What Alternative Payment Methods Should You Offer? A Five-step Checklist

By Author: Sahil Verma
Total Articles: 160
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Customers are becoming more interested in Alternative Payment Methods (APMs). In Europe, 80 percent of consumers expect to be able to pay with a method other than a credit card. The same is true in the Asia Pacific, where 94 percent of consumers plan to use APMs in 2022. While in the Middle East (MENA), digital wallets are expected to become the preferred mode of payment in the near future.

As the demand for APMs rises, you must have a plan in place to implement the right ones in the right markets at the right time. Here are five ways to ensure you're providing your customers with the appropriate alternative payment methods.

1. Draw on local knowledge

When it comes to the APM of choice, consumer preferences differ between and within regions. Businesses must incorporate local knowledge and insights to provide their customers with the appropriate online payment gateway in the appropriate region.

Consumer payment preferences can vary greatly between countries even within the same region.

That is only the tip of the iceberg. Even within countries, there is variation ...
... in demographics and geography. These aren't always obvious at first glance. As a result, businesses should make the most of their local resources and expertise for their payment providers in order to uncover these insights.

2. Consider your line of business

Offering the appropriate payment method is not a one-size-fits-all solution. To find suitable options, each business must consider its industry, needs, and customers.

For example, a company that receives a large number of small transactions will be most concerned with the cost per transaction because their margins are so thin that even a small increase in transaction cost can wipe out profits. As a result, these businesses should offer and encourage customers to use payment methods that are the most cost-effective and have the best chance of success, such as direct debit.

Buy now, pay later (BNPL) transaction fees, on the other hand, are typically higher. Retailers who offered BNPL to their customers, on the other hand, saw a 50 to 200 percent increase in units per transaction. So you must determine whether this is a payment option that is appropriate for your company and its sales strategy.

There are other factors at work as well. Consider a subscription business. It may see a higher conversion rate if it offers a specific payment method. However, the business is powered by recurring revenue, and if that payment method leads to increased churn, it's probably not the best one to offer.

3. Stay nimble

The payment method landscape is rapidly changing as new players enter the fray. Keep an eye on future payment trends and be ready to pivot if the data suggests it.

However, keep in mind the reason for introducing a new payment method or the best online payment gateway. A clear goal will keep you from adding them unnecessarily, whether you're using it to reach a new market or to encourage your current customer base to spend more.

Remember that simply providing more options is not the answer for APMs — no one wants to be presented with 20 different options at the checkout. If you change your strategy to include a new payment method, you may have to retire one that is no longer serving you.

4. Focus on customer expectations

When developing an APM strategy, consider your business goals. Ultimately, however, your customers' expectations must also be kept in mind. You should make it as easy for them to pay as possible.

BNPL allows some of your customers to spend more while breaking down their payments into smaller installments. Loyalty programs, on the other hand, provide an incentive for people to pay for everyday items online. And, if mobile is your primary sales channel, digital wallets provide customers with the most seamless checkout experience.

Within the next ten years, digital personalization in e-commerce could generate up to $2.9 trillion in revenue for retailers. Payment methods that you offer are part of the personalization of the end-to-end shopping experience. APMs should be viewed as an essential component of any plans to innovate or develop new business models.

5. Get access to data and make smarter decisions

If you're wondering which APMs are the most popular among your customers. Which are the most appropriate for what you're selling? Or how much each will set you back. Data is the key to answering all of these questions.

To begin, look at market data to better understand payment preferences, sector benchmarks, and comparative APM costs. Second, make use of your internal data — in other words, what are the transactions in your company telling you?

And, if your company can run all of its APMs on a single, unified API platform, it will have the benefit of a consolidated view of all data as well as the tools to turn insights into actions.