Alternative payment methods (APMs) are any form of payment offered to customers outside of traditional credit or debit card networks like Visa or Mastercard. This category includes digital wallets, bank transfers, cryptocurrency, and Buy Now, Pay Later services.

For SaaS businesses, offering APMs is becoming a key strategy for growth. They cater to evolving customer preferences, open up global markets, and can even reduce transaction costs and involuntary churn. The main types of APMs include:

• Digital wallets: Services like Apple Pay, Google Pay, and PayPal store a user’s payment information, enabling fast and secure one-tap payments.
• Bank transfers: Methods like ACH (Automated Clearing House) in the US allow customers to pay directly from their bank accounts.
• Buy Now, Pay Later (BNPL): Services like Klarna and Afterpay let users split the cost of a purchase into several installments, which is becoming relevant for high-value annual software subscriptions.
• Cryptocurrency: Payments made using digital currencies like Bitcoin or Ethereum, offering a decentralized and global payment rail.

Each alternative payment method operates differently, providing unique benefits for specific transaction types. Understanding their mechanics helps you decide which ones fit your business model.

Digital wallets like Apple Pay work by creating a tokenized, one-time-use number for each transaction, so the actual card details are never exposed to the merchant. This enhances security and simplifies checkout, especially on mobile devices.

ACH, on the other hand, is a network for electronically moving money between bank accounts in the United States. For SaaS subscriptions, it’s a form of direct debit. The customer authorizes a business to pull funds directly from their account on a recurring basis. This process is slower than card payments but is often more reliable for recurring revenue.

BNPL services essentially provide a point-of-sale loan. The BNPL provider pays the business the full amount upfront (minus a fee) and takes on the responsibility of collecting the installments from the customer.

Integrating alternative payment methods is no longer a niche strategy; it’s a core component of optimizing conversions, expanding globally, and reducing churn. They directly address the limitations of a card-only payment system.

Here’s why they matter for a software business:

• Meet customer expectations: Modern buyers, especially younger demographics, expect the convenience of digital wallets and the flexibility of BNPL. Failing to offer these can lead to cart abandonment.
• Improve global reach: Credit card penetration is low in many parts of the world. Local payment methods like iDEAL in the Netherlands or SEPA in Europe are essential for entering those markets successfully.
• Reduce involuntary churn: Credit cards expire or get declined, leading to payment failures and customer churn. Bank transfers like ACH don’t have expiration dates, making them a more durable payment method for recurring subscriptions.
• Lower transaction fees: Card processing fees typically range from 1.5% to 3.5%. ACH transaction fees are often significantly lower, making them a cost-effective choice for B2B SaaS and high-ticket subscriptions.

While the benefits are compelling, integrating a diverse set of payment methods comes with technical and operational challenges. Businesses need to plan for complexity beyond a simple credit card form.

The primary challenges include:

• Integration complexity: Each payment method has its own unique APIs, authentication flows, and user experience requirements. Building and maintaining direct integrations for multiple APMs can be a significant engineering effort.
• Subscription suitability: Not all APMs are designed for recurring payments. Some BNPL services, for example, are primarily built for one-off purchases, and adapting them for subscriptions can be complex.
• Financial reconciliation: With money coming in from multiple processors and settlement times varying, reconciling financial records can become a major headache for your finance team.
• Regulatory overhead: Different payment methods and regions come with their own compliance and security rules (e.g., PSD2 in Europe). Managing this can be a resource-intensive task.

To successfully leverage APMs without getting bogged down by complexity, it’s best to adopt a strategic approach. Focus on what your customers need and use tools that abstract away the underlying complexity.

• Use a payment aggregator: Instead of building direct integrations, use a payment processor like Stripe or Adyen. These platforms bundle dozens of payment methods into a single integration, handling the routing, compliance, and reconciliation for you.
• Understand your target market: Research the preferred payment methods in the regions you operate in. If you’re selling to businesses in the US, offering ACH is a smart move. If you’re expanding into Germany, Sofort and Giropay are essential.
• Clearly display payment options: Make sure customers know what payment methods you accept by displaying their logos prominently on your pricing and checkout pages. This builds trust and reduces friction.
• Align methods with your billing model: For recurring subscriptions, prioritize methods that support auto-billing, like digital wallets and bank transfers. For large, one-time purchases or annual plans, BNPL can be an effective option to increase conversions.

Kinde’s billing engine is designed to separate subscription logic from payment processing, simplifying how you manage revenue without locking you into a single payment system.

Kinde connects directly to Stripe, a third-party payment processor that handles the secure collection and processing of payments. This integration means you don’t have to build custom code for every payment method. You manage your subscription plans, trials, and upgrades within Kinde, and your connected Stripe account manages the payment layer.

By using Kinde with Stripe, you can offer any alternative payment method that Stripe supports, including:

• Digital wallets like Apple Pay and Google Pay
• Dozens of international payment methods
• Direct debit systems like ACH

This architecture allows you to focus on your product and user experience while leveraging a best-in-class payment infrastructure that can scale with your business. You configure your desired payment methods in your Stripe account, and Kinde’s checkout process will automatically make them available to your customers.

• The Kinde billing model
• Connect payment processor (Stripe)
• Manage Stripe connection