Alternative payment methods (APMs)

Alternative payment methods (APMs) refer to non-traditional forms of payment that are used as alternatives to traditional payment methods like credit cards, debit cards, or cash. APMs offer consumers different ways to make online or in-person purchases, providing flexibility, convenience, and often catering to specific regional preferences or specific customer segments.

Here’s how alternative payment methods generally work:

1. Selection of APM: When making a purchase, customers are presented with various payment options, including alternative payment methods. These can include digital wallets, bank transfers, prepaid cards, mobile payments, cryptocurrency, buy now pay later (BNPL) services, and more.
2. Account creation: Depending on the chosen APM, customers may need to create an account or register with the service provider. This typically involves providing personal and financial information, linking bank accounts or credit cards, and setting up necessary authentication methods.
3. Payment authorization: Once the customer has selected an APM, they proceed with the payment process. The specific steps may vary depending on the chosen method:
   • Digital wallets: Customers can load funds into their digital wallet accounts and use them to make purchases by authorizing the payment through a mobile app or website. The wallet may store payment card information or link to bank accounts, providing a convenient and secure payment experience.
   • Bank transfers: Customers initiate a bank transfer from their bank account to the merchant’s bank account. This can be done through online banking, mobile banking apps, or using payment service providers that facilitate the transfer.
   • Prepaid cards: Customers purchase prepaid cards or vouchers with a predetermined value and use them to make payments. These cards can be physical or virtual and may be specific to a particular merchant or usable across multiple merchants.
   • Mobile payments: Customers use their mobile devices, equipped with mobile payment apps or near-field communication (NFC) technology, to make contactless payments at the point of sale. The payment is authorized by tapping or scanning the device, often requiring biometric authentication or a PIN.
   • Cryptocurrency: Customers can use digital currencies, such as Bitcoin or Ethereum, to make online purchases. Transactions are verified and recorded on a blockchain network, and payment is made by transferring the specified cryptocurrency to the merchant’s digital wallet.
   • Buy now pay later (BNPL): Customers can opt to use BNPL services that allow them to split their payments into installments or delay payment for a specific period. This provides flexibility in managing expenses while making the purchase.
4. Payment processing: Once the payment is authorized, the transaction is processed by the payment service provider or the relevant financial institutions involved. This typically involves verifying the transaction details, conducting fraud checks, and transferring the funds from the customer’s account to the merchant’s account.

Alternative payment methods offer benefits such as faster checkout, enhanced security, reduced dependency on traditional banking systems, and expanded access to customers who may not have credit cards or prefer specific payment options. Merchants integrate these APMs into their payment systems to cater to customer preferences, expand their customer base, and improve the overall customer experience.

It’s worth noting that the availability of alternative payment methods can vary depending on the region, the specific merchant, and the payment service providers they partner with.