The world economy is gradually moving towards a cashless payment model. We already see that alternative payment methods for e-commerce are gaining popularity and growing fast today. If a business sells goods or services on the Internet, thereby being present online, it is important to be able to accept payment from the buyer online.
Types of alternative payment methods
First, let’s figure out what are alternative payment methods in the modern economy. The term “Alternative Payment Methods” (APM) encompasses other forms of payment besides credit/debit cards and cash. Simply put, this is an opportunity to pay for purchases by any other method, except for traditional ones. APM can be divided into three groups:
Bank transfer. This method consists of a money transfer from one organization or person to another. Buyers who pay by bank transfer must confirm the transaction using online banking.
Cash in. Prepaid accounts, which operate on a similar principle but operate independently from card networks, and prepaid cards from well-known brands like Visa and Mastercard are the two main ways to cash in.
Solutions based on electronic wallets. This group includes mobile transactions and e-wallets. E-wallets are really very convenient and provide secure storage of funds. Proponents of a modern approach to payments benefit from not having to think about how to use an alternative payment method. The simplicity of these alternative methods of payment is the main reason for their rapid growth.
Let’s look at the last of these categories in more detail:
Payoneer
Let’s start with one of the most common alternative payment systems – Payoneer. Most of the remote specialists and outsourcing companies working with the West are paid through it.
The main disadvantage is that the service is designed only for business transfers. That is, you will not be able to start auto-sending amounts. Before payment, the employee must create an invoice, enter the email address associated with the employer’s account in the service, and send the invoice. You pay this bill from your own funds in Payoneer, or the system will deduct the money from your bank account.
The above is inconvenient, but the advantages are quite significant:
- Free registration and no service fees.
- Commission for withdrawal of funds – 0-3%.
- Payments are processed within 15 minutes.
A Payoneer user can withdraw money to a bank card or can order a card from Payoneer itself. Its annual service will cost $30, but you do not lose on conversion and can immediately use the funds received.
PayPal
Very convenient for overseas online shopping but inconvenient for personal transfers. It is realistic to withdraw money, but you will have to contact conversion services and lose up to 15% on commissions. PayPal works with Visa and Mastercard. Any foreign cards can be linked to it.
In Europe, the US, and Canada, there are no problems linking local cards to PayPal. If your employees issue an account and a card there, they will be able to receive money on it without any problems. By default, PayPal does not charge a fee for opening an account, sending payments to personal accounts in the United States, and withdrawing money from PayPal to a personal account.
A commission may be charged when transferring money from a personal card and transaction. Here the service policy is as flexible as possible. In some countries, there is no commission at all (Andorra, Croatia, Iceland, and Monaco). In other countries, the commission is not taken if it is not necessary to convert currencies.
Skrill
This service is considered one of the most popular in the world along with the above. It enables:
- Paying for purchases.
- Receiving money from friends and clients, from almost any country, and in any currency.
- Sending money to other Skrill users with a 1.45% fee.
- Buying and selling cryptocurrencies.
- Registration, payment on sites, and sending money to other accounts are completely free.
Of course, not everything is so simple. In Skrill, you need to be careful about withdrawing money. You can overpay. For example, you will pay 7.5% for a withdrawal to Visa and 4.99% for a withdrawal to Mastercard.
As for receiving money, the situation is as follows:
- Depositing to your Skrill account is free.
- Replenishment of your account with a bank card – 2.5%.
- Transfer to another Skrill account – 1.5%.
- Currency conversion – 3.5%.
Wise
This service operates in 80 countries, which means that you can receive and transfer money to them. Fifty-four currencies are supported.
Basic rates:
- Opening an account is free.
- Service is free.
- Currency conversion is free.
- Learn more about pricing at this link.
To transfer through Wise, only one of the parties needs an account in the system. That is, you create an account for yourself, and your next steps are as follows:
- Your Wise account needs to be funded by any nearby bank.
- Your employee gives you bank details (European, US, or Canadian bank). Usually, this is the IBAN number.
- You make a transfer in Wise. The commission will be from 1% to 2.5%, depending on the urgency of the transfer.
- The system transfers money from your account to the employee’s account.
- Such transactions can be made regularly.
Why are APMs so important?
APM is utilized in more than 50% of all digital purchases nowadays. If you don’t provide your clients with a range of payment choices, you’re almost likely losing business. Given that international trade is a significant factor in the growth of international e-commerce, it is important to look into local payment choices if you plan to do business abroad. This brings us to the conclusion that other payment methods are rapidly growing, even though credit cards still make up most global payments. Businesses must consider client preferences regarding payment methods if they want to expand globally or meet the evolving needs of their clients domestically.
Example: tourism industry
Despite the fact that traditional payment methods are still popular in the tourism business, the growth in demand for APM has become more noticeable than ever. APMs are especially important in the holiday rental market, where the owner may be in one country, and the guest may be from another. One of the best ways to build confidence when using new platforms across countries is to allow travelers to use familiar APMs.