In our recent blog post, we discussed important factors to consider when selling games with credit and debit cards, selecting the appropriate business partner, and leveraging cards to enhance revenue. Bank cards are a cornerstone for facilitating consistent global sales and are particularly essential when devising local expansion strategies. On the other hand, alternative payment methods play a pivotal role in diversifying your payment portfolio especially when building your web shop, catering to the varying preferences and locations of players. One crucial aspect in adding alternative payment methods (APMs) into your payment portfolio is determining whether to manage APMs by establishing direct connections, or entrusting your business partner (PSP or MoR) to handle payments on your behalf. In either scenario, it is essential to assess several key factors:

• Coverage and supported markets list
• Payment currency compatibility for local processing per APM, as well as payout currency and cycle to ensure timely fund reception with minimal exchange costs
• Payment flow intricacies, emphasizing a detailed, user-friendly process to avoid potential conversion obstacles
• Support for one-time payments and recurring billing, especially critical for subscription-based products
• Additional features and benefits such as refunds, partial refund support, chargeback policies, transaction processing times, and more

Our experience shows that not all ecommerce solutions partners offer comprehensive global APM coverage and optimized payment flows for your web shop. Some companies may prioritize specific regions, limiting global scalability, while others may lack a seamless payment flow due to restrictions on supported currencies or cumbersome checkout processes. For example, if the payment flow includes a redirect setup and asks for extra unnecessary information during checkout, especially for one-time payments or similar situations. By addressing these considerations, businesses can better understand the significance of APMs integration, their impact on business operations and success of the web shops, as well as the importance of selecting the right partner for enhanced payment experiences and customer satisfaction.

Markets overview

Certainly, although credit cards remain the most prominent option in certain markets, consumers in many countries have a strong preference for alternative payment methods. Let’s take a look at particular examples: The charts show that alternative payment methods are popular in both developed and emerging markets, accounting for more than 50% of the payments landscape. For your business, this means you should offer these alternative payment options along with card payments within your web shop. Research by PayPal found that 59% of customers may not complete a purchase if their preferred payment method isn't available. To avoid losing nearly 60% of potential customers and associated revenue, it's important to understand why people prefer these alternative payment methods. Join us to learn more about this growing diversity of alternative payments.

What factors drive consumer preference for alternative payment methods?

