What are alternative payment methods?

What are alternative payment methods?

An alternative payment method is anything that isn’t cash, debit card, or credit card, but more specifically, it’s a cashless, cardless way to send money. These are usually software solutions where people can access and spend funds without needing to carry cards or cash.

Types of alternative payment methods

Businesses may see any of the following alternative payment methods:

Digital wallets

Digital wallets allow individuals to transfer money without needing to physically pull out cash or a card by saving the payer’s credit card information or storing digital cash in the wallet. Using near-field communication (NFC) technology, payers tap their phones on the terminal to make a payment. Apple Pay, Google Pay, and PayPal are all examples of digital wallets.

Bank transfers

Automated Clearing House (ACH) payments and other types of bank transfers are also alternative payment methods. Bank transfers allow customers to transfer money from their bank account to a business to make a transaction. It is similar to debit card payments but does not require a physical card to move funds.

Cryptocurrency

Cryptocurrency is a digital currency mined through computational equations, which can be stored or moved to a hardware wallet or on an exchange or internet-connected service called a hot wallet. Cryptocurrency transfers aren’t as straightforward as other APMs and carry high fees, which may be why they aren’t as popular as other methods.

Buy now, pay later

Buy now, pay later (BNPL) solutions or payment installments allow customers to purchase without paying the full amount at the time of checkout. Customers make multiple, smaller payments to pay for the item. BNPL is a popular choice for customers as it’s interest-free and allows customers to spread out the cost of a payment.

Alternative payment methods around the world

One of the most popular alternative payment methods is Alipay, a digital wallet operated by Alibaba Group. Alipay has 1.3 billion users. Alipay is especially popular in China.

WeChat Pay is another popular China-based digital wallet option. It has hundreds of millions of users. WeChat Pay provides a way to transfer money on a peer-to-peer basis, as well as make purchases.

PayPal which is used internationally allows for the transfer of money in more than 200 countries. While Venmo (owned by PayPal) or Zelle are popular options in the US, they do not operate in other countries.

Benefits of accepting alternative payment methods

Businesses can enjoy several benefits for accepting alternative payment methods, including:

• The ability to drive more sales by using customer-preferred methods
• Allowing the business to expand to markets around the world
• Giving customers with little credit card history to make purchases
• Saving the business money from limiting credit card transaction fees
• Offering secure transaction methods that lower risks of fraud