Sampling the payments smorgasbord

Buy just about anything on a website these days, and you’ll be faced with a smorgasbord of payment options on the checkout screen: Google Wallet, Amazon Pay, Venmo, Paypal, Klarna, good old credit cards, and the list goes on. But many of these options weren’t available just a few years ago.

As Katie Chew, managing director of treasury operations for United Airlines, said at the recent AFP 2024 conference, “There’s been more transformation in this space in the past few years than really I’ve ever seen before.”

But there’s a lot for CFOs to consider when choosing which payment methods to accept beyond costs such as customer loyalty and geographic differences.

If you don’t offer customers a seamless way to pay, Chew said, they may balk. Especially as many people have become used to the convenience of one-click payments.“So we risk losing customers where either they could go to another airline, or, more likely, they're going to go to a travel agent, because that travel agent is going to accept bank transfer,” she said.

So many ways to pay: Chew outlined some of the newer alternate forms of payment (AFOPs, if you’re hip) that CFOs can consider accepting at their businesses:

• Digital wallets such as Apple Wallet, Google Wallet, and Payz, which let customers store their credit or debit card information online. These are more convenient for consumers, but for companies they’re basically “still a credit card we’re processing at the end of the day,” Chew said. Digital wallets don’t offer companies cost savings compared with credit cards, she said, but do help with customer loyalty.
• Online payment platforms like PayPal and Alipay, which incorporate digital wallets as well as allowing users to send and receive funds. These are often less costly for companies to accept, Chew said.
• Buy now, pay later (BNPL) services like Klarna, which let customers pay in installments over time. Though some consumers are wary of BNPL apps, fearing they make it too easy to accumulate debt, the services can benefit businesses, Chew said. They appeal to a different segment of consumers, she said, and can spur spending. “You’re much more likely to see somebody upgrade themselves to first class” if they’re using a BNPL option, she said, “because all of a sudden, that first-class ticket isn’t hundreds of dollars more. It’s another $15 a month.”
• Pay-by-bank methods that allow consumers to transfer money directly from their bank accounts to merchants without using credit or debit cards. (Venmo, for instance, lets customers pay by bank.) Payment by bank is “one of the cheapest ways to accept payment,” Chew said, and it’s “getting a lot of traction right now with the younger generations.”

Know how your customers prefer to pay: Different generations might not trust different methods, Chew said, using GenZ as an example.“If you survey them, the Gen Z's don't like credit cards as much because they feel like they've seen too many Millennials get into trouble with credit card debt and say they don't so they don't want to touch that,” she said.

Global companies also pay attention to which payment methods are popular in the regions where they operate. For example, credit cards are still popular in the US but are “kind of falling out of fashion internationally,” Chew said, whereas in Germany “a lot of people pay via wire transfer.” In countries with fluctuating currencies, she said, people are going to be “less comfortable taking on credit, because you don’t know what that money is going to be worth later in the future.”