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Your Guide to Alternate Payment Methods

Alternative payment methods are generally defined as any form of payment that isn't through a debit or credit card. This may be a bank transfer, both online and offline, a direct debit, payment through an e-wallet, cash on delivery, or other forms of payment, such as local card schemes and digital currencies.

Bank transfers are done via the customer's bank, and the customer is generally given a reference number which can be quoted when making payment. Bank transfers can also be done online, over the phone, or in-person at a branch.

Direct debits are generally used for lower-value recurring payments for a subscription or a gym membership. They aren't as relevant to all merchants and can carry a risk of chargebacks.

E-wallets are growing quickly and are used for buying digital goods like music and video games. They are also increasingly being used for more general purchases, particularly in more advanced markets like the UK and the US.

Cash on delivery is generally used when couriers deliver goods, but this is the payment option falling in popularity the most out of the payment options covered.

In the last 5-10 years, traditional payment options (credit and debit card payments) were still prevalent, but alternative payment methods are growing. It has been estimated that by next year, 59% of all transactions will be done via an alternative method. This trend is being led by economies in Europe in particular, with around 41% of transactions using an alternative method, compared to 71% of all transactions being done on a card in the Americas. Even in Europe, this trend was seen though, with countries like the UK, Denmark, Ireland, and Turkey still having a card-dominated market. China is also leading the change towards alternate payment options, with 44% of the population using e-wallets as their preferred option. PayPal and Alipay were the most common providers used in the last year, which has caused other card providers to try to jump on the trend and create their own alternatives.

The use of smartphones as a payment method has also grown considerably. In 2012, there were 1.4 billion phones used globally, with the number far more significant now. As mobile payments like Apple Pay and Android Pay become more sophisticated, this is a definite growth area in the alternative payment industry.

In the next five years, industry experts expect to see these trends continue. With contactless payments becoming the norm for card users, cash, in particular, is on its way out. Related to this, mobile payments are increasing rapidly as every person in the developed world has a mobile phone and uses it daily. Now that card payments can be made contactless with a mobile, carrying a physical card is becoming more redundant.

In China, Europe, and across the Americas, the e-wallet transaction value continues to rise, which brings in the final trend towards a diversity of payment types increasing into the next decade.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes.

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