WHAT ARE ALTERNATIVE PAYMENTS & PAYOUTS?
The Complete Guide
to Alternative Payments & Payouts
Everything you need to know!
In this comprehensive guide we introduce you to Alternative Payments & Payouts, highlight the benefits and opportunities for businesses and consumers and take a look at their impact in a handful of key global markets.
Today, organizations can take advantage of a variety of methods designed with international customers in mind as the compelling world of alternative payments and payouts continues to evolve.
Alternative payments offer organizations of all sizes expanded options for payouts to customers and partners worldwide. With more countries beginning to accept new forms of payment, it's becoming easier than ever to offer seamless global payments regardless of location or currency. This is of increasing importance as businesses look to expand into international markets and increase their presence globally.
However, for businesses to reap the full benefit of offering global alternative payments and payouts, they must understand each country's regulations, compliance obligations, and various other considerations.
Reliable payment providers (like MassPay) are knowledgeable about local laws and can offer best practices for getting funds to customers quickly and securely will prove invaluable.
This article will cover all of this and more—including an overview of the critical alternative payment and payout methods in China, Brazil, Colombia, Europe, the United States, and India, as well as insights into the latest trends in each region.
wHAT ARE ALTERNATIVE PAYMENTS & PAYOUTS?
Let's start with a basic definition. Alternative payments are any payment methods that don't require cash.
- Credit/debit cards
- Digital wallets
- Mobile apps
- Prepaid cards
In terms of alternative payouts, these are any methods used to disburse funds from an organization to customers or partners. Examples include direct bank transfers and e-wallets, which typically offer the fastest and most secure payout solutions.
Today, more customers expect the ability to send and receive payouts in multiple currencies and use different payment methods—which is why alternative payouts have become so popular.
With certain payment providers businesses can easily enable various alternative payment and payout methods. In turn, they can reduce processing costs, increase customer satisfaction, and expand into new markets.
The key is to find a provider—like MassPay—with global coverage who can help you understand the rules in each country and determine the most efficient way to make payments or issue payouts.
Please note: For simplicity's sake, will use the term Payments throughout this guide to refer to both payments and payouts.
overview of alternative payments & Payouts
While alternative payments have existed for some time, they've gained traction more recently as customers shift their buying habits online after the COVID-19 pandemic. Additionally, more countries are embracing these payments as a way to drive financial inclusion.
Organizations can use alternative payments to provide customers with more payment options and increase the likelihood of conversion. Other payment methods may be more reliable and widely accepted than standard credit/debit cards, especially in international markets.
Along with increasing customer satisfaction and loyalty, alternative payments can also help cut costs associated with traditional banking fees and offer better fraud protection—critical considerations regarding global payouts and payments.
For payouts, organizations can leverage alternative payment methods to disburse funds quickly and securely while also avoiding delays due to bank holidays or slow processing times.
Finally, alternative payments have opened up a world of new possibilities for businesses looking to expand into international markets. With more countries beginning to embrace these payments, it's becoming easier than ever to offer seamless global payments regardless of location or currency.
Alternative Payment Methods
We know alternative payment methods include credit/debit cards, digital wallets, mobile apps, prepaid cards, and cryptocurrencies. Here's a bit more detail on the most popular methods:
These are the traditional payment methods for online purchases. Customers provide their card details and authorize payments, which secure networks then process.
With digital wallets (or e-wallets), customers can store their credit/debit information in a specific app or website. This makes it easier to make payments without having to reenter their card details each time they shop. Options like Apple Pay, Google Pay, and PayPal are some of the most popular digital wallets.
These applications let customers make payments right from their mobile devices. Most banks now offer a banking app with payment capabilities. Other third-party providers (think Venmo or CashApp) have become incredibly popular in recent years.
Prepaid cards allow users to load a set amount of money onto a card. Then, they can spend it online or at point-of-sale locations. Many organizations provide prepaid cards as an alternative payment or payout option for customers who don't have access to traditional banking services. Gift certificates also fall under this category.
These are digital currencies created on secure systems such as blockchain technology. They offer numerous benefits—including increased privacy and security—but may require additional compliance considerations in specific markets.
Alternative Payments for Businesses
It's also worth discussing how businesses can utilize alternative payment methods and reap many rewards by doing so.
For starters, accepting alternative payments is an effective way to increase customer satisfaction and loyalty. Offering multiple payment options also helps businesses tap into new markets—as you'll see, customers in certain countries may be more likely to use certain methods.
Not to mention, using alternative payments for payouts can mean cost savings. Organizations streamline their payment activities and reduce costs associated with international transfers by eliminating the need for traditional banking fees.
