5 Alternative Payment Methods UK Businesses Use Today

Forget what you know about payments. Cash and cards are no longer the gold standard – alternative payment solutions are taking over. Open banking, digital wallets and direct debits are changing how consumers transact, offering faster, safer and cheaper options.

Merchants adopting alternative payment methods can reduce costs, improve checkout conversions and offer customers more flexibility. From shopping and subscriptions to bills and transfers – consumers are shifting to faster, frictionless methods of payment in the UK.

In this guide, we explore alternative payment methods in the UK, how they compare to cards and whether open banking offers businesses a faster, more cost-effective way to move beyond traditional payments.

What Are Alternative Payment Methods?

From coins and cheques to contactless and instant bank transfers, how the UK pays has constantly changed. Alternative Payment Methods (APMs), such as digital wallets, open banking, BNPL and cryptocurrencies, provide new ways to transact beyond traditional card payments.

• Open banking and cryptocurrencies reduce reliance on intermediaries by enabling direct account-to-account transfers.
• Digital wallets and BNPL introduce alternative intermediaries that offer different cost structures or enhanced user experiences.

Payments are evolving, with real-time transactions rising from 10% in 2023 to a projected 10.8% by 2028. To keep pace, APMs provide a faster, more secure, and cost-effective alternative, helping businesses reduce fees, improve security and speed up settlements.

Why UK Merchants Are Moving Away from Cards

For many UK businesses, card payments are becoming less viable due to rising costs and operational inefficiencies. Beyond transaction fees, merchants face delayed settlements, financial risks from chargebacks and added costs for international transactions. These challenges create unnecessary strain on cash flow and profitability.

As a result, more businesses are shifting to alternative payment solutions that offer faster processing, lower costs and greater security, ensuring a smoother and more sustainable payment experience.

Alternative Payment Solutions in the UK

Businesses now have more options beyond traditional card payments. Below are examples of alternative payments in the UK – offering greater flexibility, security and cost savings.

Digital Wallets & Mobile Payments

Digital wallets such as Apple Pay, Google Pay and PayPal have become a dominant force in UK payments, particularly in e-commerce and mobile transactions. These payment alternatives offer frictionless checkouts, strong authentication and a seamless mobile experience, making them a preferred option for consumers.

As of December 2024, digital wallets accounted for 53% of all online transactions in the UK, making them the most commonly used payment method. Their widespread adoption reflects changing consumer behaviour, with more people opting for tap-to-pay and biometric authentication over traditional card payments.

For businesses, integrating digital wallets can reduce cart abandonment rates and enhance security, as these methods incorporate strong encryption and fraud prevention measures.

Buy Now, Pay Later

More shoppers are using Buy Now, Pay Later (BNPL) services like Klarna and Clearpay to split payments into interest-free instalments, making expensive items more affordable. This has helped retailers and e-commerce stores boost sales and improve checkout conversions.

BNPL is growing but still a small player in the UK market – usage increased from 6% in 2021 to 7% in 2023 and is expected to stay the same through 2027. While it hasn’t overtaken credit cards, its continued use proves that consumers want flexible payment options without traditional credit checks.

With more consumers seeking flexible methods of payment in the UK, integrating BNPL into checkout can help businesses cater to shifting expectations and boost sales in the process.

Direct Debit & Recurring Payments

With 58% of recurring payments in the UK processed via direct debit as of December 2024, it remains one of the most reliable payment alternatives for businesses. Subscription-based services, utilities and insurance providers continue to use direct debits to ensure predictable revenue and reduce payment failures.

For companies in industries like media streaming, insurance and SaaS, direct debits provide predictable revenue and reduce failed payments. Unlike card payments, which can fail due to expiration or insufficient funds, direct debits pull payments directly from bank accounts, ensuring a stable and uninterrupted cash flow.

Cryptocurrency Payments

For businesses handling high-value international transactions, cryptocurrency provides a cost-effective alternative to traditional payment methods. 24% of UK businesses already accepting crypto, and industries such as luxury goods and travel are using digital currencies to eliminate chargebacks, reduce FX fees and avoid banking delays.

With 10,567 cryptocurrencies available worldwide as of January 2025, businesses have a wide range of options beyond Bitcoin and Ethereum, allowing them to explore payment solutions that best fit their needs. Unlike card payments, crypto transactions settle instantly, helping businesses retain more revenue without high processing fees.

As adoption grows, crypto payments may become a key tool for businesses looking to streamline cross-border transactions and reduce reliance on traditional banking systems.

Open Banking

More than 11 million UK consumers are now using open banking, an 88.4% increase in just two years. For businesses, this means a shift away from card networks with high fees, slow settlements, and various fraud risks toward A2A payments, which use open banking technology to bypass intermediaries reduce costs and improve payment security.

By 2027, A2A transactions are expected to reach €223 billion, growing 212% from 2024. Businesses that integrate A2A payments benefit from:

• Lower Transaction Fees – A2A payments cost as little as 0.35% per transaction, compared to the 4% average for card payments
• Instant Settlements – Payments are processed in real-time, eliminating the usual wait of several days
• Stronger Security – Built-in bank authentication reduces fraud and eliminates chargebacks
• Better Cash Flow – Faster access to funds helps businesses manage operations more efficiently
• No Reliance on Card Networks – Businesses keep more control over how payments are accepted, managed and settled – without third-party processing fees

Businesses are no longer tied to expensive card networks – A2A payments, made possible through open banking, are giving them a faster, cheaper and most reliable alternative payment solutions in the UK.

How Noda Improves Payments in the UK

Noda is a trusted Open Banking provider operating across multiple markets and industries, including e-commerce, travel, online gaming, SaaS, and retail. By enabling direct A2A transactions, Noda removes the need for card networks, helping businesses cut costs, speed up settlements and improve customer satisfaction – creating a smoother payment experience for both merchants and their customers.

How Noda Compares to Traditional Card Payments

Noda’s Open Banking platform goes beyond transactions, offering businesses real-time data access to improve customer experience, security and financial management.

• Personalisation – Analyse customer spending patterns to offer tailored services
• Verification & Compliance – Automate income verification, fraud prevention and KYC
• Financial Management – Consolidate financial data for real-time cash flow insights

With over 2,000 bank connections across 28 countries, extending beyond the UK and Europe, and support for multiple currencies – Noda helps businesses simplify operations, reduce costs and expand globally with frictionless payment experience.

Go Beyond Traditional Payments with Noda

We believe businesses shouldn’t have to deal with high fees, slow settlements, or chargebacks. Noda offers a faster, more cost-effective way to accept payments with instant bank transfers, lower costs and built-in security – giving businesses a smarter alternative to traditional card payments.

With straightforward API integration and no-code e-commerce plugins, getting started is simple. Our scalable infrastructure ensures reliability as your business grows, while bank-grade encryption keeps every transaction secure.

No complex setups, no unnecessary intermediaries – just seamless, direct payments that put you in control.