Voice of the Industry

Building an alternative payment method roadmap: 5 steps for every merchant

Thursday 9 March 2023 08:55 CET | Editor: Raluca Constantinescu | Voice of the industry

Katharine Evans, Economist at CMSPI, presents the five steps merchants should follow to build their APM roadmap and make the most of their payments mix.

Alternative Payment Methods (APMs) are now expected to make up 25% of global non-cash payments by 2025 – and in some European markets, they already dominate. As many merchants scramble to meet customer demand, it can be easy to lose sight of a long-term strategy that puts productivity first. With that in mind, here are our 5 steps to build your APM roadmap and make the most out of your payments mix. 


1. Understand your customer 

Preferences for specific payment types can vary significantly by market – meaning it’s vital that multinational retailers localise their APM strategy. 

This can be due to market-specific APMs (think iDEAL in the Netherlands) or internationally-accepted brands (such as Klarna). In every case, it’s crucial that merchants weigh up consumer interest against cost, transaction success, fraud, and consumer experience considerations on a market-by-market basis. Take Figure 1; Buy Now, Pay Later could provide a significant uplift in Sweden, the home of Klarna, but implementing in Italy, where BNPL has just 4% market share, may not be a make-or-break decision for your consumer base. 

The right APMfor a given market can be the difference between a sale and losing out to a competitor. But have some of those decisions already been made for you? 

Figure 1 – Ecommerce market shares for Italy and Sweden, 2022 

Ecommerce market shares for Italy and Sweden 2022 by CMSPI


2. Take the case to your payments partners 

Nobody wants to plan an entire APM strategy, only to get bogged down in the implementation phase when it turns out your supplier can’t integrate with the APMs you had in mind. And, although many merchants already have flexibility in their supply chain, even agnostic gateways can have limited out-the-box integration potential. 

You might have a payments partner which allows you to simply ‘switch on’ a large number of APMs – this can decrease speed to market and make reconciliation easier, but it may lead to cost discrepancies. On the other hand, you might choose to integrate directly, which can require more technical uplift while affording greater control. 

Either way, it’s vital you communicate with your existing suppliers when considering a new APM strategy – and analyse the potential costs of implementation from all angles before you act.


3. Ensure your checkout journey is top-tier 

Following the rapid acceleration of online growth throughout the pandemic, the checkout experience is now vital to retaining and increasing revenue. 

Implementing low-friction payment methods such as digital wallets can help make the checkout process more convenient – but an overabundance of APMs could make your checkout seem crowded, and may risk cannibalising lower-cost payment methods in favour of pricier solutions. 

From re-ordering your checkout to implementing dynamic checkouts and adding one-click options earlier in the flow, there are a number of ways merchants can act to optimise the checkout. But in order to take control, you need to understand the productivity of every payment method in your arsenal. 


4. Make sure you’re not turning away good customers 

Of course, clicking ‘pay’ doesn’t necessarily mean a successful transaction, as inefficiencies in the authorisation process can lead to legitimate transactions being declined. The losses can be significant: CMSPI estimates that European merchants lost EUR 3.3 billion in 2021 to falsely declined transactions. 

There are certainly APMs which can reduce friction and improve top-line approval rates. However, this isn’t the only element of transaction success – and it’s vital you consider the issue from every angle. 

Frequency and granularity of reporting is key – not only to understand the rate of successful approvals but to evaluate why transactions are unsuccessful and to benchmark against competitors. Unfortunately, market competition can limit data sharing – and for some APMs, CMSPI often observes limitations in key metrics such as decline codes, which can only be uncovered through direct collaboration with partners. 


5. Don’t get caught off guard by market developments 

As economic circumstances shift, so too does the payments market. As many APMs lay off workforces or report negative profit margin, merchants need to look towards the impact of inflation on ongoing capital investments. 

It’s also vital to be on the lookout for new market entrants, such as Open Banking, with the potential to generate long-term disruption to the status quo. In addition, mergers and acquisitions can change the potential of any new technology, as well as signposting which new players incumbents consider the most viable. 


Your APM strategy 

With APMs becoming increasingly integral to your customer acquisition and loyalty, it’s vital your roadmap is forward-looking and data-driven. But these aren’t the only considerations; CMSPI works with many global merchants whose difficulties are gaining market-leading domestic expertise and coordinating across the numerous internal teams involved in APM implementation – both of which are equally crucial to the successful implementation of your roadmap. Above all, it’s key you start now, so you avoid losing out later. 


This editorial piece was first published in The Paypers' Cross-Border Payments and Ecommerce Report 2022–2023, which taps into the fast-growing cross-border market and provides a comprehensive overview of trends and developments that are pivotal in this space, being the ultimate source of information for ecommerce businesses interested in expanding globally. 


About Katharine Evans 

An Economist as part of CMSPI’s Insights and Advocacy Team, Katharine’s role is to analyse the payments industry from the macroeconomic perspective, providing strategic insights to merchants across Europe.




About CMSPI 

At CMSPI, our payments experts provide advisory services and powerful analytics. Our ultimate goal? Supporting a more innovative and productive payments ecosystem. For hundreds of clients across the globe, our insights help improve performance and create positive change.

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Keywords: CMSPI, payment methods, merchants, retail, BNPL, ecommerce, reconciliation, checkout optimisation , digital wallet, Open Banking
Categories: Payments & Commerce
Companies: CMSPI
Countries: World
This article is part of category

Payments & Commerce


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