Alternative Payment Method
An alternative payment method is any way of paying that is not a card — digital wallets, account-to-account transfers, buy-now-pay-later, mobile money, cash vouchers, national schemes like iDEAL, BLIK, Pix or UPI — and in most markets outside the US and UK the "alternative" is the majority. For a merchant selling across borders, offering the right local methods decides conversion more than price does, and a PSP's method coverage is what it sells after approval rates.
- Also known as
- APM, Local payment method, LPM, Non-card payment method
- Used at
- e-commerce checkouts, app stores, marketplaces, remittances, in-store QR payments; in the Netherlands over 70% of online payments are iDEAL, in Germany invoice and PayPal lead, in Brazil Pix, in China Alipay and WeChat Pay, in Kenya M-Pesa
- Binding
- each method's own scheme rules, licensing and dispute terms — a wallet may carry chargeback-like protection, a bank transfer none, a BNPL provider its own credit rules
- Typical integration
- through a PSP or orchestrator that has contracted with each method — one API for a hundred methods — rather than merchant by merchant; the PSP takes a per-method fee
- Typical effect
- adding a market's leading local method typically lifts conversion in that market by 10–40%; omitting it means the merchant is competing with the card-only share of the market
- Parties
- the method's operator (a bank consortium, a wallet company, a national payments council), the PSP that integrates it, the merchant, and the customer who expects to see it
How alternative payment methods work in practice
A German customer at a foreign checkout looks for PayPal or invoice payment; a Dutch one for iDEAL; a Polish one for BLIK; a Brazilian for Pix or boleto; a Chinese for Alipay. Each is a different integration, settlement flow, dispute regime and reconciliation format, and a merchant integrating them one by one would spend a year. A PSP or orchestrator that has done the integrations offers them through the one API the merchant already uses: the checkout detects the customer's country, shows the local methods first, and the PSP routes each to its operator and settles the merchant in one currency and one report.
The economics vary by method. Wallets often ride cards underneath and cost card-like fees; bank-transfer methods cost cents; BNPL costs the merchant 2–6% and lifts basket size; cash vouchers cost a fixed fee and settle when the customer pays at the shop. Dispute rights vary too — a wallet may offer buyer protection, a transfer nothing — and a merchant's fraud and refund flows must handle each. PSPs price by method and sell coverage as a feature: "200 methods in 60 countries" is a headline number, and the useful question is which ten matter for the merchant's customers.
For payments M&A the method operators are targets and acquirers in their own right: iDEAL was bought by the European Payments Initiative in 2023; the national schemes are consolidating into regional ones; and card companies buy A2A and wallet providers to hedge.
Example
A fashion retailer selling from the UK into Europe on cards alone converts 2.1% of visitors in the Netherlands and 2.8% in Germany. Its PSP adds iDEAL, Klarna, PayPal, Bancontact, BLIK and SEPA direct debit in one release. Six months later: Netherlands conversion 3.4% (iDEAL is 65% of Dutch orders), Germany 3.9% (Klarna invoice 38%, PayPal 30%), Poland opened with BLIK at 55% of orders. Method costs: iDEAL €0.29 per order, Klarna 3.5%, PayPal 2.9% — a blended cost above cards' 1.4%, more than offset by 40% more orders in those markets. Returns rise with Klarna's invoice payments, which the retailer's finance team had not modelled and the PSP's sales deck had not mentioned.
Common mistakes
- Selling into a market with cards only and calling the low conversion a demand problem. - Adding every method a PSP offers instead of the two or three each market uses. - Modelling method costs without the conversion uplift, or the uplift without the returns and disputes. - Reconciliation built for card settlement, and a month-end that cannot match a boleto. - Assuming a method's dispute regime is card-like; most are not.