What are alternative payment methods (APMs)?

Last updated: June 2023

An alternative payment method (APM) is any way to pay for goods or services that doesn’t involve cash or a card that belongs to a recognizable major card scheme, such as Visa, Mastercard or American Express.

In recent years, APMs have grown in popularity, offering businesses and consumers a much greater list of ways to send money or make transactions. These options can often be more effective, convenient, or affordable than traditional methods.

But no one APM is dominant, and preferences vary significantly across location and demographics. That’s why it pays to understand exactly how they work and how they change from one place to another. With that in mind, in this article, we go back to basics to explain:

In this article, we go back to basics to explain:

• What are alternative payment methods?
• Types of alternative payment methods
• Popular local and global alternative payment methods worldwide?
• What are the benefits of accepting alternative payment methods?
• How to choose the best alternative payment method for your business

What are alternative payment methods?

Alternative payment methods — APMs for short — refer to any form of payment that isn’t cash or a major international credit card brand.

Domestic cards, cash-based vouchers, digital wallets — such as Apple Pay and Google Pay — or bank transfers, including iDEAL in the Netherlands, POLi in Australia and New Zealand, and Przelewy24 in Poland are all considered alternative payment methods.

However, alternative online payment options are often more mainstream than niche. In many countries, they are the de facto way to pay, particularly online. As of 2022, 93% of German shoppers use PayPal for online payments, and 90% in France, Italy, and the UK, making it by far the most popular digital wallet in the Western world.

In the meantime, in the Netherlands, consumers make 70% of all online purchases with iDEAL. This becomes even more important for SaaS payments or subscription payments.

And that’s precisely the point for businesses looking to attract customers globally. Selling online to consumers without accepting their preferred payment method is akin to leaving money on the table.

See how the Seera Group has leveraged local payment methods to improve the customer experience and grow revenues.

Types of alternative payment methods

• Prepaid cards: prepaid cards are a type of card that a consumer loads with funds in order to make purchases. They can spend the balance on the card, but no more, unless they top it up with additional funds. Unlike a debit card, a prepaid card is not directly linked to a bank account. And unlike a credit card, the consumer is not borrowing money, they are spending money they already have
• Cash-based payments (electronic cash or e-cash): When checking out online, customers choose a cash-based payment method and generate a barcode or unique acquirer reference numbers (ARNs) to identify their payment. The customer takes this printed out or on the screen of their mobile device to a participating retail location to pay in cash. Once payment is confirmed, the merchant ships the goods or credits the customer’s account in the case of a service. Examples of e-cash methods include Boleto, Oxxo and Fawry
• Realtime bank transfers: This payment method allows consumers to pay for goods and services online using direct online transfers from their bank account. iDEAL and Sofort are examples of this payment method
• Direct Debit: Direct debit payments are commonly used for recurring payments. Consumers consent to give a merchant the ability to pull funds directly from their bank account for an agreed service. Consumers will get advance warning from the merchant that the transaction will happen. Examples of direct debit payments include SEPA Direct Debit, ACH, and BACS
• Domestic card schemes: Domestic card schemes operate in a similar fashion to the global card schemes operated by Visa and Mastercard. The difference is that these cards will only be accepted in one or a few markets. These are often popular where available as they’re tailored to the unique needs of consumers in the market and can often provide merchants with lower processing costs. Bancontact, Carte Bancaire and Mada are just a few examples of local card schemes
• Electronic wallets (e-wallets): E-wallets are a digital way to store funds. Customers load their e-wallets with funds via bank transfer, card or cash and use them to make payments online, offline, as well as person-to-person and cross-border in some cases. Examples of e-wallet methods include PayPal and Alipay
• Mobile wallets: Mobile wallets are another electronic way to store funds, this time on a mobile device. Customers load their mobile wallets via bank transfer, card cash, or through their mobile carrier. Making purchases, transferring money person-to-person, and paying bills can be done electronically online, in-app or in-person via the contactless interface, via QR code, or SMS on a feature phone
• Digital wallets: Digital wallets are a way to store payment cards. They generate tokenized card numbers for each transaction. Many consumers consider these a secure, convenient way to shop online, in-app or in-store without revealing or typing out card details each time. Apple Pay and Google Pay are examples of pass-through digital wallets
• Buy now, pay later (BNPL): BNPL allows customers to either pay the whole amount later or spread an item’s cost over several installments. Purchases are mostly funded via a bank account, debit, or credit card. Klarna, Affirm, and Afterpay are a few examples of this service.

