Alternative payment methods – that is, any payment method that does not involve cash or a major payment card when purchasing goods and services – are growing in popularity thanks to evolving technologies. Many APMs are household names with PayPal, Apple Pay and Klarna leading the charge.
With no sign of the alternative payment method trend slowing down, in today’s article we provide a deep dive into four APM types. We’ll outline the pros and cons of each payment option so that you can find the right payment solution for your needs.
Alternative payment method statistics to make you think
Alternative payment methods require careful research. Let’s take a closer look at four popular types of APMs:
1. Buy now, pay later financing
Yes, Klarna we’re looking at you and your ilk. Available in e-commerce checkouts, physical stores and catalogue sales, buy now pay later is a form of consumer borrowing. In the UK, consumers who use BNPL owe £176 on average.
This method of financing can make bigger ticket purchases more viable and smart technology means that a consumer’s details can be stored allowing for easy repeat shipping. However, merchants should be mindful that too many payment options at checkout can lead to cart abandonment. Merchants and retailers also do not stand to gain directly from late fees charged by the BNPL provider.
Buy now pay later pros
- Can increase order value and conversion rated
Buy now pay later financing cons
- Merchants may not gain directly from late fees charged
- Largely for e-commerce and not suitable for all industries or sectors.
2. Faster Payments
Launched in May 2008, the UK Faster Payments Service allows you to send and receive payments quickly using internet banking and telephone banking. The advantage here is speed – no waiting days for a cheque or BACS payment to clear. Faster Payments are typically processed within hours, if not minutes.
2019 was a big year for Faster Payments too. Responsible for 1.9 trillion transactions in monetary terms, Faster Payments broke the record for the highest amount of payments processed in a single year.
But with this volume of transactions, it has also caught the attention of fraudsters. The instant nature of Faster Payments means that once monies are sent they are practically impossible to be recalled. In a rather sobering statistic, over £600 million was fraudulently obtained using Faster Payment in just a six month period in 2019.
Faster Payments pros:
Faster Payment cons:
- Open to fraud
- Not suitable for all transactions as there is a cap of £250,000 applied to Faster Payments
3. Direct Debit
Direct Debit allows payments to be collected automatically from a nominated bank account on a set day. Over the course of 2019, Direct Debit was responsible for 4.5 billion transactions.
In contrast to the volatility of cryptocurrency or the e-commerce niche of BNPL, Direct Debit is a secure payment method that has applications in many sectors and industries. From collecting recurring fees for subscription businesses such as gyms and magazines to processing one-off payments or variable amounts, Direct Debit does it all.
Those looking to set up a Direct Debit facility for their customers can be put off by high initial start up fees and the prospect of expensive Bacs software. However, instruct an established Bacs approved Direct Debit provider such as FastPay Ltd and this is all done for you – often considerably cheaper than if you were to handle your Direct Debits in-house.
Direct Debit pros
- Secure, flexible and popular payment method that can be “set and forgot”
Direct Debit cons
- Not suitable for same day payments
The above four APMs are far from an exhaustive list of all payment options available. There are literally 100s of e-wallets, prepaid cards, mobile payments, bank transfers and more, poised as payment solutions.
Do you need an APM?
Fastpay is a Bacs approved Bureau and Bacs affiliate that can quickly tell you if Direct Debit is the right alternative payment method for you. We provide cost- effective Direct Debit solutions to businesses, clubs and charitable organizations across the UK.
Find out how we can save you time, money and hassle by calling 0161 737 5290.
Alternatively, you can request more information about our services or book a call back by submitting your contact information online.