Written by Araminta Robertson.
Previously, companies were the ones that decided which payment methods to accept. But in today’s world, consumers now want to have the freedom to choose how to pay. They want to use their British Airways credit card to get travel points, Buy Now Pay Later schemes to make payments more manageable and Apple Pay so they don’t have to reach for their wallet.
The tide is shifting towards personalised, customer-centric payments methods, with new ones popping up every year. All these different types of payment methods are usually grouped under the term, Alternative Payment Methods (APMs). According to the Global Payments Report, here are some of the most popular payment methods that will be used in 2024.
Source: Page 9 of The Global Payments Report, by FIS Worldpay.
What’s an alternative payment method and why does it matter?
APMs can be considered as any form of payment that is not cash or major debit/credit card schemes like Visa, MasterCard and American Express.The most popular alternative payment methods are digital wallets, mobile payment apps, prepaid cards, and buy-now-pay-later (BNPL) instant financing. As you can see, it’s quite an extensive category that ranges from bank transfers to cryptocurrencies.
Why do they matter? APMs matter because they give customers the autonomy to choose how they prefer to pay. If a customer prefers to split a payment in three with an instalment based credit scheme or by using a specific payment provider that offers cash back, APMs afford customers the freedom to pick and choose. By offering a variety of APMs, businesses are able to provide a wider range of payment methods and cater to a broader range of customers. Ultimately, this will enhance customer retention, which is likely to lead to an uptake in sales.
What is a mobile payment app?
Mobile payment apps allow consumers to pay with their phones, and are one of the most popular alternative payment methods. Why? Think of mobile payment apps as giving superpowers to smartphones, allowing everyday shoppers to forget their wallets and use only their phone to make purchases.They’re more convenient, easier to use and a lot more secure. By using biometric authentication such as a fingerprint or face ID, consumers often feel safer using mobile payment apps.
Here are some examples of the top payment apps:
Google Pay is a digital wallet and a mobile payment system available to both Android and Apple iOS (with limited features) users. Google Pay allows users to send and receive money by using email addresses and phone numbers, store debit and credit card details, and pay for goods and services both online and in physical stores.
Apple Pay is similar to Google Pay, but in this case, it’s only available on Apple devices such as iPhones and iPad. Compatible with most debit and credit cards, it allows users to pay online and in-store and send and receive money from friends and family via messages.
Samsung Pay offers comparable features to Google Pay and Apple Pay but is strictly for Android users that use Samsung devices. Samsung Pay uses both NFC and MST (Magnetic Strip Technology), which means users can process payments even when NFC mobile payments are not available.
Paypal is one of the largest and oldest players in the market when it comes to online payments. The app is available on Android and iOS, but it has the disadvantage of being one of the most expensive payment apps, charging a fixed fee plus a 2.9% for money sent from a debit or credit card. The fee also varies from country to country and increases if the receiver is outside of the UK.
At Mode, we are redefining the way payments and loyalty work by providing merchants with a new way to accept instant payments through Open Banking technology. We’ve built a novel payment solution which offers a cheaper, safer and smarter alternative to card payments.
How does it work? Instead of doing a manual bank transfer, Mode uses innovative Open Banking technology to facilitate payments that land directly into your business bank account, skipping the intermediaries and eliminating costly card processing fees for businesses. Customers set up an account with Mode, and can use it as a platform to manage their finances, make instant payments, earn cashback rewards in Bitcoin and receive personalised offers from merchants.
Why mobile apps are replacing card payment systems
According to Capterra, 55% of UK residents have a mobile wallet installed, and 96% of those use a smartphone to make payments via their mobile wallet. You’ve probably experienced it yourself: nowadays we do a lot of our everyday activities on our phones. It’s more convenient to carry, more secure and even more hygienic. You can also see everything from one location including account aggregation, transaction history and notifications.
Mobile apps are a big win for customers, and those that are enabled by Open Banking also greatly benefit merchants. With Open Banking, merchants can minimise the risk of fraud by skipping intermediaries and receiving payments directly into their bank account, bypassing the need for acquirers, card networks and issuing banks.
Mobile apps are an overall win-win, which is why it’s likely we’ll see them replacing card payment systems altogether. The pandemic was a big driver of alternative payment methods since consumers were forced to shift online off the back of the Covid-19 pandemic. It’s a trend that won’t be going away any time soon and accordingly, APMs that afford customers more control over their finances and the way they make transactions, are hugely beneficial to both parties.
Interested in learning more? Speak to one of our expert team to join our merchant network, benefiting from Mode’s cheaper, safer & smarter payments and loyalty solution.