Let's explore further into understanding why the majority of local consumers opt for APMs. High percentage of unbanked population Based on various reports, the top 10 countries with over 50% of the adult population lacking bank accounts and the highest percentage of unbanked adults are: As we can see these countries with the highest proportion of unbanked population are making their mark in regional and even global video game rankings. Players who lack access to traditional banking systems are turning to alternative payment methods such as FawryPay in Egypt, GCash in the Philippines, OXXO in Mexico, Paga or mobile money in Nigeria, Pago Efectivo in Peru, QRIS and digital wallets like GoPay, OVO, Dana in Indonesia, and other alternative payment channels. These options serve as financial inclusion tools for local consumers without bank accounts. User-friendly interfaces and convenience Numerous consumers are attracted to APMs due to their user-friendly payment flows. For instance, when US consumers were asked about the main reason for using a digital wallet for purchases, 41% of respondents highlighted convenience as the number one reason for purchasing with the digital wallet. QR code payments serve as another excellent example: consumers conducting online transactions can effortlessly scan the QR code and finalize the payment on their mobile device with a single tap or by opening the payment app through the provided link on their mobile device. The most recent QR code payments study conducted by Juniper Research anticipates substantial market expansion in developing regions, particularly in Southeast Asia, over the next five years. This growth is attributed to how QR technology facilitates access to digital payments for unbanked populations. Faster transactions Although bank card payments are processed in real time, it often takes a few days for funds to clear. With the emergence of new alternative payment methods, financial institutions and government entities recognize the importance consumers place on the speed of payments reaching the recipients accounts. Consequently, many markets are transitioning to instant payments, enabling transactions to be completed within seconds and providing round-the-clock availability of these payment methods. Two notable illustrations are India's Unified Payments Interface (UPI) developed by the National Payments Corporation of India (NPCI) and Brazil's Pix introduced by the Brazilian Central Bank. These platforms facilitate rapid, secure, and continuous transfers, transforming financial ecosystems and promoting financial inclusivity. Introduced in 2016, UPI in India has transformed the local payment scene, boasting over 300 million users and 500 million merchants. In March 2024, UPI transactions witnessed a 55% increase in volume and a 40% surge in value compared to March 2023. Pix in Brazil caters to the country's unbanked population, ushering in a new era of financial inclusion. In 2023, over 143 million individuals conducted more than 36 billion transactions through Pix, with 11.4 million businesses in Brazil adopting Pix. Numerous instant payment methods have been garnering popularity among consumers worldwide, including PayNow in Singapore, The New Payments Platform (NPP) in Australia, FedNow in the USA, PromptPay in Thailand, Sarie in Saudi Arabia, InstaPay in the Philippines, and others. Incentives for consumers Who doesn't enjoy receiving rewards for their actions, especially when spending money results in cashback or other incentives which can be utilized for future purchases? Rewards programs tied to payment options are a longstanding feature, available through both traditional bank cards and alternative payment methods. To effectively engage your web shop’s consumers, a focused reward program tailored to their interests is essential. This is why local alternative payment methods, such as digital wallets are successful in this regard. Numerous surveys confirm this notion: the availability of rewards or loyalty programs is identified as the second most influential factor, with 23% of responses from US consumers citing it as a reason for using digital wallets. Regarding bank transfers, 38% of surveyed consumers who prioritize rewards expressed a high likelihood of utilizing this payment method for both online purchases and recurring bills if rewards were offered. Rewards and incentives play a crucial role in fostering customer loyalty and satisfaction, as well as attracting new paying customers and driving sales growth. Xsolla's track record demonstrates this impact: a targeted campaign launched for a game partner with Alipay+ resulted in 17% increase of new spending players and 53% increase in total sales of the game. Security and trust Alternative payment methods frequently utilize advanced technologies like data encryption, tokenization, two-factor and biometric authentication, personal identification numbers (PINs) and more to safeguard transactions, lowering the risk of fraud. Digital wallets, for instance, mitigate the risk of fraud by prompting customers to verify their identity before finalizing a transaction. In a survey of US consumers, enhanced security was identified as one of the reasons for utilizing a digital wallet for purchases, mentioned in 14% of responses following convenience, and rewards. Cost-savings Even if consumers have bank cards (credit or debit), many opt to make purchases through alternative channels like digital wallets, instant payments, or cash. These consumers contend that alternative payment methods can assist in avoiding interest rates associated with credit card payments and unforeseen expenses when merchants pass costs on to consumers. Some individuals utilize alternative payment methods, such as reloadable prepaid cards, as a way to manage spending and financials effectively, specifically for their children’s purchases. From the merchant's viewpoint, alternative payment methods may prove to be more cost-effective in comparison to bank cards, although certain payment methods like mobile carrier billing entail higher processing fees than bank cards. The processing fees for APMs, such as digital wallets, instant payments, bank transfers, BNPL, etc., can vary depending on the type of APM and differ across the globe. Notably, for some prominent local APMs, local institutions impose merchant discount rates or processing fees as low as 1% or even 0% to encourage digitalization and enhance financial inclusion within the country. Payment habits Consumer shopping habits are influenced by a variety of cultural, political, economic, and technological factors. While some regions still prefer cash or cash-on-delivery payment methods, others are more inclined towards digital wallets and managing multiple accounts across different platforms simultaneously. For instance, Indonesia boasts over 48 licensed digital wallets like GoPay, OVO, Dana, ShopeePay, DOKU, LinkAja!, each offering similar functionalities such as transfers, payments, and purchases. However, each wallet caters to specific Indonesian consumer groups with distinct pillars and values, including targeted promotions, easy access to cashless payments, services like loans, investments, and pay-later options, among others. Consumers adopt these payment methods based on factors like rewards, accessibility and convenience, cost savings, security and trust. Preferences shaped by generational differences can be influenced by new governmental incentives or emerging payment methods. The key to swift adoption lies in understanding consumer needs and proficiently addressing those needs through innovative payment channels.

Tap into the world of alternative payment methods

At Xsolla, we are dedicated to providing all players with equal access to your exceptional games, regardless of their location. We prioritize offering players their preferred and secure payment options. As your trusted MoR business partner, our goal is to maintain a diverse and up-to-date portfolio of payment methods by continuously researching each market and staying informed about emerging trends. Interested in exploring alternative payment options to unlock new revenue streams for your game and web shop? Contact one of Xsolla's experts to begin this journey.

Written & Published By

Yulia Mikhailova, Product Marketing Manager at Xsolla