Debit and credit cards are the most common payment methods worldwide. A Nilson Report publication put the total amount transacted via debit and credit cards in 2022 at $40.645 trillion, increasing 4.4% from 2021. The Nilson Report also noted that this was the first time the global card industry handled more than $40 trillion in transactions.

Card payments are now so popular that the use of cash is declining. A recent projection revealed that cash payments in most parts of the world will likely reduce considerably with time. According to the report, the Middle East & Africa had the most cash transactions in 2021, representing 44% of all payments. However, the projection for these payments in the region is 31% by 2025. In North America, cash payments are expected to fall from 11% in 2021 to 6% in 2025.

While there is still a considerable volume of card or cash payments worldwide, alternative payment methods are gradually becoming popular. Essentially, alternative payment methods are options used to pay for goods and services without cash or cards. These may include digital wallets, bank transfers, prepaid cards, electronic cash, real-time bank transfers, cryptocurrencies, and buy now, pay later (BNPL) options.

People are now shifting to these alternative payment methods for the general ease of use and global access. According to the Consumer Financial Protection Bureau, the five largest BNPL companies in the US (Klarna, Zip, Affirm, PayPal, and Afterpay) processed a total of $24 billion in purchases from more than 180 million users in 2021. This figure is an increase of over 1,000% compared to 2019.

There is now a notable rise in the demand for alternative payment methods. For some analysts, the increase is a direct reflection of payment methods used by employers for staff salaries. Others believe the demand for alternative payment methods comes from these platforms being able to provide financial access to the “unbanked” and “underbanked” population, which major financial institutions sometimes neglect.

For BNPL specifically, the reason for the demand is straightforward. An option that allows people to take ownership of goods or enjoy services by making little to no initial payment will likely gain popularity, especially among low-income earners. Nonetheless, the BNPL option is also popular among people who may not be low-income, but prefer to maintain liquidity. According to a Forbes Advisor survey, most people (38%) who use BNPL platforms do so because it helps them break their purchases into comfortable chunks. This is a lot more flexibility than traditional payment methods offer.

The crypto option is one of the most interesting alternative payment methods. Although not the most popular, a growing number of people are interested in using digital assets for many different reasons. Firstly, crypto payments are very secure as they are powered by blockchain technology. Since this tech is immutable, the risk of a manipulated transaction is low. In addition to the security, cryptocurrency payments are not restricted by many of the limitations set by traditional platforms. This means that the average merchant, seller, or service provider can reach a vast market of potential customers without worrying about geographical limitations.

There are many interesting benefits to transacting with alternative payment methods. One of the most obvious is the capacity to welcome more customers and drive sales by supporting popular alternative options. Businesses that stick to cash or card payments may inadvertently push customers away if their target audience prefers one or more alternative methods.

Another advantage is that merchants and service providers may enjoy cost-effective operations since transactions conducted via alternative payment methods are cheaper. Service providers like online casinos sometimes offer users a high return-to-player (RTP) percentage when they can optimize operational costs. Many of today’s online casinos integrate options like Venmo, Skrill, or PayPal to pay gambling wins. With selected payment methods like these, casinos can attract more customers and comfortably offer these players higher RTP percentages.

Another benefit of lower costs from using alternative methods is that it frees up funds for reallocation. Companies enjoying cheaper transactions can use the money saved to shore up other areas of operations. For instance, a merchant saving money via reduced transaction costs can channel those funds into finding more customers via marketing and advertising, or simply use the extra funds to find and integrate more alternative payment methods.

As more businesses embrace alternative payment options, card payments may decline. Already, businesses sticking to cash or card payments may be restricting their customer bases and limiting the number of transactions they handle, as well as the amount of money processed. Although card is still king, widespread adoption of alternative payment methods may increase well enough to fiercely challenge the status quo.

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