Why the time is right for retailers to invest in Alternative Payment Methods

Visa in talks to invest $290M into Airwallex despite fintech downturn

The payments sector is responding well to the challenges facing the global economy, argues Delia Pedersoli, COO at MultiPay Global Solutions, who provides an overview of how Alternative Payment Methods (APMs) are shaking up the fiscal landscape.

There’s no hiding that it’s a tough time for high-street retailers. The latest Office for National Statistics (ONS) data found a 2.7% year-on-year decline for high-street retailers in October 2023. Poor weather, high-interest rates, and a weak UK economy reduced consumer confidence and spending. 

While interest rates have dropped slightly, the economic outlook for the UK remains feeble in 2024 will keep the pressure on retailers and increase demand for retail technology suppliers to provide solutions that help businesses through this challenging period.

The Rise of Alternative Payment Methods

One industry that has responded to the challenge is payments. Payment providers are constantly developing, creating, and innovating to create new solutions that better meet the needs of retailers and consumers alike. 

One area of intense innovation is Alternative Payment Methods (APMs). APMs like crypto payments, Apple Pay, and Google Pay are already cemented as mainstream payment methods. Due to the many inherent advantages they offer by running on simplified payment rails compared to debit and card payments, APMs are becoming popular with retailers and consumers alike. 

With the challenges that high street retailers face, these advantages make APMs powerful tools that can enhance customer experience (CX), reduce operating costs, and unlock new revenue streams. 

For consumers, APMs provide a better CX and additional choice for how they pay. For example, Pay By Bank, works by a customer simply scanning a QR code at checkout, which then opens their banking app, where customers can approve and authenticate the payment- all very quick and simple! 

For retailers, the advantages include lower transaction fees and instant reconciliation thanks to running on simplified payment rails. At a time when retailers are dealing with challenging trading conditions, reducing operating costs, and easing cash flow management is a real win-win. However, this is just the tip of the iceberg of advantages on offer. Just as crucial is the ability of APMs to generate valuable payment data. 

Using payment data, retailers can create a digital footpath of how customers engage with a brand, what habits they have formed, and their preferences for how and where they shop. As a result, payment data has broken into the boardroom to aid decision-making processes and highlight opportunities for growth. 

Using payment data as more than just a tool for improving CX allows retailers to assess the digital footpaths customers leave and make real-world, strategic decisions. 

New Revenue Streams

However, the use of payment data goes beyond the business itself. Increasingly, retailers are realising and unlocking the value held within their payment data to create new revenue streams. For instance, suppliers also want to better understand customer habits, trends, and preferences to enhance their operations and decision-making process. 

Retailers focusing on APMs will quickly sit on a vast treasure trove of precious data that can be sold to suppliers. Such is the potential revenue growth simply by selling access to anonymised payment data that McKinsey predicts that by 2027, “beyond retail” opportunities, like monetising customer data, will represent up to 40% of a retailer’s profits. 

When brick-and-mortar retailers face reduced customer demand and declining sales, adding a new revenue stream requiring minimal additional expenditure is an incredible opportunity to capitalise on. 

To access APMs’ advantages, retailers need the right technology and a payment solution provider who acts as a partner, not a supplier. Regarding technology, retailers must seek solutions that can process all existing payment methods while being future-proofed for new APMs. 

In addition, installing a new payment solution offers an excellent opportunity to simplify existing payment systems. For instance, switching to a system that provides a single payment gateway for all payments, regardless of currency, location, or type, reduces complexity while creating one central view of all payment data. While having the right technology is critical, the service and technical support are equally important. 

When the worst happens, and something goes wrong, you need a trusted payment partner ready to help with knowledge and experience of your unique payment system. Having a partner who can provide consultancy and knows your solution inside out saves time when the worst happens.

While there seems to be little signs of light at the end of the tunnel for high-street retailers given the current economic environment, APMs such as Pay By Bank offer retailers the opportunity to improve CX, reduce operating costs, and create new revenue streams. 

By deploying the right payment technology and selecting a payment solutions provider who is a genuine partner and not a supplier, retailers cannot only navigate the current challenging trading period but also lay the foundations for long-term success.