Alternative Payment Methods UK: Your Complete Guide to Modern Payment Solutions

The way people pay in the UK has undergone a significant change. For years, card payments were the undisputed champion of the checkout page, but the ground is shifting. Today's customers arrive at your checkout with higher expectations for speed, choice, and security. 

For merchants, embracing these alternative payment methods UK is more than a nice-to-have; it’s a vital step to reduce costs, increase checkout success rates, and provide customers with payment choices that suit their preferences.

This guide unpacks the relevant examples of alternative payments UK,  showing how moving beyond cards can unlock significant advantages. You’ll learn why these methods, especially open banking, are no longer niche; they’re essential for merchants wanting growth, trust, and happier customers. And you’ll see how Noda can help you thrive in this dynamic market.

Key Takeaways

1. Alternative payment methods in the UK go beyond cards, including digital wallets, Buy Now Pay Later (BNPL), direct debits and open banking payments.
2. Open banking adoption in the UK is surging, making its way among the leading alternative payment solutions in the UK.
3. Digital wallets (Apple Pay, Google Pay, PayPal) dominate online transactions, thanks to their convenience and strong security features.
4. Alternative payment methods UK like open banking use strong customer authentication, reducing fraud (£620M in card fraud losses in 2024) and building customer confidence.
5. Noda’s open banking platform enables merchants to embrace these alternative payment methods easily, offering instant settlements, low fees, no chargebacks, and broad bank connectivity for a frictionless payment experience.

What Are Alternative Payment Methods in the UK?

The term alternative payment method (APM) covers any form of payment that isn’t a traditional debit or credit card transaction.

Popular methods of payment in the UK beyond cards include:

1. Digital wallets like PayPal, Apple Pay, and Google Pay.
2. Open banking–powered instant bank-to-bank payments.
3. Direct debit.
4. Buy Now, Pay Later (BNPL) services.
5. Cryptocurrency payments.

APMs can be broadly grouped into:

• Direct account-to-account solutions – such as open banking or direct debits, which move money directly from a customer’s bank account to the merchant without card networks.
• Alternative intermediaries – like digital wallets or BNPL providers, which offer a different user experience or cost structure than cards.

The UK’s payment landscape is shifting: real-time transactions accounted for 10% of all payments in 2023 and are projected to grow to 10.8% by 2028 (Statista). Speed, security and cost savings are driving this change — and merchants that want to stay relevant are adapting now.

Why UK Merchants Are Looking Beyond Cards

For many UK businesses, the reliance on card payments is becoming a point of friction. Rising transaction fees, delayed settlements, and fraud risks are pushing businesses towards alternative methods of payment in the UK such as open banking platforms like Noda.

Did you know UK card fraud cost businesses £572,6 million in 2024? It’s time for merchants to ditch plastic.

Comparison of Card Payments vs. Alternative Payment Methods

These accumulating pressures are nudging smart businesses towards payment alternatives. They are seeking solutions that offer faster processing, genuinely lower costs, and ironclad security, leading to a smoother and more profitable operation.

A Guide to Alternative Payment Solutions in the UK

The landscape of alternative payment solutions in the UK is rich and varied. Understanding the most popular options is key to building a checkout experience that converts.

1. Digital Wallets and Mobile Payments

Digital wallets such as PayPal, Apple Pay, and Google Pay are now mainstream in British e‑commerce checkout flows. PayPal has solidified its position as the top payment method for e-commerce businesses in the UK, with Apple Pay and Google Pay emerging as major players.

Similarly, apps like Revolut and Monzo are gaining traction, with Revolut boasting 10 million UK users in 2025. These apps support seamless peer-to-peer and merchant payments, appealing to tech-savvy Gen Z and Millennials.

Why do they work?

• Frictionless checkout — tap-to-pay and biometric authentication.
• Strong encryption — reduces fraud.
• Mobile-first experience — ideal for mobile shopping users.

The numbers speak for themselves. As of June 2025, digital wallets were used for a staggering 48% of all online purchases in the UK. This isn't a niche trend; it's the new mainstream. For businesses, integrating digital wallets is a proven strategy to reduce cart abandonment by removing barriers at the crucial final step of the sale.

Merchant Tip: Digital wallets improve customer experience but don't solve cost problems. PayPal, Apple Pay, and Google Pay all charge similar fees (1.2-3.5%) because they ultimately process through card networks. The real savings come from bypassing cards entirely with open banking solutions like Noda (fees from 0.1%).

