Alternative Payment Methods: APM Gateways, Wallets, Open Banking & BNPL

Alternative payment methods can give customers ways to pay beyond manually entering a conventional debit or credit card at checkout.

But “APM” is a broad payments-industry term rather than one specific type of transaction.

Depending on the market and provider, alternative payment methods can include:

• digital wallets;
• account-to-account and Open Banking payments;
• Buy Now, Pay Later;
• local bank-payment methods;
• region-specific payment schemes;
• Direct Debit;
• prepaid or voucher-based methods; and
• other locally preferred ways to pay.

Some of these methods still ultimately use card infrastructure. Others bypass conventional card acquiring entirely.

For merchants, the important question is therefore not simply:

“Which APMs can we add?”

It is:

“Which payment methods do our customers actually need, and how will they fit with our gateway, markets, settlement, refunds and reporting?”

This guide explains the main types of alternative payment method, how APM gateways work and what businesses should compare before adding new payment options.

What is an alternative payment method?

An alternative payment method, usually shortened to APM, is a broad description for a payment option offered alongside a conventional card-entry checkout.

There is no single technical definition that covers every payment market.

For example, an APM might involve:

• a customer paying from their bank account;
• a wallet containing a tokenised debit or credit card;
• a third-party BNPL lender;
• a local payment scheme;
• a recurring bank mandate; or
• a market-specific payment service.

This is why merchants should avoid treating all APMs as though they have the same pricing, fraud model, settlement or technical requirements.

What is an APM payment gateway?

A payment gateway or payment service provider may allow a merchant to offer several payment methods through one broader integration.

Instead of building a completely separate technical connection for every method, the merchant may be able to manage multiple payment options through the same provider or payment platform.

Depending on the gateway, this might include:

• debit and credit cards;
• Apple Pay;
• Google Pay;
• Open Banking or Pay by Bank;
• BNPL;
• local bank-payment methods;
• Direct Debit;
• local or regional payment methods; and
• other provider-supported APMs.

However, one gateway integration does not necessarily mean that every payment method is automatically available.

Individual methods can still have:

• merchant eligibility requirements;
• country restrictions;
• separate commercial terms;
• technical activation requirements;
• customer-location requirements;
• sector restrictions; or
• additional onboarding.

For the wider gateway decision, see our Payment Gateway guide .

Not every APM is actually “non-card”

This is an important distinction.

Digital wallets such as Apple Pay and Google Pay can allow customers to pay using card credentials stored securely within a wallet.

The checkout experience is different from manually entering a card number, but the underlying transaction can still use card-network and acquiring infrastructure.

Open Banking payments are different again because payment-initiation services can allow a customer to authorise a payment directly from an eligible bank account.

BNPL has another structure because a third-party lender may provide credit to the customer while the merchant receives settlement under its agreement with the BNPL provider.

Merchants should therefore compare the actual payment flow rather than assuming all APMs behave in the same way.

Digital wallets

Digital wallets can simplify checkout by allowing customers to use payment credentials already stored or provisioned on their device or account.

Examples can include:

• Apple Pay;
• Google Pay; and
• other provider or market-specific wallets.

With Apple Pay, for example, the customer authorises the transaction through their device and a payment credential is passed securely for processing rather than the merchant receiving the customer's full card number directly.

For merchants, wallet support can depend on:

• payment gateway;
• acquirer;
• website or app integration;
• customer device;
• supported cards;
• merchant location;
• customer location; and
• provider configuration.

A gateway advertising digital-wallet functionality does not necessarily mean every wallet is enabled automatically for every merchant.

Open Banking and Pay by Bank

Open Banking can support account-to-account payment journeys where a customer authorises a payment from their bank account rather than entering card details.

A payment-initiation service can allow an authorised provider to initiate a payment from the customer's eligible bank account with the customer's explicit consent.

This creates a different payment journey from card acquiring.

For merchants, Open Banking or Pay by Bank can be relevant for use cases such as:

• ecommerce checkout;
• invoice payments;
• higher-value transactions;
• account funding;
• payment links;
• B2B payments; and
• other account-to-account payment journeys.

