Alternative PaymentsIt’s Time to Start Thinking BEYOND Credit Cards

October 7, 2022 | 13 min read

Alternative Payments

In a Nutshell

In the US, credit and debit cards are still the go-to choice for online shopping. Globally, however, credit cards account for only a third of internet retail. This post examines different types of cardless purchase options, and looks at why merchants should seriously consider looking beyond legacy payment options.

Alternative Payments: What are 4 Key Methods to Pay That DON'T Involve Cards or Cash?

Once upon a time, the most common question at the checkout counter was “cash, or check?”

A lot has changed over the last few decades, though. Many stores now refuse to accept checks at all. Plus, a small (but growing) number of retailers are even moving toward cash-free operations.

Now, with digital channels becoming more dominant, even the expectation that buyers will use a payment card is disappearing. New payment methods are gradually chipping away at the global dominance of credit and debit cards as a payment method, both in-store and online.

In this post, we’ll explore the world of alternative payment methods. We’ll see how they work, why they’re important, and how merchants should move to take advantage of this revolution in payment technology.

What are Alternative Payments?

Alternative Payments

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An alternative payment method can be any means of paying for goods or services that does not involve cash, check, or a credit card issued by a major bank. Mobile payments, eWallets, bank transfers, and some prepaid cards are examples of alternative payment methods.

Simply put, an alternative payment method is any means of paying for a purchase without using cash or card. The growth of alternative payments was largely spurred by the rise of eCommerce. Customer preferences developed through digital channels led merchants to embrace more cardless and cashless ways to pay.

The Covid-19 pandemic drove an unprecedented number of customers to online shopping. This also spurred the use of alternative payments, especially outside the North American market.

Payment cards using conventional chip-and-PIN technology are still the dominant payment method preferred by US shoppers. That’s not the case when we look at the global picture, though. Globally, just under 50% of retail shoppers pay using a digital wallet app. Payment cards are in second place at 34%.

What are the Benefits of Alternative Payment Methods?

Credit cards are neither flexible nor secure enough to cover the widening range of customers’ changing shopping behaviors. So, what can alternative payments offer that traditional payment methods don’t? The answer is different depending on the market.

International Transactions

Alternative payment models include unbanked consumers traditionally underserved by conventional payments. It’s estimated that over 80% of the global population doesn’t even have the option of paying with plastic. It’s no surprise, then, that many of the fastest-growing markets in Africa, Asia, and Latin America are dominated by alternative payment methods.

Merchants who offer the same payment options as local merchants are more likely to be perceived as being in tune with the region, the people, and local preferences. This is particularly relevant in markets with a high concentration of unbanked consumers.

Many of the new payment technologies discussed below can help open the market to millions of new participants. It’s a radical step forward in payments inclusivity. It’s also a tremendous opportunity for merchants who may be able to reach these customers for the first time.

Domestic Transactions

What about merchants who aren’t really concerned about expanding into emerging markets, though? Alternative payment models offer a range of benefits for domestic merchants as well.

Meeting Customer Demands

Offering alternative payment methods is one way merchants can gain an advantage in their market. As eCommerce continues to grow, more and more consumers are looking to pay with something besides a credit card. From a customer-service perspective, flexible payment options may be the deciding factor for a buyer.

Enhanced Customer Experience

Alternative payments can simplify the entire checkout experience. Online credit card purchases can be time-consuming. Navigating forms and entering all the required payment information can cause customer friction that alternative payment options can help alleviate.

Increased Security

Consumers are worried about cybersecurity, and with good reason. One of the most common reasons why customers abandon sales is lack of confidence in payment security. With payment methods like container eWallets, no actual card data is transmitted during the transaction. This makes the purchase more secure, and the customer more confident.

Generally speaking, we can break alternative payment technologies into four basic types: electronic funds transfers, eWallets, cryptocurrency, and installment payments. Let’s look at each of these in a little more detail.

