Online customers are increasingly turning to alternative payment methods, and merchants who don't want to miss out on sales should consider accepting some or all of them. Banks also are getting in on the act, creating Secure Vault Payments, which authenticate customers through online banking portals.

For the past few decades, checks, ACH, credit cards and debit cards have been the primary means of payments for consumers. These payment methods have been successful because consumers can pay for their purchases without carrying cash, merchants can increase sales by reaching a wider consumer base, and banks are able to establish themselves as trusted financial providers to both merchants and consumers. However, changing market trends are creating opportunities for alternative payment methods and practices.

The Driving Forces Behind Payments Innovation

Communications technologies, mainly the Internet and mobile phones, have dramatically altered the ways in which individuals interact with each other and, in turn, consumers are shifting more of their purchases from the physical world to the virtual. Merchants have adapted by becoming multichannel marketers and banks are following suit by providing new means for consumers to interact with their finances through popular tools such as online bill pay and mobile banking.

Second, the rise of online purchases has brought with it concerns of security. While most banks fully protect consumers against fraudulent transactions, consumers don't want to go through the hassle of identifying and fixing fraud. And merchants are even more concerned especially since they end up digesting most of the liability in the event of a security breach.

Merchants are also concerned about managing the rising costs of payment acceptance. Over the last 20 years, credit card interchange fees have gone up 25 percent to 90 percent, depending on the card type and the nature of the merchant business... continue reading