Guide to alternative payment methods

In the world of online payments, an alternative payment method is any payment method other than a credit card. As more than half of all online transactions are predicted to be processed via alternative payment methods by the end of 2017, providing customers with alternative options familiar to them, is vital to cross-border e-commerce success. While credit card payments are still hugely popular, alternatives will make the payments process far easier for customers in countries that are not dominated by credit card payments. Here is a list of alternative payment methods available in many of our markets.

Debit card
A debit card transaction is similar to that of a credit card payment, whereby a customer types in their card details and the transaction is immediately processed. But unlike a credit card, the money is available in the customer's bank account and comes off directly during an online transaction. This is beneficial to both the merchant as the money is received almost immediately, and for the customer, as the money is available and they do not have to pay it back with interest over time to their bank. The use of debit cards has become highly popular in countries where almost all people have a bank account.

Bank transfer
A bank transfer and how it exactly works varies by market but is essentially an electronic transfer from the buyer’s bank account to the merchant’s PayU account. The transfer is made from one bank account to another, using a specific process during the transaction process. In PayU markets, the exact process varies but the general bank transfer payment method would include Pay By Links in Poland, EFT in South Africa and PSE in Colombia.

Cash payments
While it seems contrary to the value of online shopping, in many markets, especially in Latin America, many consumers prefer to pay for their online purchases in cash. The consumer selects that they want to pay using cash during the checkout and are emailed a cash payment voucher to take to their local corner store or other point of payment to make the cash payment. At the same time, the status of the transaction is placed in pending so the merchant knows that the consumer is given a predefined time frame to actually go and make the payment in cash. Once the consumer has made the payment, PayU is notified from the point of payment and we tell the merchant so they can dispatch the product or service. This payment method is valuable to those consumers whom might not have a bank account nor credit card or still do not feel confident putting their payment details online. Some popular cash payment methods include Boleto in Brazil, Oxxo and 7-11 in Mexico, Baloto and Efecty in Colombia, Rapipago and PagoFacil in Argentina and BCP and PagoEfectivo in Peru.

Cash on delivery
A popular method in many countries, where a large number of people don’t have a bank account, is Cash on Delivery. Cash on Delivery allows customers to pay for their purchase with cash when it arrives at their door. If the cash is not available on delivery the purchase will be returned to the merchant. The advantage of this payment method is that the customer does not need to own a credit or debit card to make a purchase, and it has the potential to encourage a sale as the customer does not need to pay for the products in advance. This also provides confidence to consumers whom are nervous that the product will not arrive or that the product will not be what they expected when it does arrive. Many consumers will select such a payment method for their first purchase with a new merchant and afterwards will make purchases using other payment methods. The method does have a drawback though, as merchants often place a monetary limit on what can be purchased by Cash on Delivery and/or charge an additional fee for this payment method.

E-wallet
Also known as a digital wallet, an e-wallet is a form of online software that stores financial and personal details of the customer, allowing them to make a secure online payment either on a computer or mobile device. An e-wallet is essentially a digital form of your physical wallet, and transfers the relevant information automatically during an online payment process. The advantage of this payment method, is that it reduces the amount of time customers spend entering card and personal details in order to complete a transaction, streamlining the payment process and ultimately offering a simpler online experience. As a merchant, you can accept e-wallet payments only if you hold the same software on your end as the customer does.

Instalment payments
In many PayU markets, consumers are very accustomed to pay for their purchases using instalments, or periodic payments over a specified time. The actual functionality of this payment method varies by country and can be offered by credit card schemes and banks or given as a type of promotion by merchants in conjunction with PayU. This payment method allows customers to pay for higher priced goods online that they might not have the funds for at once, increasing the chance for merchants to make a sale of more expensive items. A disadvantage of this method is that customers are often charged interest by their bank on monthly payments, and end up paying more for the purchase than if they had paid upfront. Markets where instalments are popular include Argentina, Brazil, Chile, Colombia, India, Mexico, Poland, Romania and Turkey.

Credit Solutions
One of the newest alternative payments is point of purchase financing or a credit offering to consumers during the checkout process. PayU has internal credit solutions as well as works with partners to offer the best credit and usually a better option than local bank offerings in many of our markets. The type of credit can vary, typically between an instalment plan or a buy now pay later (BNPL) plan. The instalment plan is typically used for larger purchases and can be a strong offering for a merchant in increase their basket size and conversion rate. BNPL credit is primarily used for convenience so customers can make purchases at the very instance they need to and then pay later, with or without interest. To learn more about PayU’s credit solutions, click here.

If you are currently looking into offering your customers more payment options to keep up with this growing trend, a secure payment gateway, such as PayU, will allow you to offer all of the above options through one secure system. With expertise in 16 global markets, you can tailor your payment options to the countries in which you operate via computer and mobile.