Why You Should Be Accepting Alternative Payment Methods
In the last several years, we’ve seen a massive spike in online purchases, whereas cash transactions have taken a dive in the opposite direction. Historically, the go-to payment types fueling the surge in digital purchases have been credit and debit cards, but they’ve seen their own market shares dip a little thanks to the new(ish) kid on the block—alternative payments. These “kids” are starting to give cards a true “run for their money.”
Why is this important?
Because alternative payment methods (APMs) help increase payment volume and conversion rates, especially on mobile devices—which in turn, drives more revenue.
What is an alternative payment method (APM)?
An alternative payment method or APM refers to payment types other than major credit cards, debit cards, cash, or checks. This mainly includes digital payment methods, but can also include options like prepaid cards.
Types of alternative payment methods
Chances are you’ve used at least one APM already. Here’s a quick rundown of some of the most popular options:
Mobile wallets
A mobile wallet securely stores payment data and allows customers to make purchases with their smartphones. Some of the most popular examples of mobile wallets in the U.S. are PayPal, Apple Pay, and Google Pay, whereas Alipay, WeChat Pay, and GrabPay are the most popular mobile wallets across Asian countries.
Buy-now-pay-later (BNPL)
Buy-now-pay-later is a short-term loan option that lets customers buy goods and pay for them in equal installments. BNPL is similar to the old layaway model, except you receive what you purchase right away, rather than having to wait until the item’s paid for. Some of the most well-known Buy-now-pay-later companies are Affirm, Klarna, and Afterpay.
As a bonus, BNPL also reassures that a shortage of acronyms will never become a problem in the payment industry.
Fun fact:
Despite Android having the most users, Apple Pay dominated 2020, accounting for a staggering 92% of mobile wallet transactions. Mic drop!
The customer experience and alternative payments: It’s a matter of convenience
Now on to customer expectations. The truth is, consumers like options. This includes what they buy and how they buy it. If online purchase trends continue in the direction they’ve been heading, convenience will transition from sidekick to hero in no time.
Consumer demand for convenient, frictionless experiences also correlates with data on how customers are paying for goods and services online. Mobile wallets made up 29% of global POS payment methods in 2021, and are expected to account for 39% by 2025.
Furthermore, a 2020 report from the National Retail Federation (NRF) revealed that while the majority of customers still rank quality and price as their top deciding factors, more than 97% of those same people surveyed claimed to have abandoned a purchase due to inconvenience.
Alternative payment methods can improve your customer experience by making payments more convenient. For instance, it lets customers securely store credentials so they don’t have to key in a card number every time they make a purchase. APMs also help platforms move more volume as they'll attract more merchants by providing more ways for their customers to pay.
Again, it's all about having options.
How alternative payment methods can boost sales and increase revenue for SaaS platforms
In the case of APMs, convenience is also what drives increased revenue and sales. This is because customers are more apt to do business with a company that offers the payment methods they prefer to use. In other words, APMs help to create sticky customer experiences!
What business doesn’t want that?
Alternative payments are especially important when it comes to mobile users. This is because they tend to have lower conversion rates than desktop users despite accounting for more than 61% of overall internet traffic.
Couple that with PPRO’s findings that 42% of customers in the United States cut and run if their favorite payment method isn’t available, and it’s clear that providing multiple ways to pay is the way to go.
More payment options paired with a streamlined experience will help capture these missed opportunities.
The easiest way to accept alternative payment methods
Integrating with a PayFac (like Finix) that offers them is the simplest way to allow your merchants to accept alternative payment methods. This is because everything is already set up and in one place, which results in faster implementation and easier management.
The PayFac handles most of the technical, behind-the-scenes payment intricacies so you can focus on your product. You’ll also earn more revenue from a larger payments volume and higher conversion rates in the process—win-win.
Choosing a payment provider that offers alternative payment methods can give your SaaS platform a competitive edge in today’s cluttered market. Finix currently supports mobile wallets for Apple Pay and Google Pay—with more options on the way.