Additionally, taking advantage of fraud protection features offered by alternative payment providers or banks helps reduce risk in volatile global markets.
Benefits for End Users
Several benefits also exist for end users who utilize alternative payments.
These methods offer more convenience and flexibility than traditional payment options.
For example, customers can make payments from anywhere, at any time—without carrying cash or waiting in line. Moreover, they may have access to features like rewards programs or loyalty points unavailable with traditional banking services.
Security also plays a major role. Many alternative payment methods offer additional layers of protection and fraud prevention that traditional banking services do not, making them ideal for users concerned about online safety.
Now more than ever, customers are looking for convenient and robust payment solutions—alternative payments provide just that.
key global trends & statistics
To highlight the current status—and potential—of alternative payments, here are some key statistics to consider:
- Globally, digital payments will likely reach US$9.46tn in 2023.
- Mobile apps account for over 60% of global e-commerce transactions.
- By 2025, the number of unique digital wallet users will surpass 4.4 billion worldwide.
- The value of the digital wallet industry will likely grow from $1.97 trillion in 2020 to $11.83 trillion in 2028.
- The blockchain industry will likely achieve a worth of $163.83 billion by 2029, with a compound annual growth rate of 56.3%.
- The number of blockchain wallets globally, which includes users of Blockchain.com and Coinbase, exceeds 170 million.
- Approximately 10% of the global population, and 16% of Americans, have invested in cryptocurrency.
Ultimately, alternative payment solutions provide businesses and end users an efficient and secure way to process online purchases and payouts across international markets.
Speaking of international markets, we'll now explore the intricacies of alternative payment methods in different countries and how they differ from (or relate to) one another.
Alternative Payment Solutions Around The World
The countries (and continents) we'll discuss concerning alternative payments include China, Brazil, Colombia, Europe, India, and the United States. Each plays a unique role within the global alternative payments landscape, and understanding the nuances of each is vital to success in international transactions.
Speaking of international markets, we'll now explore the intricacies of alternative payment methods in different countries and how they differ from (or relate to) one another.
China: Leading the Mobile Payment Revolution
We'll begin with China, a country at the forefront of the mobile payment revolution. In fact, mobile payments account for more than 50% of total online transactions in China—the number of mobile payment transactions was around 159 billion in 2022.
Alipay is one of the most widely used payment solutions in China and works directly with central banks across the country to offer users secure online payments for goods and services. Now, consumers often opt for Alipay over traditional banking services thanks to its convenience, security, and wide acceptance.
WeChat Pay is another favored payment solution in China. It's touted for facilitating payments between users without the need for bank accounts or credit cards.
It also offers a range of impressive features to provide additional incentives for customers to use the service including discounts, loyalty points, coupons and more.
Users often turn to WeChat Pay to pay for gaming, eCommerce, travel, and online education.
UnionPay is another Chinese payment provider—the most prevalent card issuer worldwide. The UnionPay network supports more than 9.4 billion cards globally—many in China. As such, it's an ideal option for businesses hoping to expand into the Chinese market.
UnionPay is also widely accepted in most countries, making it an excellent choice for businesses looking to make payments and receive payments overseas. Again, this is a quality that's becoming increasingly important for many individuals and businesses.
Chinese Alternative Payments: Trends and Future Outlook
As for what the future of alternative payments in China holds, we expect three notable trends to emerge:
- The continuing rise of mobile payments.
- Increased adoption of blockchain-based payments, as consumers view the technology as a major value-added layer for online transactions.
- Continued growth in voice-based payment technology will likely become even more popular due to its convenience and ease of use.
Brazil: A Growing Market for Digital Payments
Now we'll turn our attention to Brazil, a particularly exciting market for alternative payments due to the country's increasing reliance on digital solutions. Predictions have more than half of Brazilians utilizing digital wallets by 2025 with their excited adoption of these technologies.
Regarding specific alternative payment methods, let's look at Boleto Bancário, PIX, and Mercado Pago—Brazil's three most popular options.
Boleto Bancário is a Brazilian online payment system. With it, customers can make payments using their bank accounts or credit cards without any upfront fees. It's also one of the leading alternative payment methods in the country and we attribute its popularity to its enhanced security and convenience.
The Central Bank of Brazil has developed PIX, a digital payment system that facilitates near-instant payments through bank accounts or credit cards. On top of enabling fast transactions, PIX also offers supplementary features that include peer-to-peer transfers, recurring payments, and mobile wallet integrations.
Mercado Pago is another alternative payment solution in Brazil.
