The evolution of alternative payments

Over time, alternative payment methods (APMs) have undergone significant evolution to cater to individuals without access to conventional payment options like credit cards. They've seen advancements in user experience, and approval procedures, and diversified into various forms: digital wallets, mobile money wallets, cash vouchers, prepaid cards, and a range of account-based transfers, including instant ones.

However, there remains a crucial stride to make, especially in emerging markets where card accessibility is limited. The necessity for APM solutions for recurring payments becomes paramount, particularly in sectors like streaming, gaming, and SaaS.

For André Allain, Vice President of Growth at EBANX, this will be the next frontier in advancing APMs, mainly targeting specific verticals like entertainment and low-to-medium ticket sizes. “This will open a tremendous addressable market for many global companies. It'll take a few waves, a few steps to implement this, but it will be worth it”.

Juliana Borges, Director of Operations at EBANX, emphasizes the credibility of the APM market, highlighting its secure nature, authentication, superior user experience, and cost-effectiveness. She highlights that the overall advantages favor APMs in the financial equation, asserting that people already place considerable trust in these methods. While acknowledging the limitations of current rails for recurrence, Borges underscores that it represents a viable path forward.

“The APM market has already proven its worth. It's a secure transaction as it's authenticated, with good UX, and costs much less. In the end, the whole math favors APM. It's just a matter of time: people already trust APMs a lot. Today, most rails are not suitable for recurrence, but it's a path”, she says.

“It's just a matter of time: people already trust APMs a lot.”

Juliana Borges

Director of Operations at EBANX

For Sebastian Fantini, director of Product at EBANX, if alternative payments do not attack the use case of recurrence, there'll be a serious limitation for their growth in the future, given the rise of subscription businesses such as streaming, online education, and SaaS.

One solution has been the adoption of prepaid options, notably favored by streaming platforms like Netflix and Spotify in countries such as Kenya, Nigeria, Colombia, Argentina, and Peru. Yet, complexities and renewal requirements associated with prepaid methods can impede user adoption.

In this framework, users pay upfront for a predetermined service period. While platforms accept prepaid cards, gift cards, cash vouchers, transfers, and digital wallets, the renewal process can present hurdles. Users must manually reinitiate the payment process at the end of the period, potentially causing a drop in adoption rates. 

Prepaid cards for Playstation, Netflix, and Spo - Credit: JCM -

On the contrary, card usage streamlines the process by facilitating automatic monthly charges, effectively easing user anxieties regarding payment renewals and mitigating the potential loss of clients due to repetitive procedures. Emulating this seamless experience poses a challenge that APMs are now actively seeking to address.

In India, instant transfers already allow recurrence 

The National Payments Corporation of India (NPCI) developed what is arguably one of the most efficient solutions for recurring payments using APMs to date. UPI AutoPay, introduced in July 2020, facilitates recurring transactions through UPI, which stands as the world's most extensive instant transfer system (read more about UPI and India here).

The process to enable the auto-debit manners is simple and requires a few steps for customers. Once it is set, there is no need for further action, ensuring a seamless payment process. Customers can halt or modify mandates whenever they want through their preferred UPI app. Additionally, they have the flexibility to schedule recurring payments on a weekly, monthly, quarterly, half-yearly, yearly, or customized frequency.

UPI Auto Pay - How to buy insurance - Credit: NPCI Youtube Channel

Users receive notifications for each payment made, but, for transactions under INR 15,000 (approximately USD 180), no validation is necessary. Transactions exceeding this amount require a PIN for execution. 

“Today, most instant payments are not suited for recurrence. But if you see the future, and with subscription merchants growing, I believe this challenge will somehow be solved. In India, it's there, and it works." 

Sebastian Fantini

Director of Product at EBANX

UPI AutoPay is accepted by global subscription services like Netflix, Amazon Prime, Apple, Google Play, Sony, Spotify, and Disney Hotstar. According to NPCI, in October 2023, 167 banks and 24 third-party apps were live with the solution. Monthly, there are over 10 million scheduled payments.

Brazilian Pix to enable recurring payments in 2024 

Taking a cue from India's strides in digital payments, the Central Bank of Brazil has revealed its plan to introduce Auto Pix, a recurrent payment feature set to debut in the country's instant transfer platform, Pix. Scheduled for release in October 2024, this system mirrors the functionality of UPI AutoPay and will be mandatory for all financial institutions.

For customers, utilizing Auto Pix will be free of charge, although banks retain the discretion to negotiate fees with businesses. 

“Pix is assuming a function that, today, belongs to credit cards, which is the ability to make a flow of payments over time."

Roberto Campos Neto

President of Brazil’s Central Bank, at an event in São Paulo

28th October 2024

is the scheduled launch date of Auto Pix

UPI AutoPay and Auto Pix share similarities with direct debit transactions. Yet, unlike traditional direct debit methods that require merchants to liaise with individual banks or financial entities, these platforms adopt a centralized approach. By centralizing operations, Auto Pix and UPI AutoPay facilitate a more inclusive system, allowing clients from any institution to partake in seamless recurring payments.

