In recent years many new digital payment methods have come to market. E-wallets and payment apps that offer consumers alternative ways to pay for goods and services are giving traditional online payment methods (credit and debit cards) a run for their money!
E-wallets are classed as alternative payment methods (APMs). In fact anything – other than a credit or debit card – is termed an APM, even direct debits and other long established payment options.
As a group, APMs are expected to account for over half of online transactions by 2021, they are increasingly becoming mainstream not alternative!
For online merchants there are many benefits of accepting payments via APMs. They can lower your fraud risk, reduce transaction fees, and help your business reach new customers. Alternative payment methods also play a particularly important role in cross-border e-commerce, providing customers with global or local payment methods that are convenient, secure and trusted.
Broadly speaking APMs fall into three different classifications:
For the purposes of this article I’m focusing on e-wallet and payment app solutions, exploring how they work and why online merchants should consider supporting e-wallets as a payment option.
There are some variations between different e-wallet solutions, but essentially they work in the following way:
Of course, most e-wallet providers don’t stop there. Our multi-device payment app provides customers with additional features such as a contactless NF enabled key fob so they can make in store payments from their MuchBetter account. We also offer customers a pre-paid Mastercard that can be used online and offline, as well as many more perks and rewards.
These features obviously incentivise customers to use their MuchBetter account, but the main reason customers are increasingly turning to e-wallet solutions is security.
E-wallets and payment apps effectively remove payment card information out of the equation when making online (and offline) transactions. It’s a more secure way to pay, as no actual payment data is used to process the transaction. In-person transactions are also more secure. It reduces the risk of losing cash or a payment card, having it stolen, as well as the threat of skimming.
This has benefits for merchants too. E-wallet transactions keep sensitive payment card data out of your environment reducing PSI DSS scope and costs. At MuchBetter we also use dynamic authentication methods to reduce payment fraud, protecting both customers and merchants from fraudulent activity, this includes our patent pending dynamic CVV in-app generator that makes online fraud a thing of the past.
As hinted at before, in most cases it also reduces payment processing costs for the merchant as transaction fees are generally much lower than payment card fees. Spending money using an e-wallet doesn’t cost the customer anything either, and although I can’t speak for other providers, MuchBetter doesn’t charge our customers to top up their account.
With consumers using their smartphones for all aspect of their lives, it’s no surprise that e-wallet solutions and payment apps are being rapidly adopted as a secure and convenient payment method. Supporting these payment methods is therefore an important part of providing customers with a secure online payment journey and their preferred methods to pay.