What Are Alternative Payment Methods (APMs)? How Do They Work?

Want to reach more customers and offer easier, more secure transactions? Alternative payment methods might be the answer. Read the article to learn more.

If you own an ecommerce business, chances are you’re already accepting alternative payment methods (APMs) of some sort. Despite the long name, APMs are fairly simple - they’re any type of payment that isn’t a major international credit card brand or cash. 

APMs are critical for running an expanding online business, as they allow you to cater to more customers around the world. Still, you might wonder what APMs really are and how they work. It may also be unclear why you need to offer APMs, and which ones matter most. We’ll answer all of these questions in the article below.


What Are Alternative Payment Methods?

Alternative payment methods are any form of payment that is not cash or a major credit card. For example, digital wallets, like Apple Pay, and cash-based vouchers are APMs. Smaller credit card companies and domestic cards are also considered APMs.

Alternative payment methods are sometimes referred to as local payment methods because they are the preferred payment of people in a certain geographic area. For example, a high percentage of shoppers in the Netherlands use iDEAL, a local bank transfer payment method. iDEAL is both an alternative to “mainstream” payment methods, and locally popular.

Different Types of Alternative Payment Methods 

1. Digital Wallets

The digital wallet is a payment method that allows customers to store credit and debit cards, cash, gift cards, tickets, and more. They can make contactless payments by hovering their phones near a payment terminal or by authorizing a payment online. PayPal, Alipay, Venmo, and Cash App are all examples of digital wallets or e-wallets. 

Apple Pay, Google Pay, and Samsung Pay also fall under the same general umbrella, though these payment methods are sometimes referred to as mobile payments, mobile wallets, or pass-through wallets. This is because the card information is not stored on the app, but instead tokenized and securely saved.

2. Bank Transfers

Customers can make a purchase by connecting with their bank and sending money directly from their account to a business’s bank account via a bank transfer or wire transfer. Some companies, like iDEAL, allow customers to do this through any bank, while some banks, like Sofort, specialize in this type of payment method. 

3. Cash-Based Payments

Customers can pay in cash by generating a unique barcode or reference number. Then, your business can use the reference number or scan the barcode to redeem the cash payment. This method of payment is also known as electronic cash or e-cash, with the top providers being Oxxo and Boleto.

4. Direct Debit

When a customer pays by direct debit, they allow your business to pull funds directly from their bank account in exchange for your product or service. Direct debit is often best for recurring payments and continuous services. ACH transfers, BACS, and SEPA Direct Deposit are all examples of direct debit.

5. Domestic Cards

As we discussed above, domestic cards are APMs. Domestic cards are just like global credit card companies, like Visa and Discover. However, these cards are smaller and fewer counties and markets typically accept them. They’re specifically tailored for the needs of the markets they operate in and offer lower processing costs to those people. 

6. Buy Now, Pay Later (BNPL)

With BNPL, customers can purchase a product through a third party, which pays your business right away. Then, they repay the third party in one lump sum or installments. Afterpay and Klarna are just a couple of examples of companies offering this service. Most companies require customers to repay the amount via a debit card, credit card, or bank account. 

7. Prepaid Vouchers

Customers can purchase prepaid vouchers in stores or online if they’re uncomfortable with sharing their banking information with ecommerce stores. The voucher has a code that the customer can enter during checkout, allowing them to pay. Some customers prefer this payment method as it provides immediate authorization.

8. Cryptocurrency

You can allow customers to pay for products and services by using cryptocurrency, like Bitcoin. This option is typically limited to certain types of cryptocurrency and stablecoins, which is a type of cryptocurrency designed to have a stable price. Cryptocurrency can offer a very secure transaction, since it uses encryption, making it preferable for online payments. 

Why Should Alternative Payment Methods Be Part of Your Payment Strategy?

As a business owner, your goal is to create the most frictionless shopping experience possible. One way of accomplishing this is to offer a wide variety of payment methods. You never want to miss out on a sale because you couldn’t accept a shopper’s preferred method. 

