What alternative payment methods should you offer? A five-step checklist.
Alternative Payment Methods (APMs) are gaining popularity with customers. In Europe, 80% of consumers expect to have the option to pay with a payment method other than cards. The same is true in Asia Pacific, where 94% of consumers will consider using APMs in 2022. While in the Middle East (MENA), digital wallets are expected to soon be the preferred mode of payment.
As demand for APMs grows, you must have a strategy to implement the right ones in the right markets at the right time. Here are five ways to make sure you’re offering the right alternative payment methods to your customers.
1. Draw on local knowledge
Consumer preferences differ between and within regions when it comes to the APM of choice. Businesses need to incorporate local knowledge and insights to offer their customers the right payment method in the right region.
Even countries within the same region can have vast differences in consumer payment preferences. For example, in Poland, customers want to pay using Przelewy24. While in the Netherlands, the most popular way to pay is iDEAL. In MENA, Qpay is popular in Qatar but not in Egypt, where Fawry is a popular payment method.
That's just scratching the surface. Even within countries, there's nuance demographically and geographically. And these aren’t always clear at first glance. That’s why businesses should leverage their local resources and expertise for their payments providers as much as possible to uncover these insights.
2. Consider your line of business
Offering the right payment method is not a one-size-fits-all approach. Each business will need to consider its industry, needs, and customers to find suitable options for them.
For example, a business receiving multiple small transactions will be primarily concerned with the cost per transaction because they operate with tight margins — even a slight increase in transaction cost can wipe out profits. Therefore, these businesses should offer and nudge customers towards using payment methods that are most cost-effective and with the highest chance of success, direct debit, for example.
In comparison, buy now, pay later (BNPL) transaction fees tend to be higher. However, retailers that offered their customers BNPL had a 50 to 200% increase in units per transaction. So there's a calculation to make around whether or not this is a payment option that makes sense to your business and its sales strategy.
There are other variables at play as well. Take a subscription business for example. It may well see greater conversion offering a particular payment method. But the business is powered by recurring revenue and if that payment method ends up leading to greater churn then it probably isn't the right one to offer.
3. Stay nimble
The payment method landscape changes rapidly as innovative players throw their hats in the ring. Keep an eye on future trends in payments and be ready to pivot when the data suggests.
Always be conscious of the purpose behind offering a new payment method, though. Whether you're using it to reach a new market or driving your current customer base to spend more, a clear goal will keep you from adding them unnecessarily.
And remember that simply offering more is also not the solution for APMs — no one wants to be confronted with 20 different options at the checkout. Adjusting your strategy to include a new payment method may mean retiring one that's no longer serving you.
4. Focus on customer expectations
Your business goals are important when you’re developing an APM strategy. Ultimately, though, it's your customers' expectations that must also be kept front of mind. You should be making it as convenient as possible for them to pay.
For some of your customers, BNPL allows them to spend more and break their payments into smaller installments. For others, loyalty programs that are offered by Alipay give an incentive to pay online for everyday items. And, if mobile is your primary sales channel, then digital wallets offer the most seamless checkout experience for customers.
Digital personalization in ecommerce could open up as much as $2.9 trillion for retailers within ten years. Personalization of the end-to-end shopping experience includes the payment methods that you offer. APMs should be considered an integral part of any plans to innovate or develop new business models.
5. Get access to data and make smarter decisions
Whether you’re questioning which APMs are the most popular with your customers. Which are best suited for what you’re selling. Or how much each is going to cost. The key to answering all these questions is data.
Firstly, consider market data to understand payment preference, sector benchmarks and comparative APM (Alternative Payment Methods) costs. Secondly, leverage your internal data — in other words, what are the transactions going through your business telling you?
And, if your business can have all its APMs running off one, unified API platform, it will have the luxury of a consolidated view of all the data and the tooling to turn insights into actions.
Read our guide to learn more about alternative payment methods and how you can develop the best strategy for your business to offer the methods consumers want today and tomorrow.