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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:
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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.
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.
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.
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.
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.
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%).
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.
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.
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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.
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:
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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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.
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:
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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