GUEST WRITER: Understand alternative payments and the potential revenue opportunities

Across the globe 22% of online transactions are made using alternative payments (APs), equating to €165 billion in revenue. While more traditional eCommerce markets, such as the UK and the US, are still heavily reliant on card schemes, the use of alternative forms of payment to purchase online is on the rise. 

APs include any payment that falls outside the sphere of credit card, debit card, or cash payments, including methods such as eWallets and mobile payments. Understanding and providing cultural payment preferences enables merchants to take advantage of cross-border expansion and maximise revenue opportunities. WorldPay’s Global Online Shopper Report found that nearly two thirds of online shoppers had increased confidence in a website that offered them a more varied choice of payment methods.

Currently credit and debit card payments dominate the payments market in the UK. As a mature eCommerce economy, many consumers are familiar with these methods, and there is a high level of trust when using them online. Yet there are positive signs of further uptake of APs. Transactions made using APs already account for 11% of eCommerce transactions in the UK, and of these PayPal takes up the majority of the market. eWallets are currently the most commonly used AP method across the world; today they account for 36% of AP usage, and we predict that by 2015 they will account for 43%. Visa and MasterCard have already recognised this interest among UK consumers to use eWallets and have subsequently launched their own eWallets: (Visa Europe) and PayPass (MasterCard). 

As well as selling to UK consumers, retailers are increasingly taking advantage of revenue opportunities in other markets. This is when it becomes important for retailers to work with a payment expert that can navigate the complex payment landscape for them. In the German market, for example, 66% of transactions are carried out by APs. Bank-managed offline credit transfers are most popular, and PayPal and real-time bank transfers make up 10% of AP usage. The Netherlands is another AP pioneer with 66% of eCommerce transactions completed using APs. The Dutch payment service iDEAL dominates this market, and 89% of Dutch shoppers are familiar with the payment method according to iDEAL research conducted in 2010. 

Understanding local preferences and growing AP adoption rates both in Europe and globally will be key to retail merchant growth. Providing a broad portfolio of payment types will ultimately generate more revenue. It is worth noting that outside of Europe APs are extremely influential. In China, for instance, APs account for €20 billion in revenue. By implementing an optimum acquiring set-up, retail merchants can maximise transaction rates. Processing payments quickly and securely across all territories, sales channels and card-not-present devices is a reality. Moreover, going global but acting locally by giving customers their preferred payment options is a tangible possibility. The opportunity to maximise potential revenue is available to those retail merchants that are prepared to embrace the AP market.

By Phil McGriskin, Chief Product Officer, WorldPay

About the author – Phillip has over 13 years’ experience in the online payments sector. He has held positions including Director of Sales at Neteller Plc and Commercial Director of Earthport Plc. Most recently Phillip founded Envoy Services, which was acquired by Worldpay in 2011. Following the acquisition, Phillip took up the position of Chief Product Officer on the eCommerce board of Worldpay. 




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