Leveraging alternative payment methods for growth

What are alternative payment methods? 

In simple terms, a payment that is not cash or credit card payment is classified as an alternative payment method (APM). Bank transfers, direct debits, e-wallets, mobile transfers, prepaid cards, store cards, and now even cryptocurrencies are all examples of APMs. They enable consumers to make quick and efficient payments and are particularly useful for ecommerce transactions. 

APMs are generally a localised payment solution tailored to a domestic economy, supported by local banks, mobile operators, local currency, and settlements. They are highly influenced by the local consumer behaviour and reflect the culture that is embedded in the local economy. 

Across the APAC region, the alternative payment infrastructure is dominated by the use of e-wallets. In China, Alipay and WeChat are the main methods to send money, for example. Consumers in India overcame the country’s complex and fragmented banking and payments infrastructure by shifting to Paytm and UPI. Meanwhile, in North America, where the use of credit is much more widespread, APMs such as PayPal, Venmo, and Buy Now Pay Later (BNPL) by Klarna are increasingly popular. 

Africa’s less developed banking infrastructure encouraged the growth of mobile money operators like M-Pesa. Contrast that with Europe, where the open banking ecosystem enables consumers and businesses to pay via bank transfer in just a few clicks, resulting in a surge of easy-to-use bank transfer API-driven applications. 

How APMs are driving growth 

Three areas have benefited enormously from the rising popularity of APMs. 

Firstly, cross-border ecommerce, which has climbed to one-fifth of the global value of ecommerce. The COVID-19 pandemic has accelerated the adoption of ecommerce as people turned to online avenues to buy necessities quickly and safely. This in turn forced merchants to provide new online solutions to meet demand. APMs gave merchants the means to receive payments from a wide variety of sources and made the online transition viable. 

Secondly, remittances have shifted from cash-based payments to digital transfers. Following the increased penetration of smartphones and improved Internet access in developing economies, migrant workers can use e-wallets and other APMs to remit money overseas to their loved ones back home. 

Lastly, the gig economy. Technology giants like Uber, Airbnb, and Fiverr have made the concept of on-demand workers become mainstream by leveraging the power of APMs. More people can now share and market their services to a global audience – from part-time drivers to freelance creatives and holiday home lettings. Gig workers also expect to be paid instantly, in real time, securely, and in the currency of their choice, prompting many to turn to APMs in order to receive funds seamlessly. 

The golden opportunity for businesses who want to go global 

The growth of APMs presents a big opportunity for merchants and businesses who want to access new territories. To succeed in this landscape, you need to offer the right payments services. The fundamental question is: how do I send and receive money across borders? 

Cross-border payments are more complex than domestic payments. Compliance with different regulatory requirements and varying settlement times can make the process daunting. And with hundreds of ways to pay via APMs, payment methods are fragmented and difficult to integrate, which can further complicate the flow of cross-border payments. 

Fintechs like Thunes eliminate the complexity of cross-border payments. We plug all the APMs into our central platform, so they become interoperable, which means businesses can easily transfer money from one country to another in a seamless, more affordable way. Using Thunes’ single API, our partners can connect to more than 100 countries and tap into our vast network of banks, mobile money operators, e-wallet providers to send money to multiple countries, in multiple currencies, across a variety of payment channels, in real time. 

To go global, you must first go local 

Businesses that fail to offer the right payment options put their customers’ experience at risk, leading to a lack of trust and possibly even losing the customer. Consumers all around the world value the choice, convenience, and security offered by many APMs. For businesses looking to go global, offering APMs that align with local customer expectations creates a positive user experience, increases conversions, and enhances brand loyalty. 

To access and appeal to an international customer base, offering local payment options that are preferred and recognisable is often the final step in taking a payment experience from mediocre to great. Additionally, for cross-border payments there is also a need to consider interoperability – as the domestic payment methods are not available in other countries. Allowing businesses and consumers to send money using one payment method, such as bank transfer, and receive money via another method, such as mobile wallet, is an integral part of cross-border trade, particularly in emerging markets. 

What is next for alternative payment methods? 

The payments landscape is developing very fast. The introduction of a real-time payments infrastructure in markets such as India, Brazil, and Singapore will enable fintechs to further evolve the use of APMs. In addition, greater interoperability will make it easier to move money between bank accounts and APMs like e-wallets. 

Fintech firms and non-bank players such as Thunes will continue to open global commerce and trade to the underbanked population in emerging markets. Tech-driven solutions will enable people to make payments in new and innovative ways using their preferred local payment methods. Further advancements in detecting fraud and heightened overall security in digital payments will drive new use cases for APMs and boost trust among consumers. And finally, the wider adoption of cryptocurrencies will see APMs become mainstream, with a growing choice of ways to make crypto payments. 

All these factors will continue to shape the evolution of APMs for the next decade. 

About Shradha Kampani 

Shradha has built and scaled various fintech products and platforms across neobanking, payments, transaction banking, and cash management. She is currently Product Director at Thunes, where she is responsible for driving treasury products to enable cross-border payments and solutions for emerging markets. 

About Thunes 

Thunes  is a B2B company that powers payments for the world’s fastest-growing businesses. Corporates and financial institutions are able to move funds seamlessly, securely, and cost-effectively with Thunes’ well-established, reliable, and far-reaching network. Thunes is used by global banks, money transfer operators, platforms, and many other businesses to make payments to bank accounts, e-wallets, and cash pick-up providers around the world. Thunes’ platform currently connects more than 260 customers and network partners from across 110 countries to send and receive money globally. Thunes is headquartered in Singapore with regional offices in London, Shanghai, New York, Dubai, and Nairobi.