bank transfers. Activating PIX requires a merchant to have an account at a connected financial institution, which can include both banks and payment service providers. PIX is available for customers and merchants located in Brazil.
4. Buy Now, Pay Later (BNPL)
Buy Now, Pay Later — or BNPL for short — is a type of installment loan payment method that allows customers to break up purchases into smaller payments over a set period of time.
One of the most well-known and reputable BNPL providers is Klarna. With Klarna, customers can separate their payments into four equal installments. From a merchant’s perspective, Klarna pays out the full amount of a purchase to the merchant, meaning merchants do not have to worry about the financing element offered through Klarna to customers.
To activate Klarna, merchants must get started through the Klarna for Business Merchant portal.
To activate Klarna, merchants must get started through the Klarna for Business Merchant portal.
How Does Customer Preference Affect APMs?
The APMs that are best for online merchants to use varies widely depending on the personal, regional, and cultural preferences of the customer base you are conducting business with.
Cultural norms and customer sentiment can greatly impact which APMs your customers might prefer. For example, eBay sellers tend to lean towards PayPal, given the connections between the two companies. However, in some business communities, people making B2B payments lean towards Wise.
By comparison, B2C customers in Germany may prefer SEPA direct debits, SOFORT (a single-use, delayed notification payment method), and Giropay (an online banking payment method), given those are the most culturally accepted forms of payment.
As you can see, the kinds of customers you wish to attract can greatly impact which APMs are best for your business to integrate. This makes it important to do your due diligence and research which payment methods your target audiences prefer.
Final Thoughts: Activate APMs with Ease with Spreedly
Alternative payment methods are advantageous to merchants for many reasons, from enhancing the customer experience to enabling global business expansion and lowering payment costs.
At Spreedly, our global payments orchestration platform has the tools merchants need to activate and offer a wide range of APMs. Once a merchant connects to our powerful API, they can then carry out transactions through virtually any payment service in over 100 global currencies.
With Spreedly’s universal gateway and PCI-compliant payments ecosystem, activating the alternative payment methods your customers prefer has never been easier.
To get started, create an account with Spreedly today.
Looking for more on alternative payment methods?
Click here to read our comprehensive guide to local and alternative payment methods!
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