Popular local and global alternative payment methods worldwide

There is no single, global way to pay. Every country has unique banking rails, payment methods, regulations, requirements and licensing. Payment habits also develop over time and are often formed by various cultural, political or economic and technological factors.

When talking about local payment methods, we’re referring to types of payment that are specific to a particular region and consumer preferences in that region, because of the aforementioned factors. Global payment methods are those that are accepted in most regions, regardless of local factors or preferences.

North America

In North America, digital wallets (32%) have now overtaken credit (31%) and debit (19%) cards to become the most popular payment method as of 2022. In the United States, this is mostly via Visa and Mastercard. Canada meanwhile has a robust domestic debit card, Interac, which is used in-store via card and online as a bank transfer payment method. LPMs are becoming more popular, though, especially amongst the younger generation using services Apple Pay, Google Pay, PayPal and Venmo — the mobile wallet service from PayPal. According to GlobalData, APMs such as these account for 30% of ecommerce transaction value.

South America

APMs are gaining ground in South America, and are expected to account for 39% of the total volume of the region’s digital commerce within two years, according to the latest Beyond Borders study. At the same time, credit card usage has shrunk slightly, from 55% in 2020 to 51% in 2022. Cash on delivery is also popular given the region’s large unbanked population. Increasingly the use of alternative online payment solutions, such as e-cash solutions is becoming more widespread. This is an offline way to make online purchases and is particularly suited to a region with a high unbanked population. Popular examples of e-cash in South America include Boleto Bancário in Brazil and OXXO in Mexico.

Europe

As in the US, in Europe, digital wallets (44%) have now overtaken credit and debit cards (42%) as the most popular online payment method. Some popular domestic debit cards that sit alongside the global brands include Bancontact in Belgium and Cartes Bancaires in France. The same study found that 16% of consumers prefer using bank transfer methods, especially in Austria, giropay, Sofort and PayNow in Germany, iDEAL in the Netherlands and Przelewy24 in Poland. Other alternative online payment options, like Apple Pay, were preferred by 6% of online shoppers.

Africa

In Africa, mobile wallets are attractive due to the lack of bank branch infrastructure and a large rural population. Customers can load their mobile wallets in various ways, including cash, carrier billing, or bank transfer. Payment preferences are distributed fairly unevenly across the continent. Cash on delivery (40%) is still the preferred method for online retail in much of the region, especially Nigeria (66%) and South Africa (40%), followed by card. However, digital wallets have experienced some growth, and are the preferred method for online transactions in Kenya (19%) and Nigeria (16%).

Middle East

In the Middle East, cash has reigned supreme until recently. According to our research, significant internet and smartphone penetration has resulted in a growing preference for mobile wallets in a region that could see 565 million smartphone connections by the end of 2025. This shift was driven by the suspicion that cash was a potential carrier of the virus during the pandemic. This is driven by deeper penetration from international brands, as well as the development of government-backed payment networks. Examples include KNet in Kuwait, Oman Net in Oman, QPay in Qatar and Mada in Saudi Arabia.

Asia Pacific

China has a robust domestic card scheme, UnionPay, which accounts for 45% of global card spending. Mobile payments are also popular in China. And it's anticipated that transactions totally $120 trillion were made using mobile wallets by consumers across China in 2020. Alipay and WeChat Pay dominate, with more than 90% market share between them. There is a large variety of popular alternative payment methods used by consumers across the rest of the region also. Some examples include GrabPay in Singapore, OVO Wallet in Indonesia and True Money in Thailand.

What are the benefits of accepting alternative payment methods?

Not accepting customers’ preferred payment method is a conversion killer. Our research, conducted in partnership with Oxford Economics showed that 56% of consumers said that if they couldn’t use their payment method of choice, it would permanently put them off shopping on a site.

Indeed, shopping cart abandonment - when a potential customer adds items to their basket but never completes the purchase - is a big risk for merchants who offer a limited range of payment options. Customers may deem the options you do offer to be untrustworthy, or may not be able to afford the items unless they can pay in installments.

