The Key to the Future in E-Commerce: Alternative Payment Methods (APM)
Cards are not the only way to pay for online transactions. In fact, there are more than 300 different payment methods in the e-commerce world. Consumer preferences may vary depending on the country, product or service purchased.
Since we entered the digital age, things change every day in our lives. One of them is our payment habits. On a global scale, traditional payment methods are being replaced by alternative options such as online or mobile payments. Because people no longer want to carry cash or cards in their wallets. There are three main reasons for the rise of alternative payment methods. First; increasing customer demand, secondly, they are comfortable and reliable, and thirdly, the spread of mobile applications in parallel with technological developments.
By the end of 2019, 55% of all online transactions are expected to be made using alternative payment methods. In order to imagine the future, it is useful to examine alternative payment methods in depth. After all, when a new concept becomes a phenomenon, it ceases to be fashionable and becomes a standard element. For this reason, we need to have the most up-to-date information in order to be able to direct new dynamics according to needs and create foresight.
First of all, what are the alternative payment methods?
AÖY is a general name given to methods that do not rely on traditional payments such as credit cards and/or cash. E-commerce platforms are able to offer more flexible options for shoppers, rather than sticking to a specific payment model. In this context, two different alternative payment methods come to the fore at the moment;
First, there are ATOs that include wire transfers. This is a model that allows the shopper to pay using an online banking method. According to the WorldPay Global Payment Report, the use of this method is expected to increase in parallel with the increase in online banking activities.
Another common IPM is a digital wallet-based solution. Accordingly, consumers make their payments using mobile devices. Users can benefit from this method by authorizing their credit cards to a mobile application.
The world of technology and mobile applications are growing rapidly beyond traditional payment methods, paving the way for more different payment methods. The latest report from the U.S. Department of Commerce Census Bureau stated that in the first quarter of 2018 alone, e-commerce sales in the retail industry were $123.7 billion. Online payment methods are also on the same growth trajectory. It is thought that 75% of US consumers use online payment methods while shopping, and the transaction value of the digital payment market will be approximately US$ 1 billion in the coming period.
It is estimated that roughly three billion people in the world do not have a traditional bank account. The same population is much more likely to use a mobile device with online payment capabilities. At this point, offering only credit card payment service as a payment option means that companies cannot and cannot reach international consumers. With more accessible payment options, companies can catch up with shoppers regardless of their credit or banking habits.
So, what are the latest developments and trends in alternative payment methods?
1- Big Steps from Big Technology Companies (GAFA)
How big is the GAFA (Google, Apple, Facebook, Amazon) gang? This question is literally a billion-dollar question, as GooglePay and Apple Pay are important payment systems and Amazon states that it is taking steps in this direction.
2- Payments to Customer Experience
The simplicity and convenience that consumers have in e-commerce platforms has changed their shopping behavior. New payment methods offered by non-banking players like Google, Apple, Facebook and Amazon are raising the bar by changing the way consumers experience payments.
3- Data-Driven Approaches
The data on consumers' transaction histories represents vast knowledge of consumer behavior that can be used to personalize customer experience and specific product offerings. E-commerce giants have realized that new financial institutions have recently started using this data.
According to research reports, already major payment industry players are developing analytical capabilities and algorithms to use payment data. In this way, it aims to better understand consumers and to offer better products/services.
4- Omnichannel Approach
Consumers no longer want to use a single payment method as they expect to shop whenever, wherever and however they want. As technology develops, payment transactions can be made through different channels. For example, payment methods can be incorporated into new technologies such as voice assistants and IoT devices.
Trends and developments continue to move rapidly in this direction. In this context, companies need to focus on the following questions;
-Do you fulfill consumer demands?
-What does the future of your e-commerce experience look like?
-If your system does not include alternative payment methods, do you make any plans for it?
Finally, I can say that for retail companies to be successful in customer acquisition strategies, it is of great importance to closely follow the development of alternative payment methods, which are becoming increasingly critical and rapidly growing, and to seize opportunities.
Resources:
https://www.chargebee.com/blog/alternative-payments-methods/
https://www.compelo.com/retailers-payment-trends-2019/
https://thefinancialbrand.com/78052/payments-trends-banking-future/