The US is a global e-commerce giant, being the second-largest e-commerce market. Retail sales through e-commerce in the fourth quarter of 2024 were over $308.9 billion, ranking just behind China.
So, what are the most popular alternative payment methods in the US? Its top contenders are digital wallets, BNPL, cryptocurrencies, P2P transfers, bank transfers, prepaid cards, and direct debit payments.
This article will serve as a guide to examine these options in detail so you can consider their benefits and use them to improve your business’s payment processing.
What Are Alternative Payment Methods?
Alternative payment methods (APMs) include digital or non-traditional ways to make payments for goods and services without using cash or traditional credit/debit cards. These methods frequently rely on technology to provide users with convenience and security.
Evolution of Alternative Payment Methods
Alternative forms of payment have existed for a long time, even before the use of technology, which we usually depend on to spend and access our money. Bartering is one of the earliest methods of alternative payments, as a case in point. The very first coins were an early form of standardized currency, often having value within specific regions or with particular merchants due to localized economies.
As money became standardized with national currencies and credit, people started using the traditional payment methods we rely on today. However, with the growth of the Internet, alternative payment methods also started to develop. PayPal gave people a way to send money straight from their financial accounts without using cash or cards. Smartphones pushed this trend further, with mobile payment apps processing massive transactions each year.
Popular Alternative Payment Methods in the US
As digital transactions continue, users from both end consumers and businesses in America are increasingly embracing alternative forms of payment apart from cash and credit cards. Modernized transactions offer different conveniences, increased security, and an opportunity for more flexibility. Among the most popular APMs are the following:
Digital Wallets
Juniper Research says digital wallet users will grow from 3.4 billion in 2022 to more than 5.2 billion by 2026, showing a 53% growth. Digital wallets have become the go-to alternative payment method for businesses, with NFC technology allowing users to simply tap their phones to transfer money—no need for cash or cards. Services like Apple Pay, Google Pay, and PayPal make it easy for users to store their payment details and complete transactions quickly.
Peer-to-peer Payments
People can send money to one another using their phone numbers, email addresses, or account information through services like Venmo, PayPal, Zelle, and Cash App. The transfers may be instantaneous or take a day or two, depending on the service. These services are useful for small transactions, paying friends, and dividing expenses.
Buy Now, Pay Later (BNPL)
Although American customers are adopting BNPL, it is still less popular than in Europe and Australia. According to Bank of America, adoption in the United States is slowing down year over year. Despite this, big firms like Affirm, Afterpay, Klarna, Sezzle, and Zip are still committed to making BNPL a reality. They are working to increase its acceptance and further incorporate it into the American payment system.
Bank Transfers
Bank-to-bank electronic transactions, known as ACH transfers, are handled by the Automated Clearing House network rather than card networks like Visa and Mastercard. Direct deposits, bill payments, and interpersonal transactions frequently employ these transfers. Businesses can save money by accepting ACH transfers, but the settlement timeframes for ACH transfers are usually greater than those for other payment systems.
Cryptocurrency Payments
By 2025, about 28% of adults in the US (around 65 million people) are expected to own cryptocurrencies, notwithstanding their limited application as a form of payment. Even so, Bitcoin is becoming more popular in certain industries, including gaming and digital goods, with California, New Jersey, and Washington being hotspots.
Prepaid Cards
Prepaid cards, sometimes known as “safer than cash,” are a flexible way to pay for both in-person and online transactions when debit and credit cards are allowed. Major card networks like Visa, Mastercard, and Amex support them, and they are widely used in the United States.
Direct Debit
Debit card payments represent one of the most commonly used payment channels for recurrent transactions. Thanks to the authentication system, the funds are quickly transferred directly from the customer’s bank account to the merchant’s account once the customer’s consent is acknowledged. Also, customers will receive an appropriate notice from the merchant before the transaction takes place.
Advantages of Accepting Alternative Payments in the US
Introducing alternative payment options helps firms enhance customer preferences and comfort in transactions. Alternative payment options have many advantages:
- Fast and convenient transactions: Alternative payment methods help enhance customer service quality in any business employing them. They provide quick and simple alternative payment options that are quite popular with clients worldwide.
- Smooth payment processing: ATM lets customers make payments without having to enter their payment details again for every transaction, thereby eliminating one of the big hurdles in quick payment processing.
- Wider customer reach: Companies can draw in and keep clients who select particular payment methods by providing a range of payment choices.
- Higher sales potential: Increasing conversion and sales by providing your clients with different ways to pay can be highly effective.
- Access to global markets: Companies offering other forms of payment are able to serve clients worldwide.
- Stronger competitive advantage: In an increasingly competitive world, organizations that have adopted alternative forms of payment will be flexible and innovative, allowing them to keep up with the competition.
- Lower transaction fees: Compared to traditional ways, most alternative payment methods have reduced transaction fees, saving your company money.
- Improved security measures: Most alternative payment methods are among the safest since they incorporate sophisticated security features like tokenization, encryption, and biometric authentication.
- Quicker fund settlements: Compared to traditional banking systems, most alternative payment methods offer quicker or instantaneous settlement periods, which lead to quicker settlement and better cash flow management.
How to Select the Best Alternative Payment Method for your Business
Convenience is the key to improving the consumer experience. Companies should carefully provide their clients with alternate payment options. Businesses allow customers to pay however they like by offering various payment methods.
Knowing customers’ preferred payment methods is one of the biggest problems businesses face. As a result, companies must create payment plans that are adaptable enough to accept several payment options.
Another important consideration is the countries with which enterprises interact and attempt to develop. For example, businesses operating in European nations need to search for payment gateways that support SEPA payments.
To keep up with the many alternate payment options worldwide, a robust payment method with no barriers to integration and powered by features your firm really needs will make a difference in your corporate payment strategy.
To sum it up, businesses that use alternative payment methods can stay competitive, attract more customers, and improve the payment experience. These methods help businesses reach goals like lowering transaction costs, increasing payment security, and making international payments easier. Regardless of the method, businesses can enjoy benefits like loyal customers and steady growth, which helps them grow stronger in the market.
Alternative Payment Methods FAQs
Below, you will find common questions and answers about alternative payment methods.
Can I accept international payments using alternative payment methods?
Yes, there are many APMs that are able to support international payments and different currencies. It will improve your business to the level of getting new clients from other countries.
Can I track transactions using alternative payment methods?
Yes, the vast majority of payment gateways and processors provide in-depth transaction reports for all payment methods, including APMs. This helps track sales, refunds, and fee payments more easily.
Do alternative payment methods cost extra?
The service provider and transaction method decide this. Some alternative payment options may charge a fee, while others are free. It’s a good idea for customers to check the terms and conditions before using any payment method.
Are alternative payment options secure for businesses?
Most APMs have security features like encryption, tokenization, and fraud detection to keep businesses and customers safe. But to stay risk-free, it’s best to choose a trusted payment provider.
What should I do if I encounter issues with an alternative payment method?
You can reach out to the payment provider’s support team by calling them. Most providers have help centers, live chat, or phone support to quickly solve your issue.
How do I handle refunds with alternative payment methods?
The way refunds are processed depends on the payment method. Most APMs let you refund money using the customer’s original payment method. Make sure your payment provider allows refunds for the APMs you use.
Cheqly Makes Business Payments Fast and Safe
Cheqly offers business owners two secure ways to make payments: ACH and Wire Transfers. ACH lets you quickly transfer money within the US, while Wire Transfers work for both local and international payments. These methods save businesses time, cut costs, and make sure payments are safe and fast.
Sign up for a Cheqly account for secure, fast payments today.