For many years, Visa and Mastercard have dominated payment processing with billions of transactions made with their cards. But recently, alternative payment methods have been introduced by fintech companies on the market, and this has disrupted traditional payment methods.
So, what exactly are alternative payment methods and are they a threat to Visa and Mastercard?
Alternative Payment Methods
Alternative payment methods (APMs) are any form of payment that doesn’t use cash or credit card like Visa, Mastercard, and American Express. Because of the shift in online shopping, the e-commerce market has grown exponentially, especially with new alternative payment methods being introduced to offer a faster and more convenient way for customers to pay for their purchases online.
But while there’s a lot of clamor for these alternative payment methods, most consumers still rely a lot on their credit cards to purchase products offline and online. Regardless of the type of business you operate, partnering with reputable high-risk merchant account processors to help you process all manner of payments is vital.
According to Senate Majority Leader Richard Durbin, “Visa and Mastercard still are so dominant in the payments market that merchants couldn’t stay in business without using their cards.”
He also noted that last year, merchants paid over $62.5 billion in swipe fees that were eventually passed down to consumers, a longstanding issue that the government has faced against credit card companies (Durbin, 2021).
But while alternative payment systems offer lower fees for transactions, credit card companies still play a role in completing these transactions because most of these APMs still don’t have an independent payment processing system to allow them to operate without going through credit card companies.
For instance, you could be using Google Wallet, which is an APM that allows you to pay for purchases using a virtual card. But how do you fund that card? One of the best ways to do so is by linking your debit card to a Google Wallet account where you can transfer funds to make payments.
Credit and debit cards will also remain as a primary payment method for a lot of consumers, especially since they offer the most flexibility when it comes to the different types of transactions that consumers make. Subscriptions, for instance, require credit cards for payments and they’re easy to process and can be canceled at any time.
Safest Payment Methods
Credit cards like Visa and Mastercard are also some of the safest payment methods because they have a strong fraud protection program, and you can always request a chargeback if there’s anything wrong with your transaction.
Most alternative payment methods still don’t have a secure payment system and you don’t have a way of having your payments reversed if you experience problems with your purchases.
Although there are newer methods on the market today, credit and debit card payments will continue to dominate the industry because they’re reliable, convenient, and secure.
So as a business, it’s imperative to partner with a reliable payment processing company that allows you to process credit and debit card payments more conveniently.
Durbin Highlights His Efforts to Bring Fairness, Transparency, and Competition to Credit & Debit Card Swipe Fees. (2021, March 11). Dick Durbin United States Senator Illinois. https://www.durbin.senate.gov/newsroom/press-releases/durbin-highlights-his-efforts-to-bring-fairness-transparency-and-competition-to-credit-and-debit-card-swipe-fees