Driven by digital transformation, changing consumer and merchant preferences are creating growth in alternative payments at the expense of traditional plastic card use. Sifted’s interview with Till Wirth and Jack Wilson of Open Banking provider TrueLayer takes a look at 4 critical elements highlighting the shift to alternative options from traditional card payments:
- All alternative payment methods are growing in Europe: While alternative payment methods have been growing steadily, their adoption has been accelerated by the pandemic, further boosting ecommerce and therefore online payments.
- Cards are expensive for merchants — and customers: For Wilson, one of the biggest reasons for the rise of alternative payment methods is that they’re more cost effective. “There’s certainly a move by merchants to accept different types of payment because it’s cheaper for them,” he tells Sifted. “Merchants are paying anything up to 3% of transactions and they also have the costs of chargebacks and other contingent costs of accepting cards.”
- BNPL is booming: One of the biggest contributors to the rise of alternative payment methods is BNPL, which is used to fund £4 out of every £100 spent in the UK. Wirth attributes its popularity to the ease of getting credit, without relying on the big players.
- Open banking payments are on the rise: Policymakers in Europe and the UK brought in open banking — where banks open up and share their data with third parties to provide additional services — in 2015 and payments have been a key driver of its adoption.
While the figures presented in the interview show that alternative payments still trail the scope of traditional payments, there is clear growth and scale opportunities to continue innovation and disruption.
Overview by Jordan Hirschfield, Director of Research at Mercator Advisory GroupCategories: Banking