How alternative payment methods can help your business to expand globally?
If you are looking into emerging markets, check our reasons why you should consider alternative payment methods in your payment strategy.
What are alternative payment methods?
APMs (Alternative Payment Methods) refer to any form of payment that isn’t a major international credit card brand. These can include domestic cards, cash-based vouchers like Boleto in Brazil or Oxxo in Mexico, mobile money payments, digital wallets such as Apple Pay and Google Pay, as well as local bank transfers like Pix in Brazil, and UPI in India.
Integrating alternative payment methods into your business strategy can significantly boost growth and expand your global reach. These diverse payment options are gaining traction worldwide, facilitating access to both physical and digital goods, particularly within rapidly growing markets in Africa, Asia, and Latin America.
Credit cards can be inaccessible in emerging markets
Although credit and debit card usage is extensive in nations like the United States — with 84% of the population possessing a credit card — the scenario contrasts in developing countries.
In emerging economies, credit card adoption remains relatively low, often hovering around 20%, owing to limited accessibility, consumer skepticism, and apprehension regarding card-related fraud. In contrast, smartphone penetration rates soar, reaching levels of 70% to even 80% in countries like Argentina, Mexico, and Brazil.
The boom of digital payments
Digital payments underwent massive adoption during the pandemic, particularly in emerging markets. According to The World Bank, 64% of adult consumers purchased or received money through a digital payment network. The number of adults receiving or making digital payments grew from 35% in 2014 to 57% in 2021, marking a 22% increase.
Furthermore, as The World Bank's latest report indicated, digital payment growth outpaced account owners' growth in emerging markets.
The instant payment phenomenon
In November 2020, Brazil, the largest online market in Latin America, introduced Pix, an instant payment solution. Within just two years, Pix has achieved tremendous success, emerging as the foremost payment method in the country. It has facilitated transactions exceeding USD$2.6 trillion since its launch and has recently surpassed credit card usage to claim the title of the most utilized payment method.
In Colombia, the triumph of PSE (Pagos Seguros en Li?nea) is equally impressive, experiencing a 25% growth in 2022 compared to the previous year. Meanwhile, UPI (Unified Payments Interface) reached an all-time high in India with 9.41 billion transactions in May 2023.
With technology advancing and APMs becoming more widespread, the necessity for businesses to identify a payment gateway capable of accommodating popular options across various regions is intensifying.
Emerging economies are going through a digital revolution
In 2022, 60% of the global population had access to the internet. According to Euromonitor, this surge in online connectivity is rapidly gaining momentum and is projected to elevate the global penetration rate to 71% by the end of 2027.
This projection signifies welcoming approximately one billion new internet users worldwide within the next five years. Most of these new users will be from emerging regions, particularly in Africa and the Asia-Pacific, with prominent contributors being countries like India, Indonesia, and Nigeria.
Mobile payments have become commonplace among African consumers, driven by the rapid expansion of internet accessibility and smartphone usage in the region. Mobile money is the preferred payment method in the Sub-Saharan area, with more than 1.6 billion registered accounts, accounting for approximately US$78 billion in merchant payments processed annually in Nigeria alone.
In 2022, the most widely used payment method in global eCommerce was eWallets, accounting for 49% of the total transaction volume, compared to 20% for credit cards. Looking ahead to 2026, the projected gap becomes even more substantial: 54% for eWallets and 16% for credit cards.
User experience is the key to increasing conversion
A recent study conducted by the Baymard Institute has revealed 17% of customers abandon their online shopping carts due to overly lengthy or complicated checkout processes.
Offering a localized and distinctive user experience is developed through providing alternative payment methods, which offer customers familiar and convenient payment solutions. This approach ensures that eCommerce remains accessible to all individuals, regardless of their access to traditional banking services.
Further insights presented by Oxford Economics underscore the critical role of payment methods in customer satisfaction. 56% of consumers expressed an inability to use their preferred payment method would permanently deter them from shopping on a website.
Highlighting the significance of a positive customer experience, the Baymard Institute indicates that a well-executed strategy in this realm can potentially amplify conversion rates by a staggering 400%. This is where alternative payment methods come into play, having already demonstrated their value by enhancing customer experiences and expanding payment acceptance options.
Be a global company with local solutions
Being a global company in an emerging economy means you need to understand your customers and their habits in every region you operate in. In emerging markets, APMs are often synonymous with local knowledge. Merchants typically offer card-based checkout options and many APMs, such as mobile money, eWallets, cash-based solutions, QR codes, or SMS-powered local payment methods.
If you offer these highly localized solutions, not only will consumers perceive familiarity with your brand and find it in sync with local habits, but it will give you the same edge as a local company in terms of market reach and profitability potential.
Offering alternative payment methods can be a growth driver for your global company
As emerging markets develop and grow, so will their payment options and preferences. Learn more about alternative payment methods in each region, and the payment solutions dLocal has for your company.