Complete guide to alternative payment methods

Key takeaways:

• Alternative payment methods are any way to pay that falls outside cash and major international card networks like Visa and Mastercard – they include digital wallets, bank transfers, buy now, pay later, domestic card schemes, and more.

• Payment preferences differ by region, and understanding alternative payment preferences is essential to converting at the point of sale.

• Airwallex lets you accept 160+ local payment methods across 180+ countries through a single integration, with like-for-like settlement that avoids unnecessary currency conversion fees.

If you're selling to customers across borders, the payment method you offer at checkout can make or break the sale. A customer in the Netherlands expects to see iDEAL offered at the checkout, a shopper in Brazil might want to split the purchase into installments, and someone in China won't check out without Alipay or WeChat Pay. Miss any of these, and you've lost the transaction before it even started.

Alternative payment methods (APMs) are the local, regional, and digital payment options that sit outside the traditional card networks. For global businesses, they are the difference between converting a sale and watching a customer abandon their cart because you didn't offer the payment method they trust.

What are alternative payment methods?

Alternative payment methods (APMs) are any payment option that isn't cash, cheque, or a traditional international credit card scheme like Visa, Mastercard, or American Express. They're ways for customers to pay you that don't rely on the big global card networks.

The term "alternative" is a bit misleading. In many markets, these methods are actually the primary way people pay. For example, in China, digital wallets account for the vast majority of eCommerce transactions, while in the Netherlands, iDEAL is the default for online purchases. So while they're called "alternative" in one region, they can be the mainstream choice in the markets where they operate.

APMs are also called local payment methods because they're often specific to a country or region. Here's what falls under the umbrella:

• Digital wallets: Apps that store card or bank details for fast, contactless payment, such as Apple Pay, Google Pay, PayPal, and Alipay.

• Bank transfers and open banking payments: Direct account-to-account transfers, including domestic schemes like iDEAL (Netherlands) and SEPA (Europe).

• Buy now, pay later (BNPL): Installment-based credit at checkout, offered by providers like Klarna and Afterpay.

• Direct debit: Automated recurring pulls from a customer's bank account, common in subscription and B2B contexts.

• Domestic card schemes: Country-specific card networks such as Cartes Bancaires (France) or UnionPay (China) that operate alongside or instead of Visa and Mastercard.

• Cash-based vouchers and prepaid cards: Offline payment options that bridge the gap for customers without bank accounts or cards.

The common thread across all APMs is that they route payments through local infrastructure rather than international card networks. Depending on the method and market, this can support faster settlement, different processing costs, and a more familiar checkout experience.

Understanding the main types of alternative payment methods

Each type of APM works differently and solves different problems for your customers. Here's what you need to know about the most common ones.

Digital wallets

A digital wallet is an app or platform that stores a user's payment credentials. Think of it like a digital version of your physical wallet, but instead of holding cash and cards, it holds the information needed to pay.

Pass-through wallets like Apple Pay and Google Pay link to a card or bank account you already have. When you pay, they send a secure token instead of your real card number. Some wallets, including PayPal and Alipay, may support stored balances, depending on the market and product.

The practical benefit is speed. Customers check out in seconds without re-entering card details, which reduces friction and cart abandonment. Digital wallets can use tokenisation and additional authentication to reduce exposure to card details, although they do not eliminate fraud risk. With tokenised wallets such as Apple Pay, the customer’s actual card number is not shared with the merchant; this may reduce exposure to sensitive card data but does not remove security obligations.

Bank transfers and fast payments

Bank transfers move money directly from one bank account to another, with no card network in the middle.

Standard transfers can take one to three business days to clear. Fast payment schemes change that. These real-time networks, run at a national or regional level, usually settle funds in seconds, 24/7, including weekends and public holidays.

Examples include:

• Australia: The New Payments Platform (NPP), which powers PayID

• UK: Faster Payments

• Europe: SEPA Instant Credit Transfer

• Singapore: FAST and PayNow

• US: FedNow and RTP

For businesses, the benefits are speed and cost:

• Faster cash flow: Funds land in seconds, not days.

