A guide to alternative payment methods, and why your business needs them

October 14, 2021

Alternative payment methods (sometimes known as local payment methods or APMs) refer to products such as e-wallets, vouchers and pre-paid cards. If it isn't cash or a credit card, it can be considered a local payment method.

Some of these payment providers, such as Alipay in China, are widely accepted within a country but not outside of it. Others such as Apple Pay are used for increased functionality or cross-border payments.

What is important is that alternative payment methods are widespread and they’re transforming the payments landscape. 57% of German shoppers want to use PayPal when buying online, whilst 60% of Dutch consumers like to use local bank transfer iDEAL.

According to Simon Verraest:

“The customer may have specific reasons for choosing a certain payment method and there shouldn’t be any friction by merchants offering a multitude of options.”

Whether you’re selling products in a shop or manage an e-commerce store, it’s essential that you have a variety of payment methods to provide the best customer experience.

Table of contents

What are alternative payment methods?

Digital wallets

Sometimes known as e-wallets, digital wallets enable customers to load their accounts with money for future purchases. Transactions can be completed online or in person. Some of the most popular alternative payment methods are digital wallets such as PayPal and Alipay.

Mobile payments

Mobile alternative payment methods allow customers to load their smartphone apps with money. Google Pay and Apple Pay are two of the most popular apps and allow customers to complete online payments as well as QR code and SMS transactions.

Bank transfers

A bank transfer is where the money is sent directly from the customer's bank account to the merchant's bank account. iDEAL and Sofort specialise in bank transfers and are widely used in Germany, Austria and the Netherlands.

Direct debit

Direct debits are popular with subscription-based businesses. Customers give businesses permission to take a certain amount of money at a predetermined time for goods or services that are provided.

Buy now, pay later

Buy now, pay later allow customers to purchase products and delay payment or spread the cost over a few months. The most popular platforms do not charge any interest, which makes them very popular with shoppers who don’t use credit cards.


71% of British consumers say they will never use cryptocurrencies because of volatility. However, cryptocurrencies have significantly increased in popularity and the more stable currencies such as Bitcoin are regularly used to purchase products.

Local cards

Many companies around the world issue debit and prepaid cards that are only accepted in one location. These card schemes are popular because they can cater to local demands. In Belgium, Bancontact far outstrips even Visa, Mastercard and Maestro.

Alternative payment methods around the world

Alternative payment methods in the United Kingdom

Cards are still the most popular way to pay for goods accounting for 53% of transactions in 2019. Whilst the use of digital wallets accounted for 29% of transactions, this is projected to increase to 33% by 2023.

Combined with direct debits, bank transfers and other payments, alternative payment methods will exceed cash and card by 2023. Apple Pay, Google Pay and Paypal are leading this increase in market share.

Alternative payment methods in Europe

In Europe, digital wallets, specialist payment systems and debit cards fund 48% of transactions in-store. For online purchases, this number reaches 59%. Like the UK, the way customers pay for products continues to evolve.

Although 53% of European merchants prefer to accept cards, 31% are happier when accepting an alternative payment method such as a mobile wallet. 8% of merchants would even prefer it if customers paid in cryptocurrency.

Alternative payment around the rest of the world

Alternative payment methods are even more popular around the world. Banking infrastructure is less developed in Africa which has ensured mobile payments have made much quicker inroads into new markets. In China, mobile payments accounted for 92% of in-store and e-commerce transactions for 2018.

In North and South America, card payments are still the most dominant form of payment. However, digital wallets are increasing in popularity. Apple Pay, Google Pay and buy now, pay later platforms are pushing changes in consumer behaviour.

What are the benefits of alternative payment methods?

More international customers

Pomelo Pay was created back in 2017, when the founders Simon Verraest and Vincent Choi noticed that Chinese customers were unable to use their preferred payment methods in the UK. 

The goal of Pomelo Pay was to make paying even more convenient. So we utilised QR code technology which enabled merchants to accept international e-wallet payments.

Likewise, your checkout experience needs to be as seamless as possible. If you have obstacles during this process you will frustrate and alienate your customers.

A significant portion of these customers will want to pay through e-wallets, mobile wallets and buy now, pay later platforms.

Having a variety of local payment methods will ensure you attract as many international customers as possible. 

“I used to work for a souvenir shop in San Francisco. SF is a tech city that draws a lot of travellers, and some come from China. We saw a lot of Chinese travellers had problems paying with credit cards and they always asked whether we support WeChat or Alipay.
We added WeChat Pay as an alternative payment method and soon after that, the shop's revenue increased by around $5,000 USD a month, that's roughly a 5% increase compared to normal months. It's not impressive, but for a brick and mortar store, that's something.” Christine Wang, founder of TheSkiGirl

Increased sales

Research shows that around 80% of carts get abandoned by customers. There are a number of contributing factors including a lack of guest checkouts, high delivery costs and unnecessary form fields.

Reducing all these obstacles to pay is essential to keeping your abandonment rate low. Around 8% of purchases go uncompleted because of a lack of payment methods.

