Future of Retail: Guide to Offering Alternative E-Commerce Payment Methods
Nearly 1/3 of business owners of retail establishments claim that mobile payments have a major influence on boosting sales.
Approximately 8% of transactions are not completed because no acceptable form of payment is available.
Cryptocurrencies often offer cheaper transaction costs than credit cards and transactions performed with bitcoin are final which protects businesses from false chargebacks and fraudulent chargebacks.
Did you know that 56% of consumers are more likely to buy from merchants accepting cryptocurrency?
In a world where e-commerce is on the rise, accepting digital payments has gone from being a key differentiator to table stakes for retailers across the globe. Traditional methods like credit cards and bank transfers are no longer the only options available, and shoppers are now turning to alternative payment methods (APMs) like PayPal and Bitcoin to complete their online transactions.
What factors have led to this dramatic surge in the popularity of APMs in the retail sector? Why are they so crucial in the world of online trade? Who gains the most from the widespread adoption of these novel payment methods? Let's look into the impact APMs are having on the future of retail sector in this article.
What Are Alternative Payment Methods?
Alternative payment methods, or APMs in short, refers to any form of payment that is not cash or major credit cards. It includes anything from digital wallets such as Google Pay, mobile payment apps to cryptocurrencies, electronic checks and Buy-Now-Pay-Later (BNPL) schemes like Afterpay, Atome and Klarna. While it may seem wise to offer clients as many payment options as possible, not all of them will be worth the investment for your company. Here are a few that you should definitely consider for your e-commerce store(s):
Digital Wallets and Mobile Payments
A digital wallet, often known as an e-wallet, is a piece of software that facilitates the exchange of digital currency between individuals, either in the form of peer-to-peer payments or purchases from a third party. Mobile payment systems like Google Pay, Apple Pay, Samsung Pay, and Android Pay are just a few of the options available. Considering that 84% of American households now own a smartphone, it is logical to start accepting mobile payments systems at your store.
In addition, nearly a third of business owners of retail establishments claim that mobile payments have a major influence on boosting sales. Fortunately, a growing number of POS (point of sale) systems are designed to process mobile payments. If you are prepared to make an investment in mobile payments, find out if your current system supports that functionality by speaking with the provider of your POS software.
The term "alternative currency" refers to any currency that can be used as legal tender in place of a "traditional" fiat currency. Alternative currencies can be created by businesses and people, and they are not subject to the same national or bank regulations as fiat money. This includes digital currencies like Bitcoin and Ethereum and points earned in loyalty programs that can be redeemed for physical products (such as Starbucks Stars or Amazon Coins).
Cryptocurrencies often offer cheaper transaction costs than credit cards and, like cash, transactions performed with bitcoin are final, which protects businesses from false chargebacks and fraudulent chargebacks. Moreover, if you run an online store, taking bitcoin is a smart business decision since it allows you to reach out to a wider audience by making it simple for buyers from different parts of the world to make purchases. For these and other reasons, half of all merchants are already implementing bitcoin solutions. What is stopping you?
Retail Financing Options
Financing options have historically been intended for major purchases like a new home, vehicle, or major equipment. But nowadays, financing for relatively small retail transactions is a growing trend. Through retail financing, clients can make purchases using alternative methods of payment than those credit cards. Simply said, consumers may make purchases on credit through a third-party financing program, allowing them to spread out the expense of the purchase.
Inevitably, a better conversion rate is possible when buyers are given the option to pay for their items in installments. It has been reported that companies using the Klarna installment payment app have witnessed a 45% rise in average order value and a 30% increase in conversion after implementing the service.
Buy Now Pay Later Options
To allow customers to make in-store purchases on credit without using a credit card, some retailers (40% to be exact) provide a buy now, pay later plan (BNPL) in the form of a short-term loan. Shopify's own Shop Pay Installments, as well as Affirm, Afterpay, Sezzle, PayPal, and Klarna, are some great ones to consider. Many will do an immediate soft credit check on the consumer (the sort that doesn’t affect your credit score), and then release cash for a point-of-sale loan.
Customers have a variety of online payment methods to choose from, with some incurring interest and others not, with some lending institutions charging late or missed payment costs. Companies that operate in the BNPL space may charge retailers a fee to compensate for the loss of revenue caused by not charging consumers interest.
Benefits of Offering Alternative E-Commerce Payment Methods
Here are some amazing benefits of offering alternative e-commerce payment methods:
According to studies, around 80% of shoppers abandon their carts. Many issues contribute to this, including the absence of guest checkouts, prohibitively expensive shipping rates, and irrelevant question fields on order forms. Keeping your abandonment rate low requires that you remove as many of these barriers to payment as possible.
Approximately 8% of transactions fail to finish because no acceptable form of payment is available. Some of your clients may be located outside the country, whether you operate an online or physical store. By doing away with any potential payment roadblocks, you can be assured that your clients will have no trouble purchasing your goods. This will offer a seamless buying experience that will optimize your conversion rate.
More Secure Online Transactions
Furthermore, a new survey indicated that 18% of buyers abandoned transactions because they had worries about payment security. Typically, while utilizing a digital wallet or BNPL platform, you simply need to enter your account and password. For some buyers, this may create a sense of security.
To prevent unauthorized access to the personal information stored in their digital wallets, some smartphone owners employ biometric authentication methods like fingerprint scanners and facial recognition software. Since trust is so crucial to the buying process, you should do everything it takes to put your consumers at ease.
Online shoppers, in particular, may have a high tolerance for customer service issues. Customers are less likely to buy anything if there are too many steps in the purchasing process or if they have to wait too long for delivery. Using a payment type common on the checkout page can speed up the process.
What’s more, electronic payment methods, such as e-wallets and phone payments, typically need fewer steps than traditional payment methods, such as swipes and keystrokes. Today, instant payment methods like Apple Pay and Google Pay contribute to total revenue. It allows users to quickly make purchases using a secure payment channel.
Attract Younger Audience
Some years ago, your only alternatives for paying for a costly item if you lacked the funds were to utilize a conventional payment method like a credit card or debit card with an overdraft. More and more consumers can make purchases without having the funds in their bank account, thanks to local and alternative payment methods. The younger generation has shown a marked distaste for using credit cards while making purchases. Offering the desired payment options is crucial if you want to reach this market.
Making Alternative Payment Methods Work for Your E-Commerce Business
When faced with such a wide variety of options, how can a company be sure to choose the best alternative payment method? Consider factors like cost, features, usefulness, and security when deciding which APMs to provide. In addition, be sure to:
Learn your target demographic, especially in emerging markets.
Keep up with what your customers anticipate from you.
Take advantage of the APMs that work best for your company, field, and goals.
The beauty of APMs is that you may combine different approaches to maximize your company's success. You can accept payments using PayPal and Venmo if your business operates within the United States. To facilitate growth in Southeast Asia, APMs like Boost, GrabPay, and OVO Wallet can be utilized. Some APMs might incur greater transaction costs, which can affect your profit margin. Keep in mind that just because APMs are more convenient and flexible doesn't mean your business won't lose customers.
The Future of E-Commerce Payments: What's Next?
The retail ecosystem is undergoing significant shifts and we see APMs continuing to play a key role in the evolution of global payment processing. APMs not only empowers consumers by letting them choose their preferred payment method, but also increases conversions by preventing cart abandonment associated with declined payments. We are eager to see what more APMs can offer to both retailers and end-consumers around the world in the coming years.
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