Has this ever happened to you? You’re shopping online and want to make a purchase. But when you try to pay for your item, the payment method that you want to use isn’t available, and so you abandon the purchase. This can happen particularly in international e-commerce, where shoppers prefer to use a payment method that’s not commonly used in the merchant’s location.

When interested customers don’t complete their purchase, this can add up to significant revenue losses to the merchant—losses which come after expending effort and marketing dollars to get the prospect all the way to the check-out page. For subscription businesses this situation is compounded by the loss of the potential lifetime revenue that could have been generated if the subscriber had completed their purchase. 

This situation has led many businesses to expand the alternative payment methods (APM) they offer to online shoppers. APMs are a set of payment methods that are used as alternatives to credit card payments. Common APMs for online shoppers are debit cards, digital wallets like PayPal, Amazon Pay, and Apple Pay, and others. Some advantages of digital wallets are convenience, reduced checkout friction, and increased security. 

In this article, we want to share some insights on APM trends and discuss why we think it’s important for subscription business to offer APM.

APM usage continues to grow, and credit card is no longer the most preferred payment choice for many online shoppers

Worldpay’s 2018 Global Payments Report found that APMs such as digit wallets accounted for about 36% of global e-commerce payments in 2018 and is projected to reach 47% in 2022. In the same time period, credit card usage will drop from 23% to 17%.

Recurly’s Data Science team looked at the transaction data across our platform from January 2018 to November 2019 and found similar payment-usage trends for subscription businesses. 

Percent of payments per payment methods on January 2018 and November 2019 table Key insight subscription industry

APM usage differs by online shopper’s region, thus it’s important for merchant to offer the most relevant payment methods used in each region

According to Worldpay’s 2018 Global Payments Report, online shoppers in Europe, the Middle East and Africa (EMEA), and Asia Pacific and Japan (APAC) are more likely to use digit wallets than those in the US and Canada (NA) and Latin America and the Caribbean (LATAM).

We saw similar region patterns for PayPal usage for subscription businesses. If your business attracts customers outside North America, you might want to add digit wallets like PayPal and Amazon Pay as they gain popularity in EMEA, APAC, and LATAM.

PayPal usage by customer region bar chart Amazon pay usage by customer region bar char Key insight on the subscription industry

Offering APMs like PayPal is important for North American merchants to grow their businesses in cross-border trade  

In cross-border trade (CBT), the seller is in one country and the buyer is in another. According to a report from Zion Market Research, global cross-border B2C e-commerce will grow at a compound annual growth rate (CAGR) of 27.4% between 2019 and 2027. 

Some of the challenges of CBT are higher payment decline rates and a preference for local payment methods. We found that adding PayPal is a great idea for merchants in North America who want to increase international sales.

Payment method and its usage and decline rate table Key insight for the subscription industry

Going forward, alternative payment methods—in particular digit wallets—may become the preferred payment method for many online shoppers. Providing alternative payments gives shoppers more options and allows them to select payment methods with which they are most comfortable and which best suit their needs at checkout.

Although implementing new payment methods on your website has logistical and operational challenges, we believe that the positive impact on business growth from using APMs outweighs the effort. Recurly supports a wide variety of payment methods. Talk to us today to add alternative payment options to ensure that your subscribers and prospects will always find a payment method which suits them.