What’s driving the rise of Alternate Payments ?

The growth of APMs (Alternate / Local Payment Methods) can be attributed to:

Drivers of consumer adoption include:

• Faster and Easier UX user experience than cards;
• More convenient P2P functionality than traditional account-to-account bank transfers; 
• Better coverage of specific use cases (e.g., real-time money movement for gaming merchants); 
• Consumer concerns about security and fraud risk online; and,
• Generational shift in perception and brand affiliation (which favors more digitally-oriented payment methods over “old school” cards).

Drivers of merchant adoption include:

• Lower cost of acceptance vs. cards (often not the case following interchange regulation in Europe; many wallets or cash to digital APMs are priced at a premium);
• Enabled for PSP collecting, often with superior gross margins that incentivize PSPs to drive acceptance;
• Low effort to add additional payment methods in e-commerce due to the “plug and play” model of many collecting Payment Service Providers (PSPs); and,
• Desire to meet the preferences of digital consumers by offering a wide variety of payment methods.

External structural influences have also played a key role in driving the growth of APMs:

• Regulatory focus on reducing barriers to entry into payments, deregulation of cross-border payments, reducing the cost of payments acceptance, and harmonizing payments in Euro (e.g., PSDII, interchange regulation);
• Convergence of digital identity and payment schemes; and
• Proactive political and regulatory focus on promoting alternatives to Visa and MasterCard, such as the European Payment Initiative (EPI)
• APMs are benefitting from the ample supply of capital. Even earlier stage APMs are often well funded by VCs. 

Credits:Flagship Advisory Partners