Businesses should compare:

• bank coverage;
• customer journey;
• payment confirmation;
• refund handling;
• reconciliation;
• recurring-payment capability where required;
• commercial pricing;
• settlement;
• integration; and
• the regulatory status of the provider.

Open Banking should not be described simply as a cheaper version of card processing. It is a different payment route with its own commercial and operational considerations.

Buy Now, Pay Later

Buy Now, Pay Later can allow customers to defer or divide the cost of a purchase through a credit arrangement.

BNPL is different from both ordinary card payments and account-to-account payments because a lender may sit between the customer and merchant.

For the merchant, relevant considerations can include:

• merchant eligibility;
• customer eligibility;
• checkout integration;
• merchant fees;
• settlement;
• refunds;
• returns;
• disputes; and
• consumer-credit requirements.

UK regulation of relevant third-party Deferred Payment Credit changed on 15 July 2026, when the FCA began regulating these arrangements.

See our dedicated guide to Buy Now, Pay Later for merchants for the current BNPL regulatory and gateway position.

Local bank-payment methods

Payment preferences can vary substantially between countries.

In some markets, customers may be accustomed to completing online purchases using a domestic bank-payment method rather than manually entering a conventional international card.

For an international merchant, supporting an appropriate local method can therefore form part of localisation.

However, businesses should avoid adding local methods simply because they appear on a gateway's integration list.

First establish:

• where customers are actually located;
• what percentage of sales comes from that market;
• which payment methods customers use;
• whether the merchant is eligible;
• supported currencies;
• settlement currency;
• refund processes;
• transaction cost;
• reporting; and
• reconciliation.

Local and domestic payment schemes

Some countries also have domestic or regional payment schemes that sit alongside the major international card networks.

For merchants selling into several markets, the payment strategy may therefore involve a mixture of:

• international card schemes;
• domestic schemes;
• local bank payments;
• wallets;
• BNPL; and
• other market-specific options.

The right combination depends on the merchant's actual customer base rather than the number of payment logos that can be displayed at checkout.

Direct Debit as an alternative payment method

Direct Debit can also sit within a wider alternative-payment strategy, particularly for recurring collections.

It differs significantly from an instant ecommerce card payment.

Common use cases include:

• memberships;
• subscriptions;
• utilities;
• regular invoices;
• service contracts; and
• other recurring collections.

A business choosing between recurring card payments and Direct Debit should consider the customer journey, collection timing, failed payments, mandate management, reporting and how quickly confirmation of payment is required.

Prepaid, voucher and cash-supported payment methods

Some international payment environments also support prepaid, voucher or cash-supported payment journeys.

These can allow customers to generate a payment reference online and complete the transaction through another network or participating location.

These methods can be relevant in specific countries or customer groups, but are not necessarily useful to a UK merchant simply because a gateway technically supports them.

The merchant should first establish whether there is meaningful customer demand and whether the operational complexity is justified.

Should every ecommerce business offer alternative payment methods?

No.

Adding more payment options does not automatically improve a checkout.

A new payment method can also introduce:

• additional fees;
• new settlement flows;
• different refunds;
• different disputes;
• more reporting;
• additional reconciliation;
• extra customer-service processes; and
• technical complexity.

Businesses should add a payment method because there is a commercial or customer reason to do so.

That might be because:

• a meaningful proportion of customers prefer it;
• the business is entering a market where it is widely used;
• the payment journey suits higher-value transactions;
• customers want a quicker wallet checkout;
• the business needs an account-to-account route;
• BNPL is relevant to the purchase profile; or
• the method provides a useful alternative to the existing payment stack.

Do alternative payment methods improve conversion?

They can improve customer choice, but there is no guarantee that adding an APM will improve conversion for every merchant.

Results depend on factors including:

• customer location;
• customer preference;
• device;
• average order value;
• checkout design;
• redirects;
• authentication;
• payment-method recognition;
• merchant sector;
• transaction approval; and
• how well the payment method is implemented.

