Let us look at a simple example to understand.
- Suppose we have a custom entity name Demo Entity.
- Create a new single line of text field named Alternate Key Field.
- Create a new Alternate Key Field and specify the above field for it.

- Click on “Create index for My Alternate Keys for entity Demo Entity” which will create an Index in CRM’s Database.
- Let us update the following record using Alternate Key

- Sample code

- Updated record

- Currently alternate key can only be defined on field type – string, integer and decimal.
- The alternate key can be used for Entity Reference as well, wherein instead of specifying GUID we can now use alternate key.

Hope it helps..
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Is there a way to modify the text message alternate key generated. Its not in translations file.
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Which text message ?
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