Alternative payment methods: When (and where) cards won’t do

Let’s take an alternative payment method tour around the world:

It’s 8 am in Guadalajara, and Anna was about to go for a run. But she’s fed up with her trainers, so she orders a new pair from Decathlon. She prints off a voucher, which she will pay at her local OXXO convenience store.

Meanwhile, it's 10 am in Rio and João has just ordered the latest iPhone from Magazineluiza.com, for which he’ll pay using bank transfer method PIX.

In the UK, it’s 2 pm, and Emily has finally caved and bought the handbag she’s had her eye on for months. She softens the blow on her bank account by opting to Buy Now, Pay Later.

And finally, it's 9 pm in Shanghai, and Li Na is working late. To keep herself organised, she upgrades to Evernote Premium from her smartphone, paying with Alipay.

Alternative payment methods can vary as much as languages from country to country. They also evolve constantly, so how can you choose which to prioritise? In this article, we’ll provide a snapshot of key alternative payment methods and their adoption around the world.

Simply put, an alternative payment method is any form of digital payment that isn’t a debit or credit card.

But (sadly) things are rarely that simple. In some markets, these ‘alternative’ methods are the mainstream, and cards are niche. That’s why we prefer to use the term ‘local’ rather than ‘alternative.’ And (to complicate things further), since the payment landscape is diversifying fast these days, with new methods spanning countries and regions, it makes sense to categorise them all as ‘payment methods.’ For the sake of this article, however, we’ll stick to ‘alternative payment methods’ as it’s the most widely used term.

A digital wallet is a digital payment system built for electronic transactions using cards (like Visa, Mastercard, and American Express), user accounts, or pre-loaded funds. Instead of pulling out a card to re-enter details for every transaction, a digital wallet stores all the necessary information to make a purchase. Popular digital wallets in the West include Apple Pay and Google Pay, whereas Alipay and WeChat Pay dominate in Asia.

BNPL is a form of financing that lets customers pay for something over time. It works by the BNPL provider paying the total amount to the business and then charging the customer at a later date, either in full or in installments. This concept has existed for over a decade but has taken the world by storm in recent years.

Direct Debit, or Bankers' Automated Clearing System (BACS), is an easy way to get paid for regular or occasional payments and is a firm favourite in the UK. It’s an instruction from a customer to their bank authorising an agreed amount to be debited from their account at agreed intervals.

Online banking is a great option for customers that have a bank account but not an issued card. It’s incredibly popular in Poland (with P24, accounting for 75% of all online payments), the Netherlands (with iDEAL accounting for 60%), and in Germany (with SOFORT). In Japan, customers use the online banking method Pay Easy to pay for online purchases via an ATM. And in India, BillDesk has direct connections to 60+ Indian issuers.

Open banking enables consumers to pay directly from their preferred banking environment by facilitating the connection between banks and businesses. This takes advantage of the EU's Payment Services Directive 2 (PSD2) requirement for banks to allow third parties to initiate payments on behalf of consumers. It can slash processing costs for higher transaction values and, because open banking offers real time credit transfers, the payments are guaranteed.

We were the first provider to offer a fully-compliant, direct payment solution in the UK back in 2019. More recently,we partnered with Tinkto launch a next-generation open banking solution.

As we can see from some of the examples above, popular payment methods vary from country to country. You can discover these in detail viaour payment method explorer, but here’s a quick regional summary for you:

With a largely unbanked and highly rural population, cash is still dominant. But mobile payment methods are rising fast. M-Pesa, for example, launched in Kenya but used throughout the continent, is an SMS-based service that allows users to pay for goods and services and transfer and save money. Initially developed to help small businesses repay microloans using Safaricom’s network, it became indispensable to the rural population and Kenya's economy. For example, cash-carrying bus drivers quickly discovered that accepting M-Pesa was a safe way to avoid the high percentage of counterfeit banknotes in circulation.

China is a global pacesetter for mobile payment methods, with 92% of the population using QR-code-driven e-wallets likeAlipayandWeChat Pay. Indonesia and the Philippines are also keen m-commerce adopters, although online banking is also popular in Indonesia via DOKU.

India famously made a break with cash back in 2016 when it demonetised ₹500 and ₹1,000 banknotes in a move to drive cashless commerce and curtail the shadow economy. Cards currently dominate, but online banking, direct debit, and wallets are growing in popularity.

Japan remains a cash-oriented society, although COVID gave digital methods a shot in the arm. In the meantime, Konbini (convenience store payments) offers an easy way to tap into the cash market for ecommerce. However, Hong Kong, Singapore, and South Korea remain strong card markets.

Local card schemes abound in middle eastern countries, with Mada dominating in Saudi Arabia, NAPS in Qatar, OmanNet in Oman, KNET in Kuwait, and Benefit in Bahrain. Israel and the United Arab Emirates, on the other hand, are dominated by Visa and Mastercard, while Egypt remains strongly cash-based.

Cards dominate the Australian payments landscape, in store and online, but alternative payment methods are growing in popularity. Local online banking service Poli is increasing in usage, and Aussies are all aboard the BNPL train, with the likes of Afterpay and Zip contributing to 43% growth in 2020. New Zealand is an equally card-hungry market, with 94% of the adult population using debit cards (making it the third-highest rate in the world). But it’s also a world leader in the proportion of cash to GDP in circulation.

As you’d expect, the main card schemes dominate in North America. But in Canada, wallets like PayPal and BNPL methods like Afterpay and PayBright are growing. It’s also worth noting that Canada is proudly multicultural, with a large Asian population, so Asian methods are worth considering. PayPal and other wallets like Apple Pay and Google Pay are also popular in the US.

Like Asia Pacific, Latin America is a varied payment environment. Brazil is dominated by installment payments, which account for 80% of all ecommerce transactions, but bank transfer method,PIX, is also on the rise. Meanwhile Mexico, the story is one of modernisation; reducing cash in circulation and bringing more people into the country’s formal economy. OXXO is a popular cash-based method that lets customers pay via a local convenience store. Online banking and paying in installments are also common, and card adoption is on the rise.

Another mixed picture, Europe is a combination of advanced mainstream card adoption, local schemes, online banking methods, and cash. Visa and Mastercard dominate in Turkey, Switzerland, Italy, Croatia, and the UK (where it accounts for 90% of online transactions). Local schemes prevail in Belgium (Bancontact), Denmark (Dankort), and France (Cartes Bancaires). Online banking leads the way in the Netherlands (iDEAL), Austria, the Baltics, Finland, and Germany (SOFORT). Open invoicing is popular in Austria, and Sweden. Wallets are growing fast in Ukraine and Latvia. And finally, cash is still heavily used in the Czech Republic, Hungary, Liechtenstein, Malta, Slovenia, and Cyprus.

We built our single-platform solution with the express purpose of simplifying global commerce for ambitious businesses. To that end, we’ve built our own integrations to all the major payment methods worldwide. You don’t need to integrate each payment method separately; you can simply flick a switch in the back end and turn on the methods you need.