Key takeaways

• Alternative payment methods refer ways of paying that don’t use cash, cheques, or a traditional international credit card scheme. Examples include AliPay, WeChat, PayPal, Apple Pay, and Klarna.

• There are many different types of APMs, including digital wallets, bank transfers and direct debits, BNPL services, cryptocurrencies, and prepaid cards.

• Offering a variety of alternative payment methods at checkout provides many benefits for businesses, including a smoother customer experience, better conversion rates, increased customer retention, higher levels of security, and easier expansion into new markets.

How many payment methods does your business offer at online checkout? Alternative payment methods, like digital wallets and buy now, pay later (BNPL) options, are becoming the norm. You’ll want to make sure that you’re offering them to provide the best possible checkout experience. As well as creating a frictionless payment environment, offering a variety of alternative payment methods can also expand your market reach and benefit your payment operations, giving you a competitive edge in a crowded market.

What are alternative payment methods (APMs)?

Alternative payment methods (or APMs) refer to any form of payment that isn’t cash, cheque, or credit card provided through a traditional scheme like Mastercard, Visa, or American Express. APMs are an umbrella term that ‘local payment methods’ fall under, referring to the preferred forms of payment within a certain country or region. These could include AliPay and WeChat in China, SEPA direct debit in the European Union, GrabPay in Singapore, and Atome in the Asia-Pacific region.

Alternative payment methods actually aren’t so “alternative” at all when you consider that in some regions, they’re the preferred payment method for the majority of shoppers. For example, as of December 2024, 57% of online payments in Germany were processed using PayPal (an APM). And in China, AliPay controls nearly 55% of the mobile payment market share, with billions of transactions processed daily.

APMs can be grouped into several broad categories, including digital wallets like Google Pay, digital bank transfers and direct debits like GiroPay in Germany, BNPL services like Klarna, and more. Next, we’ll go into the different types of alternative payment methods in more detail.

Different types of alternative payment methods

Customers usually expect to see several different types of alternative payment methods at checkout when they shop online. Here are some of the categories these may fall into:

Digital wallets

Digital wallets (also known as e-wallets or mobile wallets) are a way for users to store their payment cards digitally, allowing them to make electronic transactions using their smartphones, smartwatches, and other devices through payment gateways. For each transaction made using a digital wallet, a tokenized card number is created, making it a convenient and safe method for shopping online. This alternative payment method is hugely popular, with over 500 million payments made using digital wallets in Australia in October 2024. PayPal, AliPay, Apple Pay, and Google Pay are all examples of digital wallets.

Bank transfers

Bank transfers allow shoppers to pay for goods and services online by making a direct transfer from their bank account. Popular examples of bank transfer services include PayTo in Australia, iDEAL in the Netherlands, and PayNow in Singapore. These payment methods differ from manual bank transfers, which require customers to log into their bank account and manually input the recipient's bank details.

Instead, when shoppers select these payment methods at checkout, they are redirected to their bank's online banking portal to authorise the payment. The transaction is processed in real-time, providing instant confirmation to both the consumer and the merchant.

Direct debits

Direct debits are set up between customers and businesses to allow the business to pull funds from the customer’s bank account on a one-time or recurring basis. Direct debit are useful for recurring payments like subscriptions, memberships, and other bills.

One popular example is SEPA payments in the EU. SEPA Direct Debit facilitates cross-border euro-denominated direct debit payments within the SEPA zone. This standardisation simplifies international transactions and payment collection within the EU.

Buy now, pay later (BNPL)

Buy now, pay later (BNPL) services, as the name suggests, offer shoppers a line of credit to defer payment, either in whole or in instalments. The funds are typically taken out of the customer’s bank account, debit card, or credit card, at agreed intervals. BNPL is rising in popularity – 59% of Gen Z and Millennials say they would shop elsewhere if BNPL weren’t available as a payment method at checkout. Afterpay, Klarna, and Zip Pay are all examples of BNPL services.

Cryptocurrencies

Cryptocurrencies are digital or virtual currencies that have gained significant traction over the last decade as an alternative payment method. Fans of cryptocurrencies opt for them due to their high degree of security and pseudonymity. Unlike banks, which rely on public trust to manage funds, transactions, and personal data, cryptocurrency transactions are often perceived to be more secure due to their decentralised nature. Cryptocurrency transactions are managed on a decentralised network of computers and recorded on an immutable blockchain ledger, which can’t be altered by any single authority.