It allows users to pay in many ways, including:
- Debit cards
- Credit cards
- Online banking transfers
- Cash deposits at ATMs
It's one of the most widely accepted payment methods due to its low fees and fast transaction speeds.
Brazilian Alternative Payments: Trends and Future Outlook
Looking ahead to the future of alternative payments in Brazil, we expect to see an increasing focus on mobile payments and blockchain-based solutions. This is primarily due to the country's growing demand for digital payment methods and its willingness to embrace new technologies—especially those focusing on security.
Additionally, contactless payments are expected to continue gaining traction in the Brazilian market. We also anticipate new technologies like artificial intelligence, machine learning, and biometrics will increase in popularity as more companies strive to provide secure and user-friendly payment solutions.
It's worth noting most of these trends aren't exclusive to Brazil. As you read about alternative payments and payouts in the following countries and areas, you'll see many parts of the world embracing similar technologies to make payments more efficient, secure, and convenient for their citizens.
Colombia: Embracing Alternative Payment Solutions
Now we come to Colombia, where access to traditional banking services is limited, like many parts of Latin America. As a result, alternative payment systems have become progressively more popular in the country—especially among those living in rural and remote areas who are unbanked.
In Colombia, Nequi, Bancolombia, and Davivienda are three of the more popular alternative payment solutions available.
Nequi is a Colombian digital wallet platform launched, with the backing of Bancolombia, in 2016. This platform allows users to open a free account using their mobile phone number and a valid identification document.
Upon creating an account, users can deposit money into their Nequi account by transferring funds from another bank account or using cash deposit services offered by Bancolombia. They can then use the Nequi app to make payments, transfer money to other Nequi users, pay bills, and withdraw cash from Bancolombia ATMs without a card.
Because many Colombians remain unbanked (approximately 35%), Nequi provides them with a reliable, safer, and convenient payment method.
Bancolombia is one of the largest banks in Colombia, with over six million customers nationwide. It offers its customers various digital banking options.
The bank's mobile app allows users to transfer money between accounts, pay bills, buy goods online using their phone number as a virtual card number, and even withdraw cash from ATMs without a physical card.
Davivienda is another key player in Colombia's alternative payment landscape. Founded in the 1970s and now the country's third-largest bank, Davivienda offers services such as money transfers, deposits, withdrawals, and payments. Users can choose from the bank's mobile app or a physical card to make payments.
Additionally, the bank recently launched its digital wallet, DaviPlata. Notably, Daviplata will be the first digital wallet in Colombia and Latin America to implement NFC technology, which allows for contactless payments (including donations, fund raising, and sending money to friends) using a mobile device.
Colombia: Trends and Future Outlook for Alternative Payments and Payouts
Colombia is significantly shifting towards alternative payment and payout methods, widely driven by changing consumer preferences and technological advancements. Now, mobile payments, digital wallets, cryptocurrency, prepaid cards, and cashless payments are growing in popularity in Colombia.
With the increasing availability of digital infrastructure and the growing adoption of eCommerce, the trends toward alternative payments and payouts are likely to continue, providing Colombians with more convenient, accessible, and secure ways to manage their finances.
Europe: Diverse Digital Payment Landscape
With an area as vast and diverse as all of Europe, it stands to reason that the payment landscape also varies drastically from country to country. While some countries have adopted digital payments nearly exclusively, others are still heavily dependent on cash and traditional banking systems.
Nevertheless, there are a few commonalities across Europe regarding digital payments. The most popular include SEPA (Single Euro Payments Area), iDEAL, and SOFORT.
SEPA, or the Single Euro Payments Area, is a payment integration initiative launched by the European Union to facilitate faster, cheaper, and more efficient cross-border payments in Europe that now serves 36 countries. It's helping customers make transfers quickly and securely across national borders without incurring high fees or long waiting times.
SEPA has made it easier for businesses and individuals to make and receive payments across borders using alternative payment methods, such as mobile payments and digital wallets. Traditionally, cross-border payments pose numerous challenges (including slow speeds and high costs), but SEPA is helping businesses overcome these.
SEPA also makes banking services and alternative payment methods more accessible, promoting financial inclusion.
iDEAL is another popular method of payment commonly used in the Netherlands, and millions of Dutch customers rely on it. By scanning QR codes or entering payment details into their banking apps, customers can make payments quickly and securely without having to use cash.
The Dutch version of iDEAL is widely accepted by retailers and merchants in the country, making it one of Europe's most popular alternative payment methods.
SOFORT is an online direct debit service allowing customers to make secure payments from their bank accounts to a merchant's bank account. This means customers don't need to enter sensitive information, such as credit card numbers or personal data, which increases security for both parties involved.
