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 securitySecurity security Measures used to protect transaction data from fraud and cyber threats. and fraudFraud fraud Criminal deception involving unauthorized payments or use of financial credentials. risk online; and,
• Generational shift in perception and brand affiliation (which favors more digitally-oriented payment methods over “old school” cards).

Drivers of merchantMerchant merchant An individual or business that accepts payments in exchange for goods or services. adoption include:

• Lower cost of acceptance vs. cards (often not the case following interchange regulation in Europe; many walletsWallets wallets See Digital 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 VisaVisa visa A leading global payment technology company connecting consumers, businesses, and banks. and MasterCardMasterCard mastercard A global payments network enabling electronic transactions between banks, merchants, and cardholders., 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