Alternative Payment Methods for Accepting Payments
The 2000s were all about making payments through credit and debit cards. The 2010s were a period of uncertainty with multiple alternative payment methods entering the fray. Now, as we approach the middle of the 2020s, it has become obvious that the payments industry is undergoing significant changes. This decade is all about credit and debit cards losing ground to alternative online payment options like digital wallets and cryptocurrency.
In light of this shift in payment trends, in this blog we will explore the emerging advanced alternative payment models. We will also highlight the ways in which some of the more traditional payment methods like credit/debit cards and cash on delivery are trying to stay relevant by making the necessary modifications.
Read ahead to find out more about what mix of traditional as well as alternative payment options are the best fit for your business to accept payments.
A Glance at Some Traditional Ways of Making Payments
A traditional form of making payments refers to any method in which you utilize a card and/or cash to make a payment. After the barter system, cash on delivery is probably the oldest and most traditional form of making payments.
Following the proliferation of credit/debit cards, however, this form of making purchases has also become quite traditional as a lot of people have gotten into the habit of using them.
Alternative Payment Methods: A List
Let us now look at some alternative payment options to better help you decide what (combination of) payment options should you offer:
1. Digital wallets
A lot of the features of digital wallets function similarly to electronic cards, in that both enable users to execute transactions. The card is linked to the user’s bank account via credit or debit cards. Both Apple Pay as well as Google Pay provide this feature amongst others:
- Google Pay offers strong security through encryption. Peer-to-peer transfers, online shopping, and in-store transactions are also made easier by it. Furthermore, Google Pay enables seamless checkouts by integrating with several websites (such as BigCommerce) and facilitating monthly payments for subscriptions.
- Apple Pay facilitates recurrent payments via Merchant Tokens (MPANs) to streamline subscription billing. It also provides frictionless transactions and improves user experience through its connection with platforms such as Stripe. Generally, its security, usability, and connectivity with a variety of devices (especially within the Apple ecosystem) are the main reasons for its appeal.
2. Cryptocurrency
Cryptocurrency is another alternative payment option that has gained popularity over the past few years. Your digital money is held or exchanged in a physical wallet or on a trading platform or internet powered platform such as a hot wallet. From these set locations it is usually mined using intricate computational algorithms.
This alternative online payment method is especially suited for those businesses whose customer base is tech-savvy, international, and wants privacy in their transactions:
- You need a tech-savvy client (e.g. SaaS customers) because your average person still does not know exactly how cryptocurrency works, let alone how crypto-wallets function to feel comfortable enough entrusting their hard-earned money to it.
- An international clientele (e.g. customers of businesses offering financial services) is preferred because one of crypto’s strong selling points is seamlessly making payments across continents with just a single click.
- Privacy of transactions is required (such as by businesses in adult entertainment) because such businesses usually suffer from the restrictive laws many countries have in processing their transactions to discourage such businesses from flourishing in their market.
3. Direct Debit
The reason why so many businesses (especially those dealing with recurring payments) like direct debit is because you can automatically deduct payments from your customers’ bank accounts in accordance with a pre-approved arrangement. All the customer needs to do is fill out an authorization form allowing you to deduct funds from their accounts and specify for how long they wish for their subscription to last.
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Some of the most noted benefits of direct debit are as follows:
- Direct debit gives you and your customers security and flexibility.
- They are not too difficult to operate; if a direct debit payment doesn’t go through, you can just try again.
- Additionally, they lower the chance of involuntary churn because people don’t frequently switch bank accounts.
4. Mobile Payments
This is a form of payment that is especially popular in the poorer regions of the Global South. These are countries where the Internet and mobile network technology has proliferated yet formal banking institutions and more complicated digital forms of making payments like digital wallets and cryptocurrency are yet to make serious inroads.
By doing away with the need for cash or credit cards, they provide unparalleled convenience, facilitate quick transactions that increase checkout efficiency, and make use of advanced safety measures like encoding and biometric authentication. Additionally, mobile payments increase financial inclusion by giving people without bank accounts access to financial services, being affordable for both individuals and businesses, and enabling real-time purchase tracking. They also accept a number of payment options and frequently have loyalty and reward programs. Mobile payments are especially significant in the developing world, where there is a dearth of formal banking options. They fill the gap by providing simple, safe, and accessible means of conducting transactions that promote financial inclusion and economic growth.
5. Buy now, pay later
The popularity of buy now, pay later options and installment payments as alternative payment methods has increased recently. Customers can use this option to buy an item without having to pay the whole amount at the moment of purchase. They are usually offered the choice to pay for the goods in staggered smaller payments to complete the transaction. Customers are choosing it more and more because it provides an interest-free alternative to splitting the financial burden of a payment, giving people without credit cards access to a credit-like option.
Some popular buy now, pay later services are:
- Klarna: This is the most popular buy now, pay later service as it offers interest-free payments mostly to customers in Europe.
- Zip Co: This buy now, pay later service is known for operating globally, but one of its drawbacks is its limited support for currency conversion due to which it can become a hassle for customers in one country to buy products from another country using this service.
- Sunbit: This buy now, pay later service has built its brand around tailoring its payment plan by offering flexible and customized payment plans that prioritize openness and strong customer service while increasing accessibility and usability of financing.
- Splitit: This service stands out because it doesn’t act as a middleman. Instead, it helps businesses offer buy now, pay later options to their customers by facilitating the transaction and making the process smoother.
- Affirm: This buy now, pay later service is known for its loan-giving capabilities (owing to its deep pockets), making it an ideal fit for those customers who wish to make large purchases for which they will need time to repay the company.
Understanding the Best Alternative Payment Methods for a Subscription-Management Business
Without further ado, let us now unveil the best payment method out of all the alternative online payment options.
Given its flexibility and security in automating recurring payments, direct debit is probably the best payment option for a subscription management company. It is a way of making payments that offers a steady source of income and a simplified means of managing routine transactions. Doing this also significantly lowers the possibility of involuntary churn.
And while buying now and paying later options and digital wallets offer flexible payment plans and increased security, direct debit is especially well-suited for subscription management due to its unique strengths in processing regular, periodic payments.
Final word
If your business accepts recurring payments, you’ll need subscription management software like SubscriptionFlow to manage them efficiently. Just integrate your SaaS billing with SubscriptionFlow and continue accepting recurring payments from your preferred service payment provider. The Subscription management platform also allows you to offer a variety of payment options. Choose the alternative payment method that best suit your needs from the list above, and book a demo with SubscriptionFlow today!