Electronic Funds Transfers

With electronic funds transfers, funds are simply moved from one account to another. Peer-to-peer (P2P) providers like Zelle and Cash App are an example. If both parties have enabled the service, the payer can transfer cash from their account straight to another person or a merchant.

We can further subdivide bank transfers into a few basic models:

P2P Payments

Peer-to-peer payments are manually initiated by the user. Consumers give permission for funds to be transferred on their behalf, but the bank and the customer are not directly connected. The benefit of using a P2P payment transfer is speed; funds can be moved from one account to another in minutes instead of days.

Bank Transfers

A bank account transfer lets users send money directly from one bank account to another. These usually work via the ACH (automated clearing house) system, much like a credit or debit card transaction, but can be conducted through other networks like SEPA (Single Euro Payments Area). Bank transfers can be done very easily if two users share the same bank.

Learn more about EFTs

Digital Wallets

A digital wallet lets customers shop online and pay for purchases with funds from the wallet. Of course, the eWallet first has to have money loaded onto it, often by tying it to a traditional payment source, such as a credit card or bank account. Common examples of eWallets are Apple Pay, Google Pay, and Alipay

Mobile wallets can facilitate transactions using near-field communication (NFC) technology. They may also allow for QR code scans in some cases.

These aren’t alternative payment methods in the strictest sense, as transactions are still charged directly to a payment card. Regardless, they are an alternative method of using that information. As such, they’re worth mentioning here. 

Different eWallet apps can function in different ways:

Stored-Value Wallet

Stored-value wallets are the most similar to traditional wallets. They’re pre-loaded by the customer, and the money is held until a purchase is made. If the purchase exceeds the amount in the wallet, funds from a bank account or credit card tied to the account can be used.

Staged Wallet

Staged wallets are not used to actually store funds. Rather, they serve as a conduit for securely transferring money. In many ways, staged wallets work like a debit card, except the user must track how much is in their wallet instead of funds in their account. Providers such as PayPal can be used as either a stored or staged wallet (or both).

Container Wallet

Container wallets such as Apple Pay don’t store money, either. Instead, they provide a “container” for the consumer’s payment credentials. Their main purpose is to allow customers to make a purchase without revealing any personal data.

Learn more about digital wallets
Offering alternative payment options can broaden your customer base… but will it open you to additional fraud risks? Talk to the experts to get the answers you need.REQUEST A DEMO

Buy Now Pay Later (BNPL)

One of the fastest-growing alternative payments methods is the “Buy Now Pay Later,” or “BNPL” model.

These plans became especially popular during the Covid pandemic. As the name suggests, BNPL models let customers make a purchase at the moment, then pay at a later date, often in multiple installments. This offers several advantages over conventional credit cards. For instance, it’s generally less expensive, and can also be utilized by customers who don’t have access to a credit card.

The process is remarkably simple: during checkout, the buyer chooses to pay via BNPL, then selects a repayment plan (monthly or all at once). There may be interest fees involved, but the true danger of BNPL is simply not paying on time: interest rates can be substantial, and are not regulated under a universal federal-level framework. That means there’s considerable leeway in the fees and interest charges the lender can legally assess.

BNPL services can be provided by a third party, or by one of the major card networks:

Third-Party Providers

Service providers like Klarna let users shop with merchants either through their app directly, or anywhere Visa is accepted. The buyer checks out with the BNPL service provider, and the service pays the merchant directly. The cardholder can then repay the provider in a set number of predetermined, interest-free installments.

Mastercard Installments

Mastercard Installments is a new buy now, pay later option provided for the Mastercard payments network. The program offers consumers the option to pay for in-person purchases in monthly installments rather than in one lump sum, and is facilitated by Mastercard.

Visa Installments

Visa Installments is a payment platform created by Visa to provide consumers with additional payment options at checkout. Using Visa Installments, cardholders can select and agree to an installment plan at checkout using an existing Visa account. The program is facilitated by Visa.

Learn more about BNPL


Cryptocurrencies like Bitcoin are often in the news, but the majority of consumers aren’t quite sure what they are or how they work.