A payment method that is highly familiar in one market may add little value in another.

Merchants should therefore measure actual payment-method usage and checkout performance rather than assuming that more options automatically mean more completed sales.

Are alternative payment methods cheaper than cards?

Sometimes, but not universally.

Different payment methods use different commercial models.

Potential costs can include:

• percentage transaction fees;
• fixed transaction charges;
• gateway fees;
• payment-method fees;
• refund charges;
• international fees;
• currency conversion;
• settlement charges;
• BNPL merchant fees;
• monthly platform charges; and
• integration or development costs.

An account-to-account payment may have a very different cost structure from a wallet-funded card payment or a BNPL transaction.

Businesses should therefore compare the cost of each payment method against its actual usage and commercial value.

See our Payment Gateway Fees guide for a broader explanation of gateway and payment costs.

Do APMs reduce fraud or chargebacks?

Not automatically.

The risk model depends on the payment method.

For example:

• digital wallets can use tokenised card credentials and device authentication;
• Open Banking payments use bank-authenticated account-to-account journeys;
• BNPL introduces a lender and its own customer assessment;
• Direct Debit has its own mandate and customer-protection framework; and
• local payment methods can have their own dispute and refund processes.

This means merchants should not assume that an APM simply removes fraud or dispute risk.

Instead, establish how:

• the customer authenticates;
• the payment can be disputed;
• refunds are processed;
• fraud liability is allocated;
• the payment is confirmed; and
• the provider manages unusual activity.

Settlement can differ between payment methods

Adding several payment methods can create several different settlement flows.

A merchant might receive:

• card settlement from an acquirer;
• bank-payment settlement through another provider;
• BNPL settlement under a separate commercial agreement;
• Direct Debit collections on a different timetable; and
• international-method settlement in another currency.

This can affect:

• cash flow;
• finance reporting;
• reconciliation;
• refunds;
• currency exposure; and
• how easily the business can trace a customer payment through to bank settlement.

Businesses adding several APMs should therefore consider the finance team's requirements as well as the customer checkout.

Refunds and disputes vary by payment method

Merchants should not assume that every payment method follows the card chargeback model.

Before activating an APM, understand:

• how full refunds work;
• how partial refunds work;
• whether the original transaction fee is returned;
• how long refunds take;
• how customer disputes are handled;
• what evidence may be required;
• whether the merchant can challenge a dispute;
• how refunds appear in reporting; and
• how the transaction reconciles after a refund.

This becomes particularly important for merchants with high return rates, subscriptions, travel, future delivery or more complex customer-service journeys.

Alternative payment methods for international ecommerce

International ecommerce is one of the clearest reasons to review APM coverage.

Payment preferences can differ substantially between markets.

But international APM strategy should consider more than customer preference.

Businesses may also need to consider:

• merchant entity location;
• customer location;
• gateway availability;
• local acquiring;
• currencies;
• settlement currencies;
• foreign exchange;
• local regulation;
• refunds;
• reporting;
• tax and invoicing requirements where relevant; and
• whether the payment method is actually used by the merchant's customer base.

A business selling in ten countries does not necessarily need ten different payment methods.

The starting point should be actual customer and transaction data.

Can high-risk businesses use alternative payment methods?

Potentially, but an APM is not a route around provider underwriting.

Each payment method and provider can have its own merchant-acceptance policy.

A business accepted for card acquiring might not automatically qualify for:

• BNPL;
• particular wallets;
• bank-payment services;
• local payment methods; or
• another payment product offered through the same gateway.

Eligibility can depend on:

• business sector;
• products or services;
• merchant location;
• customer countries;
• transaction values;
• processing volume;
• refunds;
• chargebacks;
• licensing;
• fulfilment; and
• provider risk appetite.

Businesses with more complex underwriting requirements can also visit our High-Risk Merchant Accounts guide .

Do you need one gateway for every APM?

Not necessarily.

A gateway or PSP may provide access to multiple payment methods through one technical integration.