By offering alternative payment methods, you open your business up to a wider audience. That means more sales and more growth for your business. 

It’s worth noting that, though cash and credit dominate payments in the US, the same isn’t true across the globe. Some regions depend heavily on digital wallets, others on domestic cards, and others on bank transfers. If you want to tap into international markets, you have to offer the payment methods that the customers in these markets prefer. 

It’s worth noting that APMs often offer safer online transactions. They tend to include more security measures, like tokenization and encryption, that protect customer information. APMs can also simplify the checkout process, allowing people to make a purchase in just a few clicks, which allows customers to make quick purchase decisions.

Which Alternative Payment Methods Should Your Business Accept?

You can never offer too many payment methods. The more you accept, the bigger your customer base can be. Plus, providing a variety of payment methods shows that you want to give your customers the freedom to pay however they prefer. 

With that said, you can tailor your payment methods to your audience. For example, if you don’t plan on selling in China, you don’t need to worry about offering domestic cards from this country. On the other hand, if you want to break into the Netherlands, you should accept bank transfers, since so many Dutch customers prefer to use iDEAL.

In general, it’s best to at least accept digital wallets, bank transfers, and direct debit, as these APMs have already gained global popularity. While the other APMs discussed above are becoming more common, they aren’t quite on the same level. Be sure to research your ideal market and cater to their preferences above all else.

How Can Your Business Accept Alternative Payment Methods? 

You can start accepting alternative payment methods right now by using Pay.com as your payment service provider. That includes digital wallets, mobile payments, and ACH transfers, as well as major credit and debit cards. Take payments using PayPal, Apple Pay, Google Pay, and more.

Pricing is completely transparent with Pay.com. There are no hidden fees or surprise bills at the end of the month, as we offer flat-rate, per-transaction pricing. You can even track all of your fees through the Pay Dashboard. Plus, you can also access reports and analytics through the dashboard so you can make informed business decisions.

Set up is easy, too. Quickly add a custom checkout page to your website that looks and feels like the rest of your site with Pay.com’s no-code solution. Or, have your web developer take over and integrate with the API for a completely custom solution.

Click here to get started with Pay.com now!

The Bottom Line

As a business owner, you know that there’s always room to improve your customer experience. By accepting alternative payment methods, you can give your customers more freedom and control. Allowing shoppers to make a purchase with APMs can make transactions easier and more secure. Plus, you can tap into entirely new markets.

If you aren’t sure which APMs to add first, start by researching your target customers and what their preferred payment methods are. Ultimately, your customers will determine what’s best. And, if you aren’t sure how to start accepting APMs, consider making the switch to Pay.com. With Pay.com, you can take digital wallets, bank transfers, and more. Click here to create your account now!


How can an ecommerce business accept multiple payment methods?

You can accept a variety of payment methods by using Pay.com as your payment service provider. With Pay.com, you give your customers the freedom to choose whether they want to pay with credit cards, debit cards, ACH transfers, digital wallets, and more.

Why should a business accept alternative payment methods?

Alternative payment methods often have additional security measures, which can make customers feel safer when shopping with you. They can also allow customers to pay with fewer clicks, making payments easier. Plus, some people will only move forward with a purchase if they can use an APM. You could lose sales if you fail to offer APMs.

How many alternative payment methods are there?

There are currently eight distinctly different types of APMs. The world of financial technology is always growing, so new APMs will likely continue to pop up.

What is the most popular alternative payment method?

Digital wallets, like Apple Pay, PayPal, and Venmo, are the most popular alternative payment method.

Is Google Pay an alternative payment method?

Yes, Google Pay is a type of alternative payment method. It falls under the category of digital wallets or pass-through wallets.

Meet the author
Ginny Dorn
Ginny Dorn is a finance and business copywriter specializing in credit card processing and fintech. She graduated from Western Illinois University with a bachelor's degree in family and consumer sciences.
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