Cryptocurrencies can be stored either in a hardware wallet or on an internet-connected exchange. Examples of cryptocurrencies include Bitcoin, Ethereum, and fiat-backed stablecoins such as Tether.

Prepaid cards and vouchers

Prepaid cards and vouchers (such as gift cards from stores) are preloaded with funds and used like debit cards. Customers can complete payments without a bank account or credit card, and it can suit those who are new to digital payments, prefer not to share their personal and financial details online, or want to stick to a budget. Some examples include Paysafecard, a prepaid voucher, and Paysafecash, a cash-based voucher.

Common alternative payment methods around the world

Each region has its own popular payment method, with alternative payment methods like Apple Pay, Google Pay, and Klarna, gaining traction. For example, PayPal is a popular alternative payment method in North America, while AliPay and WeChat Pay are widely used in China and the Asia-Pacific region.

See the full list of payment methods offered by Airwallex.

How APMs factor into your payment strategy

We all know how frustrating it is to finally commit to a purchase, only to realise that the checkout doesn’t offer your preferred payment method. That frustration might just be enough for you to abandon cart.

Offering a variety of alternative payment methods can help you meet your customers’ high expectations, reduce your cart abandonment rates, build trust, and encourage return visitors.

Here’s how offering alternative payment methods can factor into your payment strategy:

Helps you meet customer expectations

Shoppers around the world have varying payment preferences. For example, when it comes to cross-border online payments, more than half of shoppers in the UK prefer PayPay as a payment method. In Hong Kong, Visa cards still lead the way, preferred by 59% of shoppers. This cross-border payment checklist can help you understand which payment methods are preferred by shoppers in different regions.

When you offer a variety of payment methods, you can attract a wider range of customers, making it easier to enter new markets and grow globally. It’s worth doing your research and partnering with a payment provider with access to diverse payment methods.

Lowers cart abandonment rates

Payment-related issues account for an average cart abandonment rate of 70.19%. With numbers like this, you’ll want to make sure that your checkout experience is as seamless as possible. One way to do this is to offer preferred payment methods at checkout, be that credit cards, digital wallets, or BNPL options. When customers can pay in ways they’re familiar with, with payment methods they trust, they’re more likely to complete their purchases and come back for more.

Increases security and trust

Many alternative payment methods, like digital wallets and bank transfers, offer security features such as built-in fraud prevention tools and multi-factor authentication. They’re also often subject to strict regulatory standards, and are required to handle customer information responsibly. Offering customers secure, popular, and trustworthy payment options can increase their confidence in your brand and your overall credibility as a business. 

Helps you expand your business globally

Beyond all these factors, offering alternative payment methods is more than just a technical offering for your customers – it’s a way to give your business a distinct advantage over your competition. When you understand how payment and shopper trends differ across regions, you’ll be able to partner with the right payment provider that gives you the tools to succeed globally.

Why it’s good to accept alternative payment methods

Offering a variety of payment methods gives your customers options to pay in trusted and familiar ways. Here’s why else it’s a good idea to offer both mainstream and alternative payment methods:

Improves customer experience and increases conversion rates

Your business’ reputation doesn’t stop at the product. Customers want easy and reliable checkout options, with fast, secure, and familiar ways to pay. For example, younger shoppers around the world increasingly favour digital wallets and BNPL compared to credit cards, debit cards, and bank transfers. If you offer these options, you’re more likely to reach more customers and encourage repeat purchases. You’ll also reduce your rate of cart abandonment, leading to higher conversion rates.

Opens your business up to new customers

By accepting a variety of alternative payment methods, particularly local payment methods, you can attract new customers who may only want (or be able) to make purchases via a particular payment method. For example, an overwhelming 75% of shoppers in The Netherlands prefer to pay via direct bank transfers using iDEAL when shopping online, cross-border.

APMs can reduce your transaction fees

Offering alternative payment methods can be one way to lower transaction fees. Some methods, like bank transfers and direct debit, have lower processing costs compared to credit cards. Alternative payment methods also typically come with robust fraud protection and dispute resolution processes, which can lower the risk and cost of chargebacks. With higher transaction volumes and customer retention, you might even be able to further optimise your overall transaction costs through negotiating custom pricing with your payment provider.

How to implement alternative payment methods

Integrating alternative payment methods into your checkout process doesn’t have to be overwhelming. Here’s how you can get started:

1. Research popular alternative payment methods: Begin by identifying the most popular alternative payment methods among your target customers and in your operating regions. Look into options like Google Pay, Apple Pay, local bank transfers, and BNPL to ensure you’re meeting customer expectations.

