It’s Not Just PayPal! What Other APMs Could You Accept?
In the UK, PayPal is perhaps the mostly widely recognised Alternative Payment Method (APM) by merchants and consumers alike. However, there are over 200 APMs currently available and therefore just accepting PayPal is a bit like only accepting MasterCard and no other payment cards.
Of course there are other alternative payment methods that are gaining in popularity. Mobile wallets like Apple Pay and pre-paid cards such as the Starbucks card are increasingly becoming mainstream on the high street. However with online payments, certainly here in the UK, PayPal is often the only APM merchants offer.
Could you be missing an opportunity?
We think so! Alternative payment methods can open doors to new customers both at home and abroad. Currently in the UK, debit cards are the most popular way to pay online, and are predicated to become the most popular payment methods overall (online and offline) by 2018. However, alternative payment methods are a growing part of the payments market and accounted for 499 million payments in the UK in 2016.
Over the next decade APM use in the UK is predicted to increase by 66% to over 800 million transactions. This trend is being seen across Europe and is being driven by a combination of factors.
- Mcommerce – a 2015 survey by PayPal found that 33% of UK online shoppers bought using a smartphone in the previous 12 months. Europe also has the highest mobile penetration rate at 129% in Western Europe and 151% in Central and Eastern Europe. As smartphones screen sizes have become larger in recent years, making it easier to buy online, strong growth in the UK and across Europe is expected.
- Demographics – consumers aged between 18- 34 years have grown up and come of age at a time of digital and technological innovation. Unlike their parents and grandparents who prefer more established and trusted payment methods such as credit and debit cards, this younger generation are early adopters of APMs. 30% of Apple Pay and Android Pay users are in the 25-34 year group, compared to just 4% in the 55-64.
- Convenience and speed – APMs like PayPal offer even faster and more convenient ways to pay, deploying 1-click technology across multi-merchant payment pages. While merchants can optimise their payment pages for faster conversion by offering 1-click for returning customers, APMs can speed up the payment process for new customers too.
Therefore, even in UK ecommerce markets where credit and debit cards are widely used, there are opportunities to attract and convert consumers by offering alternative payment methods. Providing customers with payment methods that are convenient, streamlining the payment experience for new customers, and offering consumers the option to use payment methods that are aligned with other technology.
Reach new markets with the right APM
While domestic consumers in the UK may still favour PayPal over other APMs, there are opportunities to reach new markets by offering different APMs. If your business or organisation is looking for global growth, accepting online payments via a local alternative payment method could be the best way to launch on a new market.
The global growth in ecommerce – predicted to grow at a CAGR of 19.42% during the period 2016-2020 – is being driven by cross-border ecommerce. Domestic markets in many European countries and other economies are starting to reach maturity and growth rates are forecast to flatten out in the next few years. However, cross-border ecommerce is set to outpace domestic growth, with a CAGR rate of 17% between 2017 and 2022, compared with 12% for overall B2C ecommerce.
Consumers are spending outside their domestic markets to purchase goods or services otherwise unavailable, or to benefit from more competitive pricing in international markets. Improved logistics, the enhanced localisation of ecommerce sites and the use of marketplaces (eBay etc.) have made it much easier for consumers to shop overseas.
Perhaps the most important factor is localised payment methods. While a multi-lingual website and dynamic currency conversion (converting transaction values to the currency of the payment card’s country of issue at the point of sale) are also enabling merchants to reach new markets; alternative payment methods are crucial in many markets.
China is a great example of this. Consumers in this country are spending a lot of money overseas, buying everything from baby products to luxury goods and fashion. However, faced with a payment page offering the option to pay by the major credit card brands or PayPal you might find that these consumers abandon their shopping baskets and go elsewhere.
Online payments using credit cards are low in China, at around 5%, and while the major credit card scheme UnionPay does issue some cards affiliated with American Express, MasterCard and Visa, this payment method is still not popular. However, China’s answer to PayPal – Alipay – is huge. With over 520 million users it is the most popular online payment method in the region. If your business is interested in reaching consumers in China, Alipay is an important APM to offer.
To explore what APMs your target customers use in more detail, read our post on Which APM’s Do Your Cross Border Customers Use?
If you would like to discuss APMs with one of our payment experts, please get in touch with our team: Call +44 (0)808 159 7217 or email [email protected]