Cryptocurrency is based on a blockchain, or a public ledger that records all transactions where funds move from one wallet to another. These transactions are always “push” payments; in other words, only the authorized owner of the currency can use it to make a purchase, making the payment especially secure (at least in theory). The user’s funds are also kept in a digital wallet designed specifically for the currency used.

Some of the most widely-known and accepted cryptocurrencies include:


Bitcoin was the first contemporary cryptocurrency, debuting in 2009. It’s a decentralized digital currency that can be transferred on the peer-to-peer Bitcoin Network without any central entity issuing coins or controlling their movement.


Ether are coins traded on the decentralized, open-source Ethereum blockchain. Ethereum offers additional functionality that bitcoin does not possess, like smart contract functionality.


Unlike Bitcoin and Ether, Tether is a stablecoin, meaning it’s value is pegged to that of the US Dollar. The company that owns the Tether network maintains one dollar in asset reserves for each USDT issued.

Learn more about crypto payments

Cash-Based Alternative Payment: Exchanges & Prepaid Cards

There are a couple of novel payment technologies that don’t neatly fit into any of the above payment modes. In a sense, both are workarounds that allow for consumers to (sort of) pay for online transactions using cash.

We wanted to take a moment here to acknowledge these as well.

Payment Exchange

A payment exchange model involves two parties: the online store, and a physical store partner. The online shopper clicks the “pay with cash” option at checkout and receives an ID number, printable bar code, or some other token of the purchase.

The shopper must go to a participating retailer (typically a local convenience or drug store) and pay the purchase amount in cash. The store forwards the payment and the purchase token to the online merchant, who ships the customer’s order.

Prepaid Cards/Vouchers

Prepaid cards can be purchased at a variety of retailers. Some are general-use cards branded by Visa or Mastercard, while others are designed for use at a specific store or restaurant. Each one comes with a pre-printed code the buyer can enter at checkout to pay for online purchases. Voucher payments work much the same using store credit, such as loyalty points. Digital versions are also available.

Which Payment Offerings are Best for My Business?

Make no mistake: cash and plastic are still king.

Every merchant needs to give buyers the power to make a payment with a credit card. Beyond that, however, the choice of alternative payment options can depend on where customers are located, and how much the merchant will pay in fees.

Location is relevant because the payment method of choice varies from country to country. In some countries, digital payments or credit cards will be widely used and accepted. Other regions or countries, however, might still be very cash-dependent.

Research the most popular payment channels of the country or regions you wish to do business in. Then talk to multiple payment providers to get an idea of processing costs for alternative payment methods. Use those benchmarks to find the best options for your business.

Have additional questions? Want to learn more about protecting your bottom line in a fast-changing, uncertain market? The experts at Chargebacks911® are here to help. Continue below to get started.


What are alternative payment methods?

An alternative payment method can be any means of paying for goods or services that does not involve cash, check, or a credit card issued by a major bank. Mobile payments, eWallets, bank transfers, and some prepaid cards are examples of alternative payment methods.

What are examples of alternative payment methods?

Bank transfers and cryptocurrency are examples of alternative payment options. Digital wallets such Apple Pay or Paypal are also widely accepted. There is also the “Buy Now Pay Later” (or “BNPL”) model, which is quickly gaining popularity.

How popular are alternative payment methods?

Within the US, alternative payments are used for half of online purchases. Globally, that number drops to 34%. In both instances, those number continue to increase with each passing year.

How do merchants benefit from offering alternative payment methods?

Particularly when selling internationally, domestic merchants can grow their market base by allowing customers to control how they pay, thereby decreasing the risk of cart abandonment. Alternative payments can help eliminate friction at the point of checkout, resulting in a better overall customer experience. Most also offer better security.

Do alternative payment methods protect consumers?

Many alternative payment methods offer protection against fraud or merchant misconduct. However, the protections are typically not as strong nor as universal as those offered by major credit card brands.

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