Digital and alternative payment trends worldwide

Fabrick and its subsidiary Axerve, have released a new whitepaper, “Alternative payment solutions: how they are changing the payment scene”. The paper explores the ways in which alternative payments are revolutionising traditional banking.

Alternative payment solutions respond to the specific needs of today’s market, both in terms of user experience and the checkout process.

By providing local demographics with the opportunity to pay with their preferred and most commonly used methods of payment, merchants can take advantage of transparent fee conditions, often without hidden costs, as is the case with digital wallets.

Moreover, alternative payments offer many benefits for consumers, such as convenience, ease of use, and better accessibility compared to traditional methods. In many cases, alternative payments provide an easier and more efficient way to make payments.

The world of alternative payments, according to the paper, refers to everything that falls outside of the traditional payment methods that have been used both for online and in-store purchases, specifically all the payment solutions alternative to the main credit/debit card networks, cash, and checks.

Alternative payments are on the rise both in the e-commerce and physical stores landscape and projected to reach more than $15 trillion by 2027, with a CAGR of 16.3% over the period 2017- 2027[1].

This growth has been triggered by the increasing needs of merchants to follow the expansion of e-commerce across the world, the inability of traditional payments to meet the buyer’s needs, and the complexity around the checkout process vis-à-vis the fast and frictionless types of technological experience that were arising in the digital payments’ world.

The new whitepaper dives into the evolution of alternative payment methods and analyses the market penetration of different types of methods, such as digital wallets, account-to-account transfers, Buy Now Pay Later options, and cryptocurrencies.

According to Axerve’s customer analysis, that was performed in 2023, digital wallets remain the most widely used payment methods across the world, however, Buy Now Pay Later platforms and A2A (Account-to-Account) tools, such as iDEAL and MyBank, are gaining traction.

PayPal still holds the highest market share, accounting for 59% of the overall alternative payments. MyBank follows with 25%, and Sofort by Klarna accounts for 3% of the total collections with methods other than credit cards.

Axerve’s pool of clients demonstrates that the adoption of alternative payments is widespread across all market sectors, from Fashion to Food & Beverage.

In particular, the Fashion sector has seen the most integrations of alternative payment methods, with Klarna achieving transaction volumes of over 54%.

Despite the fact that two-thirds of the UK population believe cashless methods are riskier and more prone to fraud than cash, the current statistics and tendencies suggest otherwise.

In 2021, one third of the population barely used cash, and total transaction value in the UK digital payments sector is forecast to reach almost $440 billion in 2023.

Furthermore, the UK is one of the most cashless countries in the world, with 95% of people having internet access, 97% having a bank account, and 65% being credit card owners.

Moreover, card payments make up more than half of all payments (51%) and alternative payment methods make up 41%. Bank transfers make up 7%, while cash is only responsible for 1%.

These figures make it clear that the UK is swiftly progressing towards a cashless economy.

By comparing the transaction value of the individual methods to the total amount collected by e-commerce merchants that have integrated those specific alternatives, it is Klarna, in its instalment payment formula, that registers the highest penetration in comparison to total collections (22%), followed by PayPal, which is confirmed as the most widely used digital wallet across all sectors.

Among the A2A forms of payment, it is MyBank and iDEAL that account for the most, 10% and 7% respectively, while Satispay and Sofort by Klarna record only 2% and 1% of the total volumes collected by the Ecommerce shops that have integrated them.

“The market penetration of alternative payments continues to grow steadily in various geographies and across several product sectors around the world, displacing traditional payment methods,” notes Alessandro Bocca, CEO at Axerve.

“Going forward, we anticipate a further development of alternative payment solutions, which will require merchants to adopt collection platforms capable of managing the wide array of solutions available.

This includes not only the payment solutions themselves but also their underlying ‘supply chain’ of services, such as acquirers, fraud prevention, and integrated alternative payments. To succeed in this environment, merchants must be ready to act quickly and optimise their sales and minimise costs.”

[1] FinTech- In-depth Market Insights & Data Analysis / Statista 2022

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