“We have seen strong demand from merchants," said Carlos Eduardo Brandt, Head of Pix Management and Operation at the Central Bank of Brazil, in a recent episode of the EBANX MoneyPot podcast. "They need a solution that is inclusive, which means a solution that could serve different types of businesses, different sizes of merchants, and different business models. And also, they need a solution that can reach a really wide range of customers — and Pix has more than 141 million users.”

Offering Pix as a subscription payment method will expand companies' addressable market and help them reach more customers. Moreover, companies rely on cash flow. Having the possibility of scheduling payments helps them grow their business and have more predictability in cash management.

“They [merchants] need a solution that can reach a really wide range of customers, and we have more than 141 million Pix users.”

Carlos Eduardo Brandt

from the Central Bank of Brazil, on the EBANX MoneyPot podcast

In Africa, another path for recurring payments: mobile money

In Kenya, one of Africa's leading digital markets, the challenge of recurring payments is being addressed by telecom companies. In response to the escalating demand for recurring payments among Kenyan consumers, Safaricom, the leading player in the mobile money space, announced a first-of-its-kind feature allowing standing orders for M-PESA clients

This functionality enables the mobile money platform to handle recurring payments like subscriptions, automatic bill payments, and even person-to-person transfers.

The announcement of this feature came in late 2023 and is currently limited to Kenya. However, there is anticipation that its scope might extend to other countries in the near future and that other mobile money providers will launch their own solutions regarding recurrence. 

“A really big complaint that we hear from many industry players regarding this payment method, and why they don’t want to adopt it, is the lack of recurrence. The really good news is that some of the leading mobile money players, M-PESA included, have developed native recurrency. Very soon, you are going to see multiple payment providers, EBANX included, offering the ability to perform recurring charges using mobile money solutions across the continent," said Wiza Jalakasi, EBANX Director of Africa Market Development, during EBANX's Payments Summit.


Before that, Safaricom had teamed up with Visa to offer a virtual card linked to M-PESA accounts, in order to allow recurring purchases —a feature also made available by other mobile money operators across Africa. While this initiative addressed challenges like paying for streaming, others, such as billings, remain to be tackled.

Only 3% of Kenyans own credit cards, which makes alternatives such as mobile money imperative for tapping into the multiple opportunities of this market.

The successful adoption of this innovation relies heavily on telcos and merchants' readiness to integrate the solution, aligning with the process for conventional M-PESA transfers. In Kenya's digital commerce landscape, M-PESA currently accounts for 45% of revenue, signifying vast potential for growth through the development of standing orders. This pivotal expansion holds the promise of increased revenues and significant scalability in the African market.

"Very soon, you are going to see multiple payment providers offering the ability to perform recurring charges using mobile money solutions across the continent."

Wiza Jalakasi

Director of Africa Market Development at EBANX

Mobile money stands as a cornerstone in Kenya's financial landscape and has expanded its influence to other African nations such as Tanzania and Ghana. The potential for further growth and utilization remains vast, given its widespread usage.

“APMs are getting sophisticated: they are adding more functionalities to serve more merchants and use cases. It's not a one-time use case anymore,” says André Allain, from EBANX.  

Digital wallets adapt and provide recurring features

On another front, some digital wallets have adapted to facilitate recurring payments. Typically, this involves utilizing the credit card registered within the wallet, effectively rendering it a recurring credit card transaction. The advantage lies in not having to share credit card information across multiple websites; instead, the payment data remains stored within the wallet.

More advanced players, though, are working on use cases where the payment is deducted directly from the client's balance. Mercado Pago, the fintech arm of the Latin American retail behemoth Mercado Libre, already offers a subscription feature. It enables merchants to establish subscription plans that clients can conveniently pay for using the platform. This approach enhances convenience and bolsters sales for merchants who offer the wallet as a payment option.

“Recurring payments have an impact on reducing churn. You just forget that you have to pay. It's a seamless experience," comments Juliana Etcheverry, Director of Strategic Payment Partnerships and Market Expansion at EBANX.

Mercado Pago's recurring feature is currently available in Argentina, Brazil, Chile, Colombia, Mexico, Peru, and Uruguay. Clients can make payments using their wallet balance, where payments are periodically debited from the account. Alternatively, they can opt for other methods like credit cards, Boleto, or Pix (the latter two are regularly sent via email, requiring manual payment for the subscription plan).

Another intriguing application arises with Paga, a Nigerian digital wallet that seamlessly links to a user's bank account. When a customer opts for Paga as their payment method for a subscription, this integration allows them to initiate debits directly from their linked bank account, mirroring the functionality of a direct debit system. Moreover, Paga facilitates recurring payments through credit cards and from the user's available debit balance.

“It's not fair to say that APMs are not suitable for subscription. If you find a way to make it work, it can be a fit. Paga, for example, is making a huge impact in the region,” says Etcheverry.

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Driven by Pix and UPI, instant transfers are flourishing in rising markets and bringing new customers to digital commerce