Whether you have an e-commerce store or brick and mortar shop you will have some international customers. Even if you don’t send products abroad, you may have customers who are visiting the UK or live here temporarily.

Removing all of your obstacles to pay will ensure that none of your customers are prevented from paying for your products. This will create a frictionless shopping experience that will maximise your conversion rate.

A more secure business

A study in 2015 found that 15% of shoppers abandoned purchases because they had concerns about payment security.

Paying through a local payment method isn’t inherently safer than using a credit card. However, some customers have a perception that it is.

Typically, when using a digital wallet or buy now, pay later platform you only need to enter your username and password. This can feel safer for some customers.

Some smartphones users also make use of face ID and fingerprint recognition to reduce the risk that someone uses their phone and fraudulently uses their digital wallets. 

Every customer has their own reasons for choosing to pay the way they do. Whichever payment method they prefer, it’s essential that you accommodate for it.

“Besides accepting all major cards, my business allows payment through PayPal. Only about 2-3% of our customers use it, most of them smaller campgrounds. However, we consider it to be worth the extra amount of effort it takes to manage it.
There are some customers that specifically seek out PayPal as a payment option and being one of the few businesses in our niche that can provide it, increases our chance of converting and retaining them.” Ravi Parikh, CEO of RoverPass

At Pomelo Pay, we understand just how important it is that customers can pay how they want. This is why our technology enables merchants to accept over 25 local payment methods.

Increased trust

When customers make purchases at brick and mortar or online businesses, they need to trust the merchant, otherwise, they won’t hand over their bank details.

If customers are presented with payment methods they use all the time, they will feel comfortable and follow through with a purchase.

For some customers, local payment methods are more trustworthy than major banking institutions. Trust plays such an important role in purchasing, so you need to do everything you can to make customers feel comfortable.

A faster checkout

Customers, especially those shopping online can be very sensitive. If there are too many forms to fill in during checkout or delivery isn’t fast enough, shoppers won’t complete purchases.

One way to speed up the checkout process is to use local payment methods. Quite often, someone using an e-wallet or phone payment has to perform far fewer actions than someone using a credit or debit card.

Baymard found that checkouts average around 14 form fields. Their study found that many websites can reduce this by 20-60%.

With 18% of shoppers abandoning their carts because of complicated checkouts, simplifying payment processes can have a transformative effect on your conversion rates.

“Alternative payment methods have undoubtedly enabled us to increase our sales and conversions. They enable customers to make quicker purchases whereas they may have looked elsewhere.
Quick pay options such as Google Pay and Apple Pay now account for 4% of our sales. It enables customers to make quick purchases using their trusted payment gateway.
We have also implemented Klarna which enables our products to reach customers who might otherwise have been unable to pay for our products for a few months, in which time they might have changed their mind or gone elsewhere. Klarna now accounts for 5% of our sales in a little over 3 months.” Ian Turner, director of Care Lamps

A better customer experience

A few years ago, if you didn’t have the money to make an expensive purchase, your only options were to use a traditional payment such as a credit card or debit card with an overdraft.

Local and alternative payment methods are providing even more options for people to make purchases, even if they don’t have the money in their account.

With a payment method like Klarna, customers can quickly finance a purchase with just a few clicks. Typically, these platforms don’t charge interest which has seen them explode in popularity in just a few years.

“This year we launched a financing option on our website using Klarna. Because our average sale is over $1500, we needed to give customers more options for payment. Customers can now purchase items and pay over weeks/months instead of immediately.
It has been a great success. We see about 20% of our sales now from customers using Klarna. These are sales we might not have gotten without it, as our conversion rate has grown as well. One unique thing is that we have even seen it being used on orders of less than $100 (small items), so any retailer could take advantage of this service, no matter the average sale.” Jeff Moriarty, marketing manager at Moriarty's Gem Art

Nearly 10 million British shoppers said they would avoid a store if it didn’t have any buy now, pay later options.

Younger shoppers have shown an aversion to credit cards. If you are targeting this market it is essential that you offer all the payment methods they want.

Here at Pomelo Pay, we know how important it is that merchants have a choice of payment methods. This is why we help merchants accept over 25 payments with our business banking app.

Payment methods we accept

Which alternative payment methods are right for my business?

The right local payment method for your business will all depend on who your customer is. Think about your location, your demographics and who you’re targeting.

If you have many Chinese customers you will need different payment options than if you’re targeting a millennial customer base.

Provide customers with a variety of payment methods and you will build trust, encourage purchases and maximise conversions.

How to add alternative payment methods to my business?

There are a lot of ways to pay for transactions. Adding them all to your checkout experience can be a long and time-consuming process.

What you need to do, will all depend on which particular alternative payment method you are interested in. However, you can simply integrate a platform that incorporates multiple payment systems.

Our platform is simple to use and easy to integrate. Open an account with us and you will be able to accept more than 25 of the most popular payment methods in an instant.

If you would like to find out how your business can accept more local payment methods, contact us at Pomelo Pay.