Alternative payment methods are the ways people pay online without a credit or debit card. They are also called local payment methods, or APMs. Examples are a charge added to your mobile phone bill, a local wallet, a bank transfer and a prepaid voucher bought with cash.
In India, the most common alternative payment method is UPI. Most Indians pay online by UPI, not by card. A shop in India gets UPI through its payment gateway. But many countries have their own methods, and a global shop cannot connect to each one separately.
Take, for example, a game studio in Kochi sells a ₹100 game pack to players in Indonesia and the Philippines. Many of these players do not have a card. Some of them pay with a local digital wallet. Others pay with their mobile phone balance. An alternative payment methods company connects the studio to all of these methods through one connection.
The best-known method is carrier billing. Carrier billing means that the price is added to your mobile phone bill, or deducted from your prepaid phone balance. Say a player in the Philippines buys the game pack this way. She enters her phone number and confirms with an OTP. The alternative payment methods company sends the charge to her mobile operator. The operator's billing system adds the charge to her bill. Later, the operator pays the money to the company, which pays the game studio.
These methods are used most for small digital purchases. Examples are a game top-up, an app subscription or a music service. A game top-up means buying a game's virtual currency, such as gems or coins, with real money.
Alternative payment methods are slower to settle than cards. A mobile operator may take weeks to pay. The operator also keeps a large share of each payment as its fee. So shops use these methods mainly to reach customers who have no other way to pay.