• Lower fees: You avoid the interchange fees that card networks charge.

• Fewer disputes: The customer sends the payment from their own bank, so card chargeback rules don’t apply.

Buy now, pay later

Buy now, pay later (BNPL) is a form of short-term installment credit issued at the point of checkout. Common examples in Australia are Afterpay and Zip. The customer gets the product immediately but pays in installments over a set period. You as the merchant get paid upfront (less fees) and the BNPL provider takes on the repayment risk and the relationship with the customer.

Buy now, pay later has grown quickly in eCommerce and is increasingly used in B2B payment solutions. For customers, it removes the barrier of paying a large sum upfront. For your business, it can increase average order values because customers are more willing to buy when they can spread the cost.

Direct debit

Direct debit is a pull payment. This means you as the merchant request a fixed or variable amount from a customer's bank account on a set date, with the customer's prior authorisation. It's the opposite of a bank transfer, where the customer pushes money to you.

It's particularly relevant for B2B payment solutions and subscription businesses. Common direct-debit schemes include BECS in Australia, SEPA Direct Debit in Europe and Bacs in the UK. Once set up, payments happen automatically on the agreed schedule.

The key benefit is predictable cash flow and low failed-payment rates compared to card-on-file. Customers don't need to remember to pay each month, and you don't need to chase them. The money just arrives.

Domestic card schemes and e-cash

Domestic card schemes like UnionPay in China, Bancontact in Belgium, and Cartes Bancaires in France, work like Visa but are specific to one market. If you're targeting these markets, they're essential to offer your customers.

E-cash or cash-based vouchers (such as OXXO in Mexico and Multibanco in Portugal) let customers without bank accounts pay online. The customer generates a barcode at checkout, then goes to a retail location and pays in cash. Once the cash is received, you get confirmation and can ship the product. This bridges the gap in markets where a large portion of the population doesn't have access to traditional banking.

The payment methods customers prefer by region

No single APM works everywhere. Payment preferences are shaped by banking infrastructure, regulation, mobile penetration, and cultural habits. What's standard in one country can be completely unknown in another. Here's what you need to know by region.

North America

In the US and Canada, digital wallets like PayPal, Apple Pay, and Google Pay are used widely for consumer eCommerce. Cards are still widely used, but wallet adoption is accelerating because they're faster at checkout.¹

Europe

Europe is fragmented. There's no single APM that works across the entire continent, so if you're building a pan-European strategy, you need multiple methods.

Here's what tends to dominates in each major market:²

• Netherlands: iDEAL is used for many of the region’s online purchases.

• Belgium: Bancontact is widely used.

• France: Cartes Bancaires is the domestic card scheme many French people use.

• Poland: BLIK is a leading mobile payment method.

• Sweden: Swish is used for instant bank transfers.

• Spain: Bizum is widely used for peer-to-peer and merchant payments.

SEPA bank transfers and SEPA Direct Debit are the common threads that work across borders. BNPL adoption through Klarna is also strong, particularly in the Nordics and Germany. Businesses expanding across Europe often need to localise payment methods because payment preferences differ materially by market.

Asia Pacific

Businesses selling in China need to offer Alipay and WeChat Pay. Without them, reaching mainland Chinese customers is near-impossible. These aren't just payment methods – they're super-apps that people use for everything from messaging to shopping to paying bills.

Consumers in Japan favour domestic card schemes like JCB and convenience store payments, where they can pay in cash at a local shop. Southeast Asia has a range of regional e-wallets like GrabPay in Singapore, Dana in Indonesia, and TrueMoney in Thailand.

Australia and New Zealand remain card-led markets, while BNPL is also an established payment option. Digital wallets are a leading online payment method across many Asia-Pacific markets, but merchants should prioritise methods based on each target market and customer mix.

