"Non-traditional payment options: A necessity in the payments sector"
In the rapidly evolving world of finance, a significant shift is underway as merchants and payment providers adapt to the rising tide of Alternative Payment Methods (APMs). According to a recent analysis by EY, more than 85% of large US merchants are planning to accept new APMs within the next one to three years.
This shift is driven by the surge in global APM payment volume, which reached an impressive $19 trillion in 2022. Payment providers are seizing this opportunity to diversify their revenue streams, as banks increasingly look to compete with established players like PayPal and Apple Pay.
Mastercard and J.P. Morgan have taken the lead in this modernisation, introducing an innovative Pay by Bank solution for account-based payments. Meanwhile, J.P. Morgan Payments is piloting biometrics-based payments for secure and faster checkout experiences.
Citigroup has also joined the fray, expanding its embedded payment capabilities with Citi Pay. Domains such as e-learning, gaming, online retail, and wealth management have shown promising indications to be the top verticals looking to offer APMs.
The trend towards APMs is particularly strong among younger generations, with Gen Z and millennials showing a high propensity to use these methods. BNPL and wallet players are offering additional benefits like price drop notifications, targeted rewards, and merchandise tracking to entice users.
Merchants are recognising the importance of APMs, with over 70% acknowledging that failing to accept these methods could impact sales. They are increasingly looking to their payment providers to help them grow sales and reduce payment acceptance costs.
The Wall Street Journal has reported on banks planning to compete with payment wallets, but specific banks announcing plans to develop their own digital wallets have not been explicitly identified. However, the Liechtensteinische Landesbank (LLB) launched a digital wealth platform called "willbe" in 2022, targeting digital-savvy investors.
Worldpay from FIS published The Global Payments Report 2023, highlighting trends to watch for in the coming year. Insider Intelligence has also identified key payments trends to watch for 2023.
Digital wallets are already the leading method of payment for North American e-commerce purchases. As the landscape continues to evolve, it's clear that APMs, especially A2A or closed-loop payments, can offer a competitive edge by reducing typical payment processing costs.
In conclusion, the future of payments is looking increasingly digital, with APMs set to play a significant role. As merchants and payment providers adapt to this shift, consumers can expect a more seamless and rewarding payment experience.
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