Alternative payment methods (APM) refer to payment solutions that differ from traditional methods such as credit or debit bank cards, checks, and cash transactions.
Let’s explore what APMs are, their types, how they differ from traditional payment options, and the latest trends in the alternative payments market.
What Are Alternative Payment Methods?
Simply put, APMs are technological solutions that allow users to manage their finances without cash or physical cards. Generally, APMs include contactless payments and online transactions.
APMs have existed long before modern technology — barter was the first form of alternative payment. The first digital APM solution emerged in 1989 with DigiCash, a project by David Chaum that introduced the eCash electronic money system, an early prototype of cryptocurrencies. However, the first widely adopted APM was PayPal, launched in 1998, which enabled payments using an email address instead of traditional banking details.
Today, most APM services provide users with digital access to bank accounts, while some innovative APM solutions allow users to store funds without banks or even use virtual assets.
APMs offer fast and convenient online purchases for consumers and expand e-commerce opportunities for merchants. According to a PwC report, in 2020, APMs accounted for 42% of all cashless payments, processing around $1 trillion in transactions. By 2023, their share grew to 60%, with the global APM market valued at $2.85 trillion, FIS data reports.
Let’s take a closer look at the main types of APMs, how they compare to traditional payment methods, and key market trends.
Main Types of APMs
APMs encompass several technologies used for contactless payments, many of which are very popular due to their simplicity and increased privacy.
It’s important to mention virtual cards, which are digital equivalents of traditional bank cards without a physical form, originally used for online purchases. Today, they are used to connect non-bank payment solutions with banking infrastructure. The most popular mobile wallets, such as Apple Pay, Google Pay, Samsung Pay, and many others, allow users to use virtual cards for contactless payments.
Main types of alternative payment methods are:
- e-Purse. Various types of non-bank smart cards with built-in microchips. They’re similar to prepaid cards and, depending on the type, can be universal payment systems designed for small retail payments, or tools for specialized operations, such as fare payments for public transport, telecommunications services, utilities, and more. e-Purses can also be software that stores various types of data in digital form in addition to payment info. For example, discount cards, gift coupons, transport passes, event tickets, and much more. According to McKinsey, in 2021, about 15% of e-Purse users claimed to have completely switched to digital wallets, abandoning physical ones.
- e-Wallet. A broad category that encompasses various payment solutions operating on mobile devices, enabling users to store and manage financial information while making transactions. e-Wallets include mobile payment systems like Apple Pay and Google Pay, digital payment services like PayPal and Payoneer, electronic settlement systems such as WebMoney, payment gateways like Revolut Pay, etc. According to Statista, in 2024, approximately 50% of all global online transactions were conducted via e-Wallets.
- Buy Now, Pay Later (BNPL). Services that allow consumers to purchase goods with deferred payments. BNPL acts as an intermediary between buyers and sellers, providing an alternative to traditional bank loans. BNPL platforms assess a buyer’s creditworthiness and, upon approval, pay a merchant in full. A customer repays the purchase amount in equal installments within a specified period. BNPL services are often integrated into payment and e-commerce platforms, offering repayment options through traditional bank cards, digital wallets, or even crypto wallets. Some of the most well-known BNPL providers include Klarna, Riverty (ex-AfterPay), and Affirm. According to Mordor Intelligence, the global BNPL market is expected to grow at an average annual rate of 22% over the next five years.
- Mobile payments and super apps. These solutions integrate payment services with additional financial tools and broader functionalities on mobile devices. Examples include Alipay, WeChat Pay, Cash App, M-Pesa, etc. According to Capital One Shopping Research, in 2024, the global mobile payments market reached $98.2 billion.
- Crypto payments. Cryptocurrencies are gaining popularity in e-commerce and iGaming due to their decentralized nature, enhanced privacy, fast transaction processing, and low fees. Stablecoins, in particular, have become widely used as they minimize risks associated with crypto volatility and help bypass banking restrictions.
- Prepaid cards and vouchers. These payment tools enable users to pay for goods and services without requiring a bank account, ensuring complete anonymity. Services in this category include PaysafeCard, Neosurf, and Flexepin.
The growing adoption of APMs is also driven by the development of open banking, a technology that allows FinTech companies and third-party services to access users’ banking data via APIs. This innovation expands payment, lending, and financial management options without relying on traditional banking tools.
Many national instant payment systems, which are the most advanced solutions in traditional finance (TradFi), allow the use of open APIs and other FinTech solutions. You can read more about instant payment systems (IPS) in a special article by CP Media.
According to analysts’ prediction, by 2025, the global transaction volume using QR codes, one of the core technologies behind many APM services, could reach $2.71 billion. By 2026, QR codes are expected to account for 380 billion transactions, representing 40% of all online payments.
How Do Alternative Payment Methods Differ From Traditional Ones?
Most APMs are technological solutions that build upon traditional payment infrastructure, expanding its functionality and accessibility. For instance, digital wallets use POS terminal technologies and PIN codes, just like bank cards.
The key difference between APMs and traditional payment methods lies in their flexibility, accessibility, and transaction speed. Meanwhile, the development of traditional payment methods is significantly constrained by access to banking services. According to Paolo Ardoino, CEO of Tether, around 3 billion people worldwide still lack access to banking services, as he noted during his speech at DC Fintech Week.
Given that, the primary advantages of APMs over traditional payment methods include:
- increased financial inclusion;
- reduced transaction costs;
- easier access to financial services;
- use of innovative technologies.
The growing digitalization of financial services and the expansion of e-commerce are fueling the rapid rise of APMs. One of the key growth drivers has been technological advancements in mobile devices, particularly the integration of NFC chips for contactless payments. Thanks to this, wearable payment devices have become a reality — nowadays, paying with a smartwatch, fitness tracker, or even jewelry is no longer surprising.
Online stores and FinTech companies are actively integrating alternative payment tools, providing users with more convenient and accessible solutions. According to Juniper Research, in 2025, approximately 70% of all online payments will be processed through APMs. Moreover, by 2029, the global e-commerce transaction volume could potentially reach $11.4 trillion, with APMs accounting for over 80% of transactions, largely due to the spread of crypto payments and digital wallets.
Key Trends in APM Market
The evolution of alternative payment methods is shaped by technological advancements and regulatory changes that impact their adoption and functionality. Here are the main trends driving the development of the APM market:
- Increased regulatory oversight. Authorities in the EU and U.S. are tightening control over APMs, introducing new requirements for licensing, consumer protection, and anti-money laundering (AML) compliance for non-bank financial institutions.
- Integration with AI and Web3 technologies. AI solutions are being used for personalizing financial services, predicting expenses, and automating payments, while Web3 technologies are offering a radically new alternative to traditional payment systems.
- Rising popularity of cryptocurrencies. Digital assets, particularly stablecoins, are gaining traction in economically unstable countries, where they serve as a hedge against inflation and an alternative to national currencies.
Most analysts agree that the share of alternative payment methods will continue to increase, transforming traditional payment systems and making financial services more accessible. According to Mordor Intelligence, the global APM market could reach $6.7 trillion by 2030, growing at a CAGR of approximately 12.8% per year. Payment solutions will continue evolving alongside the global digital transformation, with the APM sphere adapting to the changing needs of users and regulators.
