WorldPay, a global leader in payment processing, has launched a whitepaper and map of the alternative payments landscape, and the varying cultural preferences of payment types by geography.
The alternative payments (AP) market is growing at a phenomenal rate, the company claims. Today, it accounts for €165bn of global e-commerce transactions around the world – 22% of the total transactional value. It is estimated there are currently over 230 AP schemes operating globally including: real-time bank transfer, offline credit transfer, direct debits, e-wallets, paper-based payments and mobile payments.
The AP market is expected to grow 13% by 2015 and within e-commerce, spend via alternative payments will outstrip card payment schemes, WorldPay says. Growth rates of payment types vary; for example, e-wallets currently lead the way with 36% of the market and this is expected to rise to 43%. Real-time bank transfers only make-up 12% of the AP types today but this figure is expected to rise to 20% in the next three years.
In the UK and US, card payments dominate (11% and17% respectively). It is only due to the scale of the e-commerce market in the US, AP transactions comprise €46.6bn of online spend, said WorldPay. In other regions, APs have a stronger share of the payments market.
Key regional findings from Optimising your Alternative payments whitepaper:
· Germany – Germany is a leading AP market globally. Currently 66% of e-commerce purchases (€45bn) are made via alternative payment types. Online credit card penetration is low while managed offline credit transfers are popular. Elektronisches Lastschrift Verfahren (ELV), a form of direct debit payment, makes up 28% of the market
· India – internet bank payments are the preferred choice when paying online. Prepaid cards and cash payments are also popular but mobile payments are gaining prominence due to the large number of mobile phone users in this region
· China – Alipay dominates in China with 60% of the market share. Cash on delivery is also a popular form of payment (20%). China UnionPay credit cards are also important for retailers entering the Chinese market. As a card scheme, it is already bigger than MasterCard and forecast to be bigger than Visa this time next year
· Austria – mobile payments are popular with Paybox supporting over 5m users
· Netherlands – whilst the e-commerce market is relatively underdeveloped, two thirds of payments are made using alternatives (66%) – the vast majority using iDEAL, a native real-time bank transfer
Phil McGriskin, chief product officer, WorldPay, said: “Cultural payment preferences have always existed but until fairly recently, online purchasing options were dominated by global card schemes. With the advances in technology, a new generation of shoppers and developing online economies, alternative payments are growing in popularity. This presents an opportunity in the e-commerce space for merchants to gain a competitive advantage by offering customers the option to pay using their preferred payment type. Merchants need to identify where their target customers are located and offer the relevant payment options to cater to cultural preferences. This will ultimately drive revenue for merchants, especially in new and developing economies.”
The fraud risk of AP to date is typically lower, although not zero, said WorldPay. However, significant attacks on banks and e-wallets have taken place and different threats exist by payment type, the company adds. The relative lack of data within AP compared to card payment schemes can also make it more difficult to identify, track and defend against fraud, WorldPay said.
McGriskin again: “Whilst fraud risks may appear lower amongst alternative payment types, as they increase in popularity, fraudsters will look at ways to exploit these channels. Merchants need to understand the different risks each payment type is vulnerable to. The ability to set different fraud rules dependent on payment type should therefore be a priority, and it’s important merchants engage a payment processor who understands the AP market and is able to advise them on the most appropriate strategy.”