Follow the Money With Alternative Payment Methods
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Cash or credit? An age-old question when conducting transactions, albeit a bit antiqued. Payments options have tended to be an afterthought when discussing innovation and disruption in the commerce space — but payment is ripe with change! Customers now have more options than ever when it comes to completing payments — from digital wallets, buy now pay later and credit card integrations. Below we will explore the new ways customers are conducting their transactions and why it is important to give options at check out.
Digital wallets usage has seen massive growth spurred by the pandemic — increasing +7% in 2020 based on transaction counts, and reports are suggesting digital wallets will account for more than half of all ecommerce payments worldwide by 2024. Top contenders in the digital wallet space include Google Pay, Venmo, Apple Pay, Cash App and Paypal. Customers are opting for these forms of payment not only for the convenience and frictionless experience, but also due the sense of security these payment methods bring by tokenizing each transaction.
Although the pandemic played a role in the sudden growth and adoption of these apps, the stickiness of the experience is proving to outlast the pandemic trend and is here to stay.
Buy Now Pay Later came onto the scene and has been taking the payment scene by storm, with the majority of retailers now offering BNPL options. These options allow the customer to purchase items across multiple — typically 4 — installments over a course of 10-15 days, or monthly installments. Affirm had been dominating this market for the last few years but recently more competition has entered the field in the form of Klarna and Afterpay — all steadily gaining market share.
Installment pricing offers a unique advantage point for both the seller, and the purchaser. The seller typically sees large basket value when BNPL is offered, increased conversion rates at checkout, and often leads to new untapped markets (younger generations and regions where credit cards are not as assessable). The purchasers are also seeing the benefits of these payment options through the ability to increase their purchasing power and access to affordable solutions to purchase items online.
This trend continues to see upward trajectory as more players are entering the field such as Paypal and Mastercard — and customers are adapting to ease, flexibility and transparency of the buy now pay later programs.
Cash was king at once – but as we have seen more and more options enter the field of payments, we can expect continuous improvement in completing transactions. Whether that be an extension of digital wallets, or full integrations of one's wealth portfolio being utilized for purchases (think crypto, NFTs etc). The payment industry was due for some shakeup, and we reviewed a few of the key players and features making up the industry, but as customers continue to seek ease and flexibility in their purchasing power we can expect new features to continue to roll out.