Latin America

Brazil's Pix instant payment system has transformed the market. It's account-to-account, free, and now broadly used for both consumer and B2B transactions. If you're selling in Brazil, Pix is non-negotiable.

OXXO can help merchants reach some customers who prefer cash-based online payment options in Mexico. Customers generate a voucher code online, then pay in cash at any OXXO convenience store.

Instalment payments are widely used for some higher-value purchases in Brazil. Customers may expect to be able to split payments into multiple installments, often interest-free. If you don't offer this, you'll lose sales.

Middle East and Africa

The shift from cash-dominant to mobile-first is accelerating. In East Africa, mobile money platforms like M-Pesa allow payments without a traditional bank account. It's a common way people transact in Kenya, Tanzania, and Uganda.

In the Gulf, government-backed cashless initiatives are driving the adoption of domestic payment networks. Mada in Saudi Arabia and Jaywan in the UAE are the local card schemes you should look to accept.

This is a region where accepting local payment methods is often the only way to reach large segments of the population. Traditional card penetration is low, but mobile adoption is high, so mobile-first payment methods are critical.

Why global businesses need alternative payment methods

The commercial and operational reasons to invest in APMs are clear. Here's what matters most.

You'll convert more sales and reduce cart abandonment. When customers reach the checkout and don't see a familiar payment method, many leave without buying. It's not that they don't want the product, it's that they just don't trust or can't use the payment option you're offering. Offering preferred local payment methods directly reduces this drop-off.

You'll access markets where cards don't dominate. In markets where credit card penetration is low or trust in international card networks is limited, APMs are a viable way to transact. A business without local payment methods may be effectively invisible to a large portion of its potential customer base in those markets.

You'll pay lower international transaction fees. Card network processing typically involves interchange fees, currency conversion markups, and cross-border surcharges. Bank transfer-based APMs and local schemes often route through domestic rails, bypassing these costs. Like-for-like settlement – collecting in the customer's currency and settling in that same currency – avoids a second layer of FX conversion. This is where multi-currency payments management becomes critical for controlling costs.

You'll reduce fraud and chargeback exposure. Some APMs are account-to-account payments authorised through the customer’s bank or payment provider. These methods may not use card chargebacks, but they can have separate reversal, refund, scam and dispute processes. Tokenisation can prevent the customer’s actual card number from being shared with the merchant, but it does not remove fraud or compliance obligations.

How to choose which alternative payment methods to offer

The biggest mistake is trying to support every APM at once. A focused, phased approach based on where your customers actually are will deliver far more impact than broad coverage. Here's how to build your strategy.

Step 1: Map your customer base and target markets. Before choosing any APM, identify where your existing and target customers are located, what devices they use, and whether your product is B2C or B2B. Different customer profiles require different payment mixes. A B2C fashion retailer selling to Gen Z in Europe should consider BNPL and wallets. A B2B software company selling to enterprises in North America may look at ACH and invoicing.

Step 2: Match payment methods to each market. Use the regional breakdown above as a reference. Prioritise the one or two methods that dominate each market rather than attempting full coverage from day one. Cross-reference with your transaction data and look for high traffic from markets where your current conversion is lower than average. That's where adding the right local payment method will have the biggest impact.

Step 3: Assess cost, settlement, and currency impact. Each APM carries different processing fees, settlement timelines, and currency implications. Evaluate whether like-for-like settlement is available as this directly affects multi-currency payments management and reduces international transaction fees. If you’re collecting euros from European customers, you may want to hold those euros rather than convert them to Australian dollars and back again when paying a European supplier.

Step 4: Understand fraud rules and dispute processes by method. Not all APMs handle disputes the same way. For example BNPL dispute resolution sits with the BNPL provider and wallet chargebacks follow the underlying card network's rules. Know what your liability exposure is before enabling each method, because this affects your working capital and risk management.