This can potentially simplify:

• checkout integration;
• reporting;
• method activation;
• refund management;
• reconciliation; and
• technical maintenance.

However, larger or more international merchants may deliberately use more than one payment provider.

This can be because:

• one provider has stronger coverage in a particular region;
• a local payment method is unavailable through the primary PSP;
• different commercial terms apply;
• the merchant wants provider resilience;
• different entities use different providers; or
• a more complex orchestration strategy is being used.

The objective should be the payment architecture that fits the business, not necessarily the smallest possible number of providers.

What should merchants compare when choosing an APM gateway?

Customer markets

Which countries and customer groups actually need additional payment methods?

Payment-method coverage

Does the gateway support the wallets, bank payments, BNPL products or local methods that matter to those customers?

Merchant eligibility

Will the individual payment methods accept the business sector, entity location and transaction profile?

Integration

Does the gateway work with the existing ecommerce platform, app, checkout or API?

Customer experience

Does the payment method keep the checkout clear and understandable, or introduce unnecessary redirects and choices?

Pricing

What does each method cost and which charges sit outside the headline gateway price?

Settlement

When and in what currency will the business receive its money?

Refunds and disputes

How does each method handle customer refunds, disputes and reversals?

Recurring payments

Can the method support repeat payments if the business uses subscriptions or memberships?

Reporting and reconciliation

Can the finance team identify the payment method, fee, refund and settlement without manually joining several reports together?

International support

Are the required merchant entities, currencies and customer markets supported?

How Merchant Advice Service helps with alternative payment methods

Merchant Advice Service does not recommend adding payment methods simply because a provider offers them.

Our role is to help businesses understand the complete payment requirement before identifying providers that may be suitable.

For APM and gateway enquiries, that can include:

• existing gateway;
• ecommerce platform;
• customer countries;
• merchant entities;
• currencies;
• monthly processing volume;
• average transaction value;
• digital wallets;
• Open Banking or bank payments;
• BNPL requirements;
• local payment methods;
• recurring payments;
• refunds;
• settlement;
• reporting and reconciliation;
• technical integrations; and
• provider eligibility.

For the wider gateway decision, visit our Payment Gateway advice hub .

Sources & References

• Open Banking – Payment Initiation Services – information on payment-initiation journeys and customer consent for account-to-account payments.
• Apple – Apple Pay Security and Privacy – information on the way payment credentials are secured and transmitted through Apple Pay.
• Google – Google Pay API – technical information on Google Pay integration for online and app payments.
• Financial Conduct Authority – Regulating Buy Now Pay Later – current UK regulatory position for Deferred Payment Credit from 15 July 2026.
• Merchant Advice Service – Buy Now, Pay Later for Merchants – guidance on BNPL integration, merchant eligibility, regulation, settlement and fees.
• Merchant Advice Service – Payment Gateway Fees UK – guidance on gateway fees and the wider cost of online payment acceptance.
• Merchant Advice Service – Payment Gateway Advice – guidance on gateway functionality, payment methods, integrations and provider selection.
• The Payments Directory® – Payment Gateway Providers – explore gateway providers and payment functionality.
• Merchant Advice Service – Editorial & Research Policies

Editorial & Commercial Disclosure

This guide provides general information about alternative payment methods and payment gateway functionality.

The term APM covers a wide range of payment models. Individual payment methods can use different infrastructure, regulations, commercial arrangements, customer protections, settlement processes and dispute procedures.

A gateway supporting a particular payment method does not guarantee that every merchant will be eligible to use it. Payment providers and individual payment methods determine their own acceptance criteria.

Merchant Advice Service does not operate payment methods, process transactions or determine merchant eligibility.

MAS is an independent payments information and provider-matching service. MAS may receive a referral fee or commission from some payment providers where a business proceeds following an introduction. Commercial relationships do not determine the factual information or provider-selection principles contained within this guide.

Payment-method availability, pricing, geographic coverage, regulation and technical functionality can change. Businesses should confirm current terms directly with the relevant provider.

Information is provided for general guidance and should not be treated as legal, regulatory or financial advice.