Alternative payment methods (APMs): Everything you need to know

At its core, alternative payment methods are financial transactions conducted through non-traditional channels, such as buy now, pay later (BNPL), digital wallets, instant bank transfers, and mobile-based payment systems. Payments done by APM bypass the traditional physical card or cash infrastructure.

While these methods are often referred to as alternatives, they are the standard way to pay in many parts of the world. Because of this, APMs are often considered . 

How do APMs work?

APMs work by using digital technology to move funds directly from a bank account, a pre-loaded digital balance, or a mobile phone account. This often allows for faster transactions and some APMs have lower merchant fees than traditional card networks. 

The benefits of using APMs include: 

1. Meeting consumer demand

Modern shoppers increasingly prefer digital-first experiences. Recent data shows that digital wallets now serve over , which is more than half of the world's population. 

If you don’t offer these options, you risk losing customers who no longer carry physical wallets or cards.

In its mission to become the number one cybersecurity company worldwide, Nord Security needed to establish a strong local presence. Letting customers pay how they want is key, and to do that, it needs a partner that can handle local processing.

To strengthen its local presence, Nord Security uses Adyen to offer local payment methods. They also constantly experiment with the adoption and usability of new payment methods.

They use Adyen Uplift to run more tests, measure results, and find the optimal local payment method mix in all their markets. One of the fastest growing payment methods in Brazil is Pix. By offering Pix, Nord Security saw 60% of users in Brazil started using this payment option.

2. Reducing payment processing costs

Alternative payment methods typically cost less to process than international credit cards. On average, businesses using local schemes see on average compared to traditional cards. As your company grows, these savings directly improve your profit margins and reduce the impact of interchange fees.

RMS is one of the first platforms in the hospitality industry, one of the first to go to the cloud, and one of the first to offer multi-property capability to their users. In 2023, they introduced RMS Pay to their users, an embedded payment solution powered by Adyen for Platforms. 

The goal? To boost operational efficiency, help users combat fraud, and create memorable and seamless guest experiences. Discover they reduced cost of payments with local payment methods. 

3. Optimizing mobile and app checkouts

Mobile commerce is expected to generate over . Digital wallets like Apple Pay and Google Pay are designed specifically for mobile devices. They allow customers to pay with a fingerprint or a face scan instead of entering long card numbers. This speed reduces the number of abandoned carts during checkout.

4. Supporting global business expansion

Offering the payment methods that locals trust builds immediate credibility. Shoppers are often hesitant to buy from an international brand if they can't use their preferred local bank transfer or digital wallet. Using these methods removes a major barrier to entry in new territories.

Operating over 780 stores across 25 countries and counting, discover how Lululemon was able to adapt to local preferences as they grew.  

There are different types of APMs, each serving a different purpose and meeting different user preferences. Understanding them helps you choose the right mix for your business. Different types of APMs include:

Digital and mobile wallets

A digital wallet is a software application that securely stores payment information. Users can link their bank accounts or cards to the wallet and pay using their phone or a computer. Examples include Apple Pay, Google Pay, and PayPal. In Asia, wallets like and are the most common ways to pay for everything from groceries to luxury goods.

Buy now, pay later

Buy now, pay later (BNPL) is a payment method that lets the customer buy a product or service immediately and pay for it in installments over several weeks or months. The BNPL provider pays the merchant the full amount upfront and takes on the risk of collecting payments from the shopper. This method is very popular for fashion and electronics.

Account-to-account and Pay by Bank

Pay by Bank is a payment method that bypasses the card networks entirely by allowing the customer to send money directly from their bank account to the merchant's account.  

In Europe, the Instant Payments Regulation has enabled these transfers to occur in real time. This is often more secure for the customer and cheaper for the merchant because there are no high credit card fees involved.

Direct debit and vouchers

Direct debit is used for recurring payments, in which a customer authorizes a business to withdraw funds from their account on a set schedule. Vouchers are common in regions where people prefer cash. A customer receives a digital code, goes to a physical location, such as a convenience store, and pays in cash to complete an online order.

Payment habits vary significantly depending on where your customers live. A successful global strategy requires offering the specific methods preferred in each region.

The list above shows how diverse the global landscape is. For example, in Brazil, the instant transfer system Pix is used by over 100 million people. In the Netherlands, nearly all online shoppers use .

Before adding new payment methods, you must evaluate how they fit into your current business model by considering:

1. Target customer habits

Research which methods your specific customers use most. If you sell to a younger demographic, BNPL and digital wallets are high priorities. If you're selling to businesses (B2B), bank transfers and direct debits are more important.

2. Risk and security

Different payment methods have different levels of risk. Some APMs do not allow chargebacks, which protects the merchant from fraud. Others might require more identity verification. You need to ensure your can handle the specific types of transactions you're accepting.

3. Technical infrastructure

Adding twenty different payment methods one by one is difficult for a technical team. Using a single financial platform that supports multiple methods through a single integration is more efficient. This keeps your checkout running smoothly and makes it easier to update your options in the future.

The most efficient way to accept APMs is through a unified financial technology platform like Adyen. Instead of creating separate connections for every local bank or digital wallet, you use a single integration that gives you access to hundreds of options worldwide.

You can manage all your transactions in one place, which makes reporting and reconciliation much faster. This approach allows you to turn specific payment methods on or off as you enter new markets, giving you the flexibility to grow without constant technical work.

Are you ready to offer alternative payment method? Get in touch to start offering the payment methods your customers want.