SOFORT uses open-banking technology to connect customers and merchants, allowing for speedy and secure payments.
Today, 13 markets have access to SOFORT:
- United Kingdom
Europe: Trends and Future Outlook for Alternative Payments and Payouts
Even though they are well established, we expect alternative payments and payouts to keep gaining traction in Europe. As in other areas, this is largely due to rising demand from consumers for more convenient, secure, and accessible payment and payout options.
An increasing number of fintech startups have been entering the market, offering innovative solutions such as faster money transfers, digital wallets, cryptocurrency exchanges, and more.
As of May 2023, there are 9,681 fintech startups in the EMEA region: Europe, the Middle East, and Africa, and that number is expected to continue to grow quickly in the next 24-36 months.
India: A Digital Payments Powerhouse
Finally, we come to India, a country that has earned its reputation as a digital payments powerhouse. India has seen a notable shift towards alternative payments and payouts, driven by the government's push for a digital economy and increasing internet penetration. In fact,
GlobalData research indicates the usage of cash for payment transactions in India has decreased from over 90% in 2017 to less than 60% presently.
We can attribute much of this shift to the Indian government. It has launched several initiatives to promote digital payments and payouts in the country, aiming to create a less-cash economy and increase financial inclusion.
One of the most significant initiatives is the Unified Payments Interface (UPI). This live payment system allows users to transfer funds between bank accounts instantly using a mobile device. It was developed by the NCPI (National Payments Corporation of India).
Paytm, or "pay through mobile," is India's largest mobile payments and commerce platform. It lets users send money, pay bills, and purchase products and services. The company reported an average of 89 million monthly transacting users for the first two months of 2023, reflecting a 28% YoY growth.
Google Pay is another mobile payment service available in India. It enables customers to make payments using their smartphones. It also supports UPI payments and card payments for online and offline purchases.
India: Trends and Future Outlook for Alternative Payments and Payouts
The future looks bright for alternative payments and payouts in India, too. With a population well over one billion, there is still plenty of room for growth. Furthermore, with initiatives like Digital India becoming increasingly prominent, the adoption rate of digital payments will continue to rise in the coming years.
Despite challenges such as low financial literacy and a large unbanked population, the trend towards alternative payments and payouts will almost certainly continue in India, providing Indians with more convenient and accessible ways to manage their finances.
United States: Innovations in Alternative Payments and Payouts
It won't come as a surprise that the United States is leading in innovation when it comes to alternative payments and payouts. We can attribute this, in part, to the US being one of the most developed economies in the world. Not to mention, it has some of the largest technology companies, such as Google and Apple, operating within its borders.
Some of the leading digital payment services available in the United States include:
Zelle is a digital payment service owned by several financial institutions under Early Warning Services, LLC, including Bank of America, Wells Fargo, and JPMorgan Chase. It lets customers send money quickly and securely between bank accounts using their smartphones or computers. It also supports person-to-person payments via text messages or email addresses.
With a meteoric rise in usage over the past few years, Venmo has become one of the most popular digital payment services in the U.S. With it, users can send and receive money from their contacts. Interestingly, it has also become a social network for sharing payments (i.e., splitting bills) with friends.
As of 2023, there are an estimated 85 million Venmo users in the US–this number will likely exceed 100 million by 2026.
Block Inc. (formerly Square) owns Cash App, now one of the biggest mobile payment providers in the United States. It supports peer-to-peer transfers and merchant payments, making it a versatile payment option. Its customers can also invest in stocks and buy Bitcoin through the app.
United States: Trends and Future Outlook for Alternative Payments and Payouts
The future of alternative payments and payouts in the United States is exciting and the possibilities for where fintech will take it are virtually endless. Already a leader in fintech, an increasing number of startups will likely enter this space. With them will come new solutions for faster, safer, and more convenient digital payments and payouts.
Government-backed initiatives such as the Faster Payments Task Force have been working on a roadmap to modernize the US payment system to enable immediate payments between financial institutions. This could open up opportunities for alternative payment providers to expand their services nationwide.
Readying your business for alternative payments & payouts
The numbers don’t lie—alternative payment methods are clearly on the rise. Governments, fintech, and large tech companies are all playing a part in promoting digital payment solutions and pushing for more financial inclusion.
Not to mention, the global population is becoming increasingly familiar with digital payments, making them more likely to choose these services over traditional payment methods.
These developments present exciting opportunities for businesses and consumers alike.
Companies will benefit from increased customer engagement and loyalty. At the same time, customers enjoy more convenient, secure, and cost-effective ways to manage their finances. In addition, when they embrace these new technologies, companies unlock new possibilities in the world of payments and payouts.