What is Alternative Payment Method?
Also: APM
Any non-card payment method, wallets, bank transfers, BNPL, vouchers, accepted at checkout.
An Alternative Payment Method (APM) is any payment option offered to consumers at Checkout that does not rely on the global card schemes like Visa or Mastercard.
The category is broad and highly regional, encompassing digital wallets (such as PayPal, Apple Pay, Google Pay), real-time bank transfers (like iDEAL in the Netherlands or Giropay in Germany), Buy Now, Pay Later (BNPL) services (for example, Klarna or Afterpay),
direct debit systems (like SEPA in Europe or Bacs in the UK), and even cash-based vouchers (for instance, paysafecard).
Mechanically, each APM operates differently. Bank transfers typically redirect the customer to their own online banking portal to authorise a 'push' payment, confirming funds availability instantly.
BNPL providers underwrite the consumer's credit at the point of sale, often requiring detailed basket data from the merchant to do so, and pay the merchant upfront while collecting instalments from the consumer.
Digital wallets either use stored card details (often network tokenised) or a pre-funded balance. The data flow and counterparties involved vary just as widely, moving beyond the standard issuer-acquirer-scheme model to include the consumer's bank, the APM provider, and the orchestrating PSP.
A common misconception is that all APMs eliminate chargebacks. While irrevocable 'push' payments from bank accounts do, many other APMs, including PayPal and most BNPL services, have their own proprietary consumer dispute processes that function very similarly to card scheme chargebacks.
Worked example
A German customer is purchasing a pair of headphones for €150 from a UK-based e-commerce store. At Checkout, alongside Visa and Mastercard, they see the option for Giropay, a familiar local bank transfer method.
They select Giropay and are securely redirected to their online banking login page for Sparkasse. They authorise the €150 payment using their bank credentials and a second authentication factor (SCA), fulfilling the payment guarantee.
The merchant receives an instant confirmation of successful payment, allowing them to ship the order immediately. The funds are settled to the merchant's account via their PSP in T+2 business days.
The transaction fee might be around 1.3% + €0.20, totalling €2.15. This is often less expensive than a cross-border card transaction and, crucially for the merchant, carries zero risk of a customer-initiated chargeback, as the payment is irrevocable.
Scheme notes
Unlike card payments, APMs are not governed by Visa and Mastercard rules, but by their own scheme or network operators. For example, iDEAL in the Netherlands is a dominant bank transfer scheme that provides merchants with an irrevocable payment guarantee.
Giropay in Germany offers a similar service. In contrast, SEPA Direct Debit, used across the Eurozone for recurring payments, is a 'pull' system that grants consumers a no-questions-asked refund right for eight weeks, presenting a risk similar to chargebacks.
BNPL providers like Klarna and Afterpay have their own distinct risk underwriting, fee structures, and consumer dispute mechanisms that operate entirely outside of card scheme rails.
Digital wallets like Apple Pay and Google Pay often act as a front-end for card transactions, meaning they are still subject to the underlying scheme's rules for interchange, disputes, and acceptance.
Why it matters for merchants
Offering relevant APMs is critical for international expansion and improving Checkout conversion. In many markets, particularly in Europe and APAC, APMs account for over 50% of e-commerce transactions.
Failing to offer a preferred local method like iDEAL in the Netherlands can lead to cart abandonment rates of over 60%. APMs can also reduce costs; bank transfer methods are often cheaper than card processing, especially for cross-border sales.
Furthermore, 'push' payment APMs eliminate Credit card fraud and chargeback risk. Integrating and managing multiple APMs can be operationally complex.
A payment orchestration provider like Cardflo simplifies this by providing access to a wide range of global and local APMs through a single API and unified settlement file, allowing merchants to easily cater to regional preferences.
Frequently asked
How do settlement timings for APMs differ from standard card payments?
While card settlements typically occur within one to three days, APM settlement cycles vary significantly according to the underlying scheme.
Digital wallets often mirror card timings, whereas bank transfer systems like SEPA or certain cash vouchers may take several business days to reach the merchant's account.
Do APMs reduce the merchant's risk of chargebacks?
Certain transfer-based APMs do not have a built-in chargeback mechanism similar to those mandated by card schemes, making them effectively irrevocable once cleared.
However, providers like PayPal or Klarna have their own dispute resolution frameworks which merchants must adhere to as part of their service agreement.
Do digital wallets like Apple Pay count as APMs?
Yes, they are generally categorised as APMs. However, it is vital to understand their mechanics.
Apple Pay and Google Pay are primarily containers for tokenised card credentials. Transactions processed through them use the Visa or Mastercard rails and are subject to standard interchange and scheme fees.
Other wallets like PayPal use a stored balance or linked bank account, operating under their own set of rules and fees.
Are APMs always cheaper than card payments?
Not necessarily. While direct bank transfer methods are often more cost-effective, with fees around 1-2%, some APMs are significantly more expensive.
For example, BNPL providers might charge merchants fees ranging from 4% to 8% of the transaction value. The cost reflects the service provided, such as credit risk underwriting and the proven sales uplift they can generate for the merchant.
How does settlement work for APMs?
Settlement timelines and processes vary significantly between APM providers. Real-time bank transfers typically settle to the merchant within T+1 to T+3 days.
BNPL services usually pay the merchant the full transaction amount upfront (less their fee), taking on the responsibility for collecting from the customer.
A payment orchestrator like Cardflo helps by normalising these varied settlement cycles into a single, predictable payout schedule and consolidated report for the merchant.
Can I receive chargebacks on transactions made with APMs?
It depends on the APM. For 'push' payment methods like iDEAL or Giropay, the payment is irrevocable and cannot be charged back by the consumer.
However, APMs that offer buyer protection, such as PayPal or Klarna, have their own dispute resolution systems that are analogous to chargebacks. 'Pull' methods like SEPA Direct Debit have built-in consumer refund rights, creating a similar financial risk for merchants.
What is the technical effort required to add multiple APMs?
Directly integrating with several APMs is a significant technical undertaking. Each has a unique API, a separate onboarding and compliance process, and its own settlement and reporting format.
Utilising a payment orchestration layer like Cardflo dramatically reduces this burden. Merchants can access dozens of APMs through a single API integration, contract, and Reconciliation process, making it much simpler to manage a diverse payment stack.
See how Alternative Payment Method plays out in practice
Industries and regions where this term drives real acquiring, routing, or dispute decisions.
Related terms
A platform layer that lets a merchant connect to multiple acquirers, APMs, and risk tools through one integration and route transactions intelligently.
The merchant-facing payment surface, the form, hosted page, or SDK where the customer enters payment details.
A card transaction where the issuer country differs from the acquirer country, attracting higher interchange and scheme fees.
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