Step 5: Choose your integration approach. There are three main routes. No-code plugins work if you're on platforms like Shopify or WooCommerce. Hosted checkout solutions handle APM display logic automatically and work for most mid-market businesses. Full API integration gives you complete control but requires developer resources. For businesses managing multiple markets, a payment orchestration layer – a single platform that routes transactions across multiple payment methods and providers – reduces operational complexity. Take a look at Airwallex’s Payment offerings for an example of each approach.

Step 6: Set success metrics and review regularly. Define what success looks like before you launch: payment method adoption rate, conversion rate by market, decline rate, and cost per transaction. Review this quarterly as APM landscapes shift, regulations change and new methods gain traction. What worked six months ago might not be optimal today.

How Airwallex drives your conversions with alternative payment methods

If you're managing payments across multiple countries, you're likely dealing with multiple providers, multiple integrations, and multiple currency accounts. Airwallex brings this together in one platform.

You can accept 160+ local payment methods across 180+ countries through a single integration. This includes digital wallets, bank transfers, BNPL, and domestic card schemes. Instead of integrating separately with each supported method, you can use one Airwallex integration to access available methods.

Like-for-like settlement means you collect in 20+ currencies and avoid unnecessary conversion fees. If a customer in Germany pays you in euros, you receive euros, and hold those same euros in your multi-currency wallet. If you need to pay a supplier in euros next week, you use those same euros – no double conversion, no unnecessary FX fees. This is how you reduce international transaction fees and manage multi-currency payments efficiently.

The platform also handles payment orchestration. It automatically routes each transaction through the most cost-effective and reliable path based on the customer's location, payment method, and currency. This can reduce the need to manage payment-method routing manually, depending on the integration and configuration.

Beyond this, Airwallex lets you open local account details in 20+ currencies, to pay out to 200+ countries (such as suppliers), gives you multi-currency Corporate Cards to manage team and employee expenses, low-cost FX and transfers, and gives you a way to grow your USD and AUD funds with Yield. Get the account truly designed for global eCommerce growth with Airwallex.

Frequently asked questions

Is Apple Pay considered an alternative payment method for online businesses?

Yes. Apple Pay is commonly treated as a digital-wallet payment method. It uses tokenised credentials and may still rely on the underlying card network for processing. For online businesses, it's a way to let customers check out faster without manually entering card details.

Do bank transfer payment methods reduce chargebacks compared to credit cards?

Some bank-transfer and account-to-account methods may have less card-chargeback exposure, but their dispute, reversal and fraud risks vary. Once approved, a payment may not offer the same card-chargeback process; reversal and recovery options depend on the payment method, bank and circumstances. This may reduce some card-dispute exposure, but merchants still need controls for fraud, mistaken payments, refunds and customer disputes.

How do refunds work with digital wallets versus bank transfers?

Refund processes vary by payment method. Digital wallet refunds typically return funds to the wallet balance or the linked card, and the customer sees the refund within a few days. Bank transfer refunds are processed as a new outbound payment to the customer's account, which can take longer depending on the banking network. You should confirm your provider's refund flow and settlement timeline before enabling each method.

Which payment methods work best for recurring B2B subscription billing?

Direct debit is a reliable method for recurring B2B payment solutions and subscriptions because it's a merchant-initiated pull with low failure rates. Once set up, payments happen automatically. Bank transfers like SEPA and ACH work well for high-value one-off invoices where card processing fees would be disproportionate to the transaction size.

How does like-for-like currency settlement reduce foreign exchange costs when accepting alternative payment methods?

Like-for-like settlement means collecting a payment in the customer's currency and holding it in that currency, rather than automatically converting it to your home currency. If a customer in France pays you in euros and you need to pay a supplier in euros, holding and using those euros may help avoid converting them to Australian dollars and back again. Each conversion carries a margin, so avoiding the double conversion directly reduces your cost of accepting multi-currency payments.

Sources

1. https://www.finextra.com/blogposting/27367/global-payment-trends-whats-popular-in-each-region 

2. https://www.adyen.com/en_AU/knowledge-hub/online-payment-methods