Alternative payment methods must be a key part of your payment strategy. Customers like what is familiar. If they usually pay a certain way, why would they do something new to shop with you? When convenience is key to closing sales, why add extra payment friction and hassle? Let them pay their way, wherever they are.

And it’s not enough to be reactive. You're too late if you only start offering APMs when they reach critical mass. By this point, your potential customers will already be spending money with your competitors that catered to their needs sooner. Instead, you must be proactive and work to get a deep understanding of the direction local trends are heading so you go beyond their expectations, delivering frictionless, first-class payment experiences.

How to choose the best alternative payment method for your business

The challenge for merchants is knowing where to start getting this information. Nuances in the way people pay are subtle and not always apparent at first glance. And that’s where it helps to partner with experts who have a deep understanding of the local markets you operate in and work with you to understand and develop strategies to capture opportunities ahead of your competitors.

You also need to make sure that your payments technology stack is suited for your business — allowing you to add new payment methods at speed and without creating additional complexity. Not all payment providers can do that. So make sure that you’re working with a provider that gives you the international coverage you need, as well as capabilities to adapt and evolve as your business develops.

Here’s how to choose the best alternative payment methods for your business:

• Understand your customers - as we’ve seen, payment preferences vary considerably between different regions and demographics. Research the most popular payment methods among your target market and ensure your offer them at checkout
• Understand your business - at the same time, consider which APMs are right for your business needs and requirements. For example, how does the cost per transaction affect your bottom line? How easy are they to set up and manage? Do they contravene any regulations you need to abide by? You don’t need to offer every single APM to maximize conversions, and some may even have a negative impact on your business

Explore alternative payment methods with Checkout.com

At Checkout.com, you can gain valuable insights and access our comprehensive range of alternative payment methods, specifically designed to meet the needs of your business. Take a step towards optimizing your payment experience and maximizing customer satisfaction with maximum acceptance rates and end-to-end solutions.

What are the benefits of accepting alternative payment methods?

Not accepting customers’ preferred payment method is a conversion killer. Our research, conducted in partnership with Oxford Economics showed that 56% of consumers said that if they couldn’t use their payment method of choice, it would permanently put them off shopping on a site.

Indeed, shopping cart abandonment - when a potential customer adds items to their basket but never completes the purchase - is a big risk for merchants who offer a limited range of payment options. Customers may deem the options you do offer to be untrustworthy, or may not be able to afford the items unless they can pay in installments.

Alternative payment methods must be a key part of your payment strategy. Customers like what is familiar. If they usually pay a certain way, why would they do something new to shop with you? When convenience is key to closing sales, why add extra payment friction and hassle? Let them pay their way, wherever they are.

And it’s not enough to be reactive. You're too late if you only start offering APMs when they reach critical mass. By this point, your potential customers will already be spending money with your competitors that catered to their needs sooner. Instead, you must be proactive and work to get a deep understanding of the direction local trends are heading so you go beyond their expectations, delivering frictionless, first-class payment experiences.

How to choose the best alternative payment method for your business

The challenge for merchants is knowing where to start getting this information. Nuances in the way people pay are subtle and not always apparent at first glance. And that’s where it helps to partner with experts who have a deep understanding of the local markets you operate in and work with you to understand and develop strategies to capture opportunities ahead of your competitors.

You also need to make sure that your payments technology stack is suited for your business — allowing you to add new payment methods at speed and without creating additional complexity. Not all payment providers can do that. So make sure that you’re working with a provider that gives you the international coverage you need, as well as capabilities to adapt and evolve as your business develops.

Here’s how to choose the best alternative payment methods for your business:

• Understand your customers - as we’ve seen, payment preferences vary considerably between different regions and demographics. Research the most popular payment methods among your target market and ensure your offer them at checkout
• Understand your business - at the same time, consider which APMs are right for your business needs and requirements. For example, how does the cost per transaction affect your bottom line? How easy are they to set up and manage? Do they contravene any regulations you need to abide by? You don’t need to offer every single APM to maximize conversions, and some may even have a negative impact on your business

Explore alternative payment methods with Checkout.com

At Checkout.com, you can gain valuable insights and access our comprehensive range of alternative payment methods, specifically designed to meet the needs of your business. Take a step towards optimizing your payment experience and maximizing customer satisfaction with maximum acceptance rates and end-to-end solutions.

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