The Increasing need for alternative Payments

Alternative payments, also known as Other payment methods refer to payment methods that are used as an alternative to cash payments, but over the years, credit cards have been added to that list. So alternative payments refer to payment methods aside from the use of cash and credit cards. Most means of alternative payments has been developed either for electronic commerce or to address a domestic economy.

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The increasing number of alternative payments has grown exponentially in the last few years due to increased security, for fear of credit card usage online. Several other billing solutions have been brought forward for web-based merchants and other merchants as well, to be able to accept alternative payments online and also to have access to distant markets.

Currently, alternative payment options are used throughout Europe, North America, and Asia, and have a penetration level of over 62% in various countries.

The most common alternative payment methods are money orders, Prepaid cards, charge cards, direct debit, bank transfers, digital wallets, checks, debit cards, phone and mobile payments such as sms payments e.t.c. I will be giving a brief insight into each of these payment methods below.

Charge cards

A charge card is an alternative payment method issued to people, and it provides for direct debiting payment method. i.e., it allows for the cardholder to make purchases that are paid by the card issuer. The holder becomes indebted to the card issuer and generally has a deadline to repay the money at the due date often at the end of the month.

The difference between a charge card and a credit card is that charge cards are issued without spending limits, unlike credit cards that have credit limits. Also, the company that issued the charge card does not collect interest on it at the end of each month, their source of revenue is via the merchant fee on transactions, unlike credit card companies that charge interest.

Prepaid cards

This form of alternative payment method provides payment through a monetary value held on the actual card or a kind of deposit into it. Prepaid cards are most times issued in the name of the individual account holder.

Direct debit or Direct withdrawal

A direct debit or direct withdrawal is also another increasing used means of alternative payment. It is a financial transaction in which one person, business, or company withdraws funds from another person’s bank account.

The payee ( the person who draws the funds) instructs his or her bank to collect, extract or debit an amount directly from the payer’s bank account. Before this kind of transaction can take place, the payer must have advised his bank that he or she has authorized the debit before his or her bank can allow the payee’s bank to draw the funds.

Bank transfer

A bank transfer sometimes called a wire transfer is a method of payment that involves transferring money from one entity ( person or institution) to another. A bank or wire transfer is often the most effective method for transferring funds between bank accounts. Online bank transfers are popular alternative payment methods in Europe.

Online banking ePayments

This form of payment is designed and orchestrated basically for use with online commerce. With this type of payment, during the online check out procedure, the merchant or business owner redirects the consumer to their financial institution’s online banking site where they will log in and authorize the transaction.

Mobile Payments

Mobile payment is a new means of payment that is rapidly improving and spreading as an alternative means of payment, especially in Asia and Europe. A consumer can pay for a variety of goods and services without the use of cash, check, or credit cards.  The charges are added to their phone bill.

Digital wallet

Under this category, we have google wallet, Dwolla, and Paypal. Paypal currently has over 139 million active registered accounts with over 35million U.S customers. Paypal is available in close to 135 markets and 28 currencies, making it one of the leading alternative payment options.

Payment technologies are moving faster in this dispensation than at any other Era, thus an exciting improvement for merchants looking to tap into the global market. Alternative payment methods are valuable to both merchants and consumers. we will dive into some of its benefits below

Value of Alternative Payment methods to the Merchant

1. lower risk of chargebacks

Chargebacks are credit card payments that are reversed back into the consumer’s account. But with alternate means of payment, such risks are reduced to a minimal level.

2. Payment options familiar to the consumer

Some consumers have a preference when paying for specific products or services, so when you have a variety of payment options, it is most likely they will find the one familiar to them.

3. A Trusted buying process and Increased sales:

A merchant who provides trusted payment methods to interested buyers is adding trust and a sense of ease through the buying process. This will translate to increased sales.

other benefits include; real-time online payment acceptance, options other than credit cards

Value of alternative payment methods to the consumers

1. Trusted payment methods like Paypal, Dwolla, Deluxe e.t.c

2. No credit or debit card needed

3. Convenient, simple, reliable and secure

4. Simplified shopping experience

5. Access to more products and services

In conclusion, Alternative payment methods are both beneficial to merchants, consumers, and even the Economy of the nation because it facilitates a smoother flow of cash.

About Mohit Tater

Mohit is the co-founder and editor of Entrepreneurship Life, a place where entrepreneurs, start-ups, and business owners can find wide ranging information, advice, resources, and tools for starting, running, and growing their businesses.

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