A £500 sale costs you between £6.30 -£9.30 with PayPal vs. around £0.50 with Noda. Test a few SKUs for a month and watch the margin difference.

2. Open Banking – The Quiet Revolution

Perhaps the most transformative development is the rise of open banking. With over 15 million active UK users as of July 2025, open banking is rapidly moving from a niche concept to a mainstream payment method. It enables direct account-to-account (A2A) payments, allowing customers to pay you straight from their bank account with bank-level security.

Why does it work?

This model bypasses the traditional, and often costly, card networks. For businesses, the benefits are profound:

• Dramatically Lower Fees: A2A payments can cost a fraction of card transaction fees, putting more money back into your business.
• Instant Settlements: Say goodbye to waiting 1-3 days for funds to clear. A2A payments are settled in near real-time, giving you immediate access to your cash.
• Virtually No Chargebacks: Because payments are authenticated directly with the customer's bank, the risk of fraudulent chargebacks is entirely eliminated.
• Enhanced Security: Leveraging bank-grade security protocols like biometrics means every transaction is incredibly secure.

Open banking represents a fundamental shift, giving merchants more control over their payments and freeing them from the high fees and slow processes of outdated systems.

E-commerce quick win: Simplify bank transfers with Noda's open banking with fees from just 0.1%, with all security features like PCI compliance and fraud prevention built-in at no extra cost. Noda’s one integration connects you to every major UK bank plus over 2,000 institutions across Europe. You can also instantly create and send secure payment links for quick checkouts.

3. Direct Debit and Recurring Payments

For subscriptions and regular bills, direct debits remain a backbone of UK payments—handling 58% of recurring payments as of late 2024. Unlike cards, direct debits pull from bank accounts directly, reducing payment failures and creating predictable cash flow, particularly useful for SaaS and membership businesses.

However, direct debits come with trade-offs: they're prone to chargebacks (customers can reverse payments easily), settlements aren't instant (typically taking 1-3 business days through BACS), and setup requires customer mandate authorisation. While cheaper than cards for processing, the chargeback risk and delayed settlements can impact cash flow management, particularly challenging for businesses that need immediate payment confirmation.

4. Buy Now, Pay Later (BNPL)

BNPL Services like Klarna, Clearpay, PayPal and Zilch—a UK-based Buy Now, Pay Later (BNPL) fintech—are gaining steam. These services allow customers to spread the cost of a purchase over a series of interest-free instalments.

BNPL is growing but still a small player in the UK market – usage increased from 6% in 2021 to 7% in 2024 and is expected to increase slightly by 2030. While it hasn’t overtaken credit cards, its continued use proves that consumers want flexible payment options without traditional credit checks.

For merchants, offering BNPL can be a powerful way to increase conversions and boost average order value, particularly in industries like fashion retail, home furniture, consumer electronics, jewelry, fitness equipment, and home improvement where higher-priced items benefit from instalment options. 

However, BNPL comes at a premium cost—merchants typically pay 3-6% in processing fees, significantly higher than traditional card payments, because BNPL providers assume credit risk and offer interest-free financing to customers. This makes BNPL most viable for businesses with healthy margins or those in sectors where the conversion lift from offering instalments outweighs the additional processing costs.

5. Cryptocurrency Payments

Cryptocurrency payments have emerged as a new alternative payment method in recent years, but with less than 1% market share, they remain highly niche in the UK. They are primarily used by specialised industries such as online gaming, digital services, and high-risk sectors where traditional payment processors may impose restrictions. While stablecoins offer theoretical benefits like instant settlements and lower international transaction fees, regulatory uncertainty and proposed ownership caps by the Bank of England limit mainstream adoption.

For most UK merchants, cryptocurrency payments are not yet a practical alternative to established methods, though the landscape may evolve as regulatory frameworks develop through 2025-2026.

How Noda Champions a Better Payment Experience

Noda offers the technology that allows businesses across e-commerce, retail, travel, and gaming to offer direct A2A payments. Noda helps you sidestep the expensive and slow card networks for good, by facilitating a direct connection between you and your customers' banks.

Our solution is designed to tackle the core problems merchants face, creating a better experience for everyone.

Unlocking the UK Market is Simpler Than You Think

Noda helps you meet UK customer expectations, lower transaction costs, and scale your business across Europe. Streamline your operations with one integration instead of dealing with multiple providers.