The checkout process is more critical to any business than one might think. It’s the last factor a buyer considers before deciding to purchase goods and services. Without an intuitive and reliable experience, the risk of cart abandonment is high.
That said, the perfect checkout process has many components, such as adequate security measures, as well as shipping and delivery information. But one consideration that’s being given a lot of focus alongside the rapid growth of financial technology, or fintech, is the method of payment. Traditionally, consumers used cash, checks, or cards, but younger generations — whose purchasing power is not to be ignored — now prefer alternative payment methods.
What are alternative payments methods?
Simply put, alternative payment methods (APMs) are ways to purchase goods and services aside from the traditional modes of payment mentioned above. There’s a growing number of APMs today, but Payments Journal groups them into these three classifications:
1. Bank transfers: These types of transactions are completed through online banking. Aside from convenience, consumers prefer bank transfers to avoid incurring debt as they would with credit cards.
2. Wallet-based solutions: These can be used to pay in brick-and-mortar stores or e-commerce platforms through digital wallets. The most popular examples are Apple Pay and Google Pay, in which a user adds funds into the wallet, which acts like a debit card.
3. Cash-in: The alternative to credit cards, cash-in payment solutions act as prepaid cards. Because they don’t require a credit check, cash-in APMs are more accessible to more consumers, especially young people.
How can they help my business?
There are a lot of advantages that APMs bring, all of which can drive more success for your business. These three are benefits you should know about:
1. Relevance: The majority of today’s consumers are young and digitally savvy. This is particularly true for Generation Z (16-24 years old), who have a lot of experience with APMs like mobile payments. A report on Gen Z’s purchasing habits cited by Globe Newswire stated that the young generation of consumers even prefer shopping in stores that have APMs like contactless solutions. Given how much spending power they have, which reports estimate to be $140 billion, businesses can tap into a bigger market by offering newer, more relevant payment methods.
2. Hassle-free transactions: The checkout process heavily impacts the customer experience. This is why it shouldn’t be treated as an afterthought. Reputable payment provider FIS Global describes the ideal transaction as convenient and secure, which starts with a more simplified payment acceptance. The process for traditional payments is usually long and complicated, like buyers being redirected to a third-party site to input their credit card details with every purchase. Your goal with APMs is to make the checkout process more simple, user-friendly, and trustworthy — without sacrificing security, of course.
3. Accessibility: Unlike credit cards, APMs don’t require lengthy application processes. This is key if you want to attract younger consumers who might not have credit to begin with. You can make your business more accessible to a wider base with APMs, like if you want to tap into international markets.
How can they hurt my business?
As with any form of technology, there are downsides to APMs:
1. Fraud: Though adoption is rising, a survey by Transaction Network Services found that security is the biggest concern when it comes to APMs. There is still a risk for data breaches, especially with newer or untested payment models.
2. Integration: A business can only reap the rewards of APMs when integrated into the checkout process properly. Given that many APMs are still being tested, there are risks of creating an even more confusing process when deploying them too early.
Do I need one?
It’s hard to give a definitive piece of advice to small and medium-sized businesses given how unique each and everyone is. Overall, APMs can create a more satisfying customer experience that can seep into other aspects of the business.
If you’re unsure whether your business needs one, it might help to hire a finance director (FD). The role of the FD is discussed in greater detail in our ‘How Can a Finance Director Help Me?’ article.
Shoaib Aslam is the co-founder of Pearl Chartered Accountants, a UK-based chartered accountancy firm that has multiple locations across London. They are experts in helping startups and established businesses with all aspects of growth, strategy, scaling up, accounting and tax planning.