One of the biggest trends to shape the global payments industry of late is the rise of alternative payment methods. Alternative payment methods (APMs) empower consumer preference and help increase transaction acceptance rates, which is why they are a key component of any winning payment strategy.

But payment method choice can differ depending on customer preference and often location too. So, let’s look at the evolution of APMs and some key considerations for merchants wishing to incorporate APMs into their payment strategy.

What has fueled the rise in APMs globally?

  1. Domestic schemes: born out of a desire for governments to gain independence from global card networks and a drive to improve efficiency across the payment ecosystem, domestic schemes are a key APM driver. Pix, rolled out by the Banco Central do Brasil in Nov. 2020, was built for efficiency and financial inclusion. It now has 107.5 million registered accounts, more than half of the country’s population. According to central bank data, Pix payments volume is already equivalent to 80% of debit and credit card transactions. Further examples include internet banking transfers and local payment schemes such as iDEAL in The Netherlands and Multibanco in Portugal.
  2. Open banking: underpinning much of the innovation today, including the rise of real-time payments, open banking provides a secure and frictionless alternative to card payments. It enables anyone with a bank account and a mobile phone to make a payment and provides merchants with additional benefits such as lower processing fees and reduced chargebacks.
  3. Buy Now Pay Later (BNPL): the flexibility and convenience of BNPL has enjoyed initial success, particularly in the retail sector and with younger shoppers. BNPL adoption is expected to grow steadily, with a CAGR of 24.5% during 2022-2028.
  4. Digital wallets: A report by Mordor Intelligence estimated that between 2021-2025 the adoption of digital wallet apps, such as GooglePay and ApplePay, will increase by a compound annual growth rate of 26.9%. Mobile payments are far more seamless and intuitive for the consumer and this has led to an increase in the usage of digital wallets. Additionally, the growing prominence of brands like Paypal and a heightened consumer focus on security have also contributed to the popularity of digital wallets.
  5. Cryptocurrencies: while still nascent and not a widely adopted payment method, cryptocurrency is slowly gaining traction as major brands like Microsoft, Home Depot and even Starbucks are leading the charge on acceptance.

Growth in these methods has helped shape consumer attitudes toward using alternatives when paying for goods and services. But what makes APMs tricky for merchants? – a lack of uniformity when it comes to accepting and processing alternative payment methods globally.

In the Netherlands for example, most consumers use iDeal but in Brazil, it’s Pix or Boleto and some of those methods are based on offline dynamics. Throughout Asia Pacific WeChat and AliPay are by far the most popular forms of payment. Just looking at China, The Netherlands, and Brazil, without accepting payments through the popular local methods, merchants would risk losing out on addressing a large percentage of their target market. The US is largely dominated by ACH, RTP, Paypal and cards – but even cards are complicated because not all cards are created equal. So, merchants wishing to operate in multiple regions, need relationships with domestic players.

If merchants can’t accept payments using methods their customers know and trust, in countries they operate in or wish to expand to, those transactions are lost. So, payment localization makes good business sense, and it is paramount for payment partners to connect into multiple APMs globally and offer the right APM mix.

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But processing multiple alternative payment methods can also add additional layers of complexity to a business:

  1. Reconciliation: businesses must reconcile millions of transactions, all in different currencies and with different settlement times, often hindered by delays, refunds or chargebacks.
  2. Conversion: increasing conversions is always a challenge, for any business. So being able to choose the right payment method based on the circumstances automatically; or to prevent cart abandonment with decline recovery or partial approval features, can have significant benefits around conversion. Not to mention blending these all in with payouts, recurring billing, or one-click payments if required.
  3. Fraud management: businesses need to be able to rely on real-time fraud detection and scoring, so that fraudulent transactions can be stopped before they happen, no matter which payment method the transaction is made with.

For merchants to truly optimize their payment strategy, ensure revenue growth and gain trust with their customers locally, implementing custom APMs is a necessity. Hence, it’s crucial for merchants to work with a payment partner who can drive growth through seamlessly incorporating APMs into their payment strategies. Beyond this, because of the complexities surrounding reconciliation, fraud prevention and conversion, it is paramount that the payment partner can streamline the processing of multiple APMs, so the processing burden doesn’t fall on the merchant.

Another key consideration for any merchant wishing to implement multiple APMs is around ongoing support. Payment partners should be able to support merchants 24/7/365 – whether that’s with new integrations or any modifications to an APM’s features or APIs. So, it’s important that merchants work with a payment provider who can offer a holistic, distinctly human service when managing multiple global alternative payment methods.

At Nuvei, we see APMs continuing to play a key role in the evolution of global payment processing. We’re constantly working to add new payment methods onto our platform. We currently offer connections to more than 570APMs and that’s more than any other provider on the market. But accepting payments using multiple APMs is only half the battle for businesses. Reconciling, optimizing conversion and preventing fraud using APMs is equally important albeit more complex. Our proprietary platform was built to completely eradicate the burden of APM processing for the merchant, giving them peace of mind, and enabling them to create a winning payment strategy.

Max Glanz Imri Meir, is responsible for driving Nuvei’s product strategy. Working with key products like its Cashier and alternative payment methods. Imri draws on merchant relationships and deep market research to deliver innovative solutions that meet the needs of Nuvei partners across diverse industries as they scale. Imri also oversees Nuvei’s gaming offering in the US. Prior to joining Nuvei, Imri was Payments, Risk Management and Fraud Director for William Hilll.

 

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