Consumer Choice Pushes the Issue for Alternative Payment Methods

This holiday season, consumers want it their way. And when it comes to the payments that fuel seasonal commerce, their way is fast, secure and flexible.

Alternative payment methods (APMs), honed over the past decade by consumer expectations and rapid technological advancements, are helping meet these dynamic new needs.

Streamlining payment processes is crucial in meeting consumer demands for speed and convenience. Flexibility — the ability for consumers to use a variety of payment options, such as alternative payment methods, digital wallets and BNPL solutions — is no longer a luxury but an expectation, particularly among younger, mobile-savvy shoppers.

Nuvei VP Pattie Mercier noted that mobile revenue is projected to account for over half (53.2%) of holiday sales this season, underscoring the dominance of digital wallets, along with buy now, pay later (BNPL) services and mobile-native payment platforms such as Apple Pay, Google Pay and Amazon Pay.

Consumer expectations, shaped by a desire for both convenience and access to diverse payment options, are dictating the rapid evolution of these methods.

Understanding Customer Needs Is Key to Meeting Them

Mercier highlighted three major forces driving the adoption of APMs: consumer demand for convenience and speed, the shift to mobile and digital-first platforms and the globalization of commerce. “About 57% of consumers shop globally today,” she explained. “Cross-border commerce has increased dramatically, and we’re seeing growth in region-specific APMs like Pix in Brazil and WeChat Pay in China.”

For businesses, adapting to this new payments ecosystem requires a deep understanding of their customer base.

“It’s really about knowing your customer and offering the right APM at the right time to the right customer,” Mercier said.

Selecting the right APM depends on factors like demographics, income levels and the nature of the product or service, she said. Luxury goods retailers, for instance, often cater to customers who favor credit cards with strong rewards programs, such as American Express, while sellers of big-ticket household items might benefit from offering BNPL options. Similarly, understanding regional payment preferences is critical. In Latin America, Pix reigns supreme, while in the Asia-Pacific region, digital wallets like Alipay and WeChat Pay dominate.

“It’s about choosing the right APMs for each region and ensuring a smooth user experience to reduce cart abandonment,” Mercier said.

After all, creating a seamless user experience at checkout is equally vital, especially since 45% of consumers will abandon their cart if their preferred payment method is unavailable. This includes employing technology that automatically routes customers to their preferred payment methods based on location or behavior, simplifying the number of steps required to complete a purchase, and displaying payment options early in the checkout process.

These strategies, Mercier said, not only enhance customer satisfaction but also improve conversion rates.

Adapting to a Dynamic Payments Ecosystem

While the benefits of integrating APMs are clear, businesses often encounter challenges. Regulatory compliance and security, for example, can be particularly complex for cross-border transactions. Another hurdle can be the integration of multiple APMs, which can create technical fragmentation and a disjointed user experience. Employing a unified payment gateway is one way to help streamline this process.

To succeed in diverse markets, localizing the checkout experience by displaying payment options in local currencies and aligning them with regional expectations is one way to drive a more streamlined commerce experience.

“Merchants should also leverage analytics to regularly track payment preferences and performance by market,” Mercier said. “It’s about adapting strategies based on data to meet customer expectations.”

She also highlighted the importance of partnering with payment providers that offer compliance support and robust security features, noting that businesses using network tokens have seen significant reduction in fraud.

In terms of the challenge of customer trust around novel payment methods, Mercier said newer payment methods may face lower adoption rates in regions where traditional methods dominate. “To build trust, businesses should display security features prominently and offer familiar APMs alongside newer options,” she said.

Looking ahead, the APM landscape shows no signs of slowing its pace of innovation. Mercier predicted that real-time payments and embedded finance will become increasingly significant, offering businesses greater flexibility and speed in transactions. Artificial intelligence (AI) is expected to play a pivotal role, enhancing personalization and fraud prevention capabilities. Additionally, the rise of super apps, which combine multiple services into a single platform, is poised to further disrupt the market.

“It’s an exciting time to be in this space,” she said. “The changes we’ve seen over the past decade are only the beginning, and I’m eager to see how new technologies and consumer demands will shape the next five to 10 years.”