2. Choose a payment provider: Select a payment provider that supports your preferred alternative payment methods and offers a straightforward integration process. The right provider will help you offer a seamless payment experience and keep your payment operations running smoothly.

3. Integrate the payment gateway: Work with your provider to integrate the payment gateway into your online checkout. Make sure the payment process is secure, user-friendly, and supports all the alternative payment options you want to offer.

4. Test and optimise: Before going live, thoroughly test your new payment methods to ensure everything works as intended. Gather feedback from customers and monitor the payment process, and make adjustments as needed.

Key considerations for a smooth rollout

Here’s what you should keep in mind to ensure a successful launch:

• Prioritise payment methods that offer robust security features to protect sensitive customer data and minimise payment risks.

• Focus on delivering an intuitive payment experience that aligns with evolving payment preferences. A smooth checkout process can significantly improve customer satisfaction.

• Be aware of the fees associated with each alternative payment method. Choose a payment provider that offers transparent and competitive pricing to help you manage costs effectively.

• Ensure your payment provider offers reliable technical support to quickly resolve any issues that may arise during or after integration.

Better yet, look for a payment provider that integrates with a variety of alternative payment methods to save you from having to separately onboard individual payment method providers. A reliable payment provider can ensure all security and compliance requirements are met wherever you operate, and can automatically unlock all available local payment methods based on your customer's location.

Best practices for implementing alternative payment methods

To get the most out of alternative payment methods, you’ll want to follow best practice to optimise your mix of payment methods:

✅ Offer a variety of local payment methods, such as bank transfers and cash-based payments, to cater to local preferences.

✅ Offer digital wallets like Apple Pay and Google Pay to provide customers with a fast, secure, and convenient way to pay using mobile devices.

✅ Enable recurring payment options, such as direct debits, for subscription-based services.

✅ Optimise your payment process for mobile devices, and ensure that customers can complete transactions with just a few taps.

Reach more customers with 160+ local payment methods

Offering alternative payment methods isn’t just a technical necessity. They can be your key to unlocking business growth and building trust wherever you operate. Imagine being able to offer AliPay in China, iDEAL in The Netherlands, and Klarna everywhere it’s offered.

Our platform, Airwallex, connects your business to customers around the world with access to major card schemes and 160+ local payment methods. With just one integration, you’ll be able to collect online payments in 130+ currencies and unlock available local payment methods based on your customer's location. You can further save on costs when you collect and settle payments in the same currencies as your customers’ into our multi-currency wallet, with no need to set up separate foreign bank accounts and pay foreign currency settlement fees.

Want to expand globally? Find out how you can expand to the US, Southeast Asia, Europe, and more.

Frequently asked questions

Why should my business offer alternative payment methods?

Alternative payment methods, like digital wallets (e.g. Google Pay), bank transfers (e.g. GiroPay), and BNPL options (e.g. Klarna) give your customers a variety of secure and trusted ways to pay. These options can lead to smoother shopping experiences, reduced cart abandonment rates, and in some cases, reduced transaction costs compared to credit card processing costs. It also helps your business expand to new regions, by tailoring the checkout experience to local payment preferences.

What are some examples of popular alternative payment methods?

Some examples of popular alternative payment methods include digital wallets (e.g. Apple Pay and Google Pay), BNPL options (e.g. Klarna and AfterPay), direct debit options (e.g. GiroPay and iDEAL), and cryptocurrencies (e.g. Bitcoin, Ethereum, and Tether).

How do I choose which alternative payment methods to accept?

When choosing which alternative payment methods to offer, you’ll need to understand your customer base and their preferred payment methods. Research the preferred payment methods in the regions where you operate, and pay attention to any feedback from customers about the ways they prefer to pay. From here, you can evaluate other factors such as the costs associated with the payment method and its risks, reliability, security features, and integration capabilities.

See the top payment methods across the world in our cross-boder payments checklist.

Are alternative payment methods secure?

There are risks associated with any payment method. But with careful consideration and planning, you can manage and mitigate these risks. Some payment methods will prioritise security, while others will prioritise customer convenience. Choosing a payment provider that prioritises security at every stage of the checkout experience through features like network tokenization, multi-factor authentication, and pre-chargeback programmes, as well as ensuring compliance with the highest international security standards, is the best way to keep your business and customers safe. Learn more about the risks associated with different payment methods.