What can be deemed a natural progression for regular banking customers to take their first steps to use APMs, bank transfers allow customers to make quick payments directly from their bank accounts. This is usually completed through online payment methods, such as iDEAL, which works through a customer’s mobile banking app - this is one of the most popular eCommerce payment methods in the Netherlands, for example.
Buy Now, Pay Later (BNPL)
Payments made via instalments have been around for decades, but BNPL has gained a big boost in popularity, taking advantage of the transformation of the online payments landscape to incorporate mobile app payments. Klarna is recognised as a global leader in this market, offering interest-free repayments to customers in a choice of instalments. Most importantly, BNPL is seen as an alternative payment method that can be accessed by people without a credit history - especially popular among Gen-Z and Millennials.
There has been growing scrutiny of this model, which has been often unregulated, causing some consumers to rack up debt due to a lack of credit checks, and signing up to numerous BNPL providers. Recently, there have been steps taken to begin the process of introducing regulation for the industry and prevent the spiral of debt experienced by some consumers.
In terms of alternative payment methods, cryptocurrencies are as alternative as they come! Crypto is popular among consumers who wish to bypass intermediaries, which are a common feature in traditional financial systems. Cryptocurrencies are based on holdings that are accounted for on a highly secure shared digital ledger, or blockchain, which cannot be altered.
Many payment and investment apps now include functionality for transferring cryptocurrency, making it easier for customers to use it as a source of funding. Of course, some enterprising merchants allow customers to make direct cryptocurrency transfers as payment, with Bitcoin being particularly popular (and the most well-known crypto).
Digital Wallets (e-wallets)
Hugely popular amongst mobile device users (smartphones, tablets, smartwatches), digital wallets allow consumers to preload money to their accounts and store their credit/debit card or bank details in an app (such as Apple Pay, Google Pay, Pay Pal or AliPay) to make payments in-store without the need to use a physical card. Digital wallets use the in-built capabilities of mobile devices to make contactless payments via QR codes, Bluetooth, WIFI and magnetic signals at a point-of-sale device. Payments then go through processors, gateways, acquirers and credit card networks and banks to make a payment.
These are pre-paid wallets that are on offer to users that often do not have a bank account, signing up for services at mobile shops with transactions carried out via SMS messages and PIN codes through regular mobile networks. Although existing bank customers can opt for this payment method too, it has proven particularly popular in Africa where many people still have either no bank account or limited access to traditional financial services. There is also a more general problem of rural communities being far away from their nearest bank and limited mobile internet signal to perform online payments and transactions. Kenya’s M-Pesa mobile money service is the market leader for this service in Africa.