The Top Ways Businesses Are Accepting Payments Online
The choice of payment methods for your online store has a significant impact on the success of your e-commerce.
Don’t know what to choose? We have checked the most popular methods that are convenient for both sellers and buyers, and collected tips on accepting online payments.
Payment by credit card
Recent research shows that 75% of customers choose to pay by credit or debit card when shopping online and live.
So let’s look at this method first. Visa and MasterCard are the leaders among the brands of bank cards and mandatory payment options.
Also, don’t forget about the local credit cards that your target audience uses. Having payment methods familiar to your customers increases the likelihood of conversion.
Bank cards, QR-code, or mobile banking
Although credit cards, mobile banking and QR code options look like 3 separate payment methods, they all perform the same operation – from the customer’s card to the dealer’s bank account. The difference is in the usage experience, but the money is withdrawn from the same source.
Advantages of using card payments
- Simplicity of transactions. No conversion of funds is required; the money comes from the client’s financial institution.
- Payments are made automatically. There is no need to fill out additional forms manually. You can choose the frequency of payments yourself, for example, once a week.
Disadvantages of using card payments
- High transaction fees. When using a credit card, a high commission is charged compared to other payment methods. Although it depends on the PSP. In addition, the transaction fee is affected by the type of your business. The higher the risk of a refund, the lower the available prices.
Payment with remittance systems (SWIFT and SEPA)
This is considered the easiest way to transfer money. In short, the funds flow from your client’s bank account directly to your bank account. SEPA and SWIFT are the most popular money transfer systems. Integrate both of these systems into your website.
SWIFT is controlled by American Financial Services, but is actively used worldwide. The main currency is dollars, so it is convenient for trading in the USA.
SEPA is suitable for trading in Europe and transfers euros. It is poorly suited for organizations located in the USA.
However, this money transfer system provides financial freedom and flexibility in use. SEPA requires a high processing fee, but is suitable for merchants who transfer thousands of dollars or more.
Disadvantages of SWIFT and SEPA
- High transaction fees. This fact makes money transfer systems inaccessible to small dealers.
- Long time of the payment transaction. You can wait up to 3 days for the money to arrive. This can be risky for merchants who need to ship the goods immediately. However, you get “live” money and you do not need to convert it.
Payments through ACH
Accept online payments using electronic checks. The Automated Clearing House (LCH) conducts monetary transactions between financial institutions.
Funds are transferred from the sender’s bank to the recipient’s bank through the Federal Reserve System. Transactions usually take 2-3 days.
Advantages of ACH payments
Low transaction fees. Traditional payment methods require a large commission, as transactions go through many stages.
Several parties are involved in the process, and each of them charges a certain amount of your money.
ACH is a more profitable financial solution. Regardless of the amount of money, you will not be asked to pay more than 1% per transaction.
It is user-friendly.
ACH is a simple payment system. To make a purchase, your customers only need to enter banking information.
Manual confirmation, bill payment and additional efforts are no longer required. After entering the date, the money is automatically withdrawn from the account.
No credit cards. They are considered unreliable due to the large number of fraud cases. In addition, unlike bank accounts, cards may expire.
Payments with mobile banking
Add the possibility of mobile payments to your platform. Conduct a lot of transactions using your smartphone. Pay utility bills and internet, repay loans, top up your gaming account, etc.
You can be sure of the security of Internet transactions thanks to data protection protocols. Each transaction must be confirmed by the user using micro calls to a mobile phone.
Advantages of mobile payments
- Fast transactions. Several button clicks are required to confirm the payment. The operation is processed quickly and without problems. The possibility of paying by phone increases the customer’s loyalty to the trading company.
- High level of protection. The security of data transmission during money transactions is a priority for mobile banking programs. They use a transaction encryption system. Thus, the personal information of cardholders is safe.
- Physical protection. In case of loss of the phone, unauthorized persons will not be able to access the data in it. The latest generations of smartphones are equipped with various types of protection, from PIN code to biometric confirmation.
- Global support. Large retail chains in developed countries always support mobile payments. In large cities, you can find many places for mobile payments.
What is the best online payment method?
Depending on your business and needs, you may find each electronic payment method profitable. There is no correct answer to this question, because each case is different. Below are tips on choosing the optimal solution for payment processing:
- Payment by bank cards for small businesses focused on sales within their region. Find a popular local bank for comfortable use.
- Electronic payment methods and cryptocurrency as a financial solution for a high-risk business.
- All types of businesses conducting global trade should provide a variety of payment options. Take the time to choose a PSP. WELLCOINEX allows you to track your business transactions in one place, accepting payments worldwide using a large number of payment methods.
- If your target audience is millennials and Generation Z, mobile banking is a must. Young adults will be predisposed to make purchases.
- SEPA is useful for all types of European enterprises.
- Low- and medium-risk American brands can accept SWIFT payments.
Benefits of Accepting Online Payments
Even if you run a business that promotes and sells services online, you can do without accepting payments online. You can act the old-fashioned way: Send the invoice and wait for the receipt by mail.
May. But most likely you will want to accept online payments because of all the features and amenities they add to your business.
No matter what you sell, your business can benefit from online payments because they are.:
- Expand your audience. Accepting multiple forms of payment makes doing business with you convenient for more people. The simpler the payment process, the more positive customer impressions are – and, consequently, the more likely they are to deal with you again.
- Make membership and subscription easy to set up. Payment service providers such as Stripe and PayPal facilitate automatic recurring payments. This will save you from having to issue invoices to customers and collect payments every billing period. In addition, it increases the level of customer retention, since they do not need to see the bill every month and decide whether to renew their subscription.
- You get paid faster. It may take several days or weeks to wait for the customer to receive the invoice and send you the check by mail. Online payments can be made instantly or, in extreme cases, within two to three days.
Challenges with Accepting Online Payments
The convenience and benefits of online payments involve some trade-offs, although the pros usually outweigh the cons. When organizing online payments for your business, keep in mind these potential pitfalls:
- Fees. Unlike a check by mail, online payments require an intermediary, and this intermediary needs to be paid. You will be donating part of your income to the payment processing fee.
- Data management. The possibility of identity theft and credit card fraud is much higher when customers make purchases online rather than in person (or use a payment method other than a credit card). If you use your own payment gateway, you will be responsible for protecting customers’ financial information on your servers. You can relieve yourself of this responsibility by using a hosted payment gateway or payment service provider.
Expenses that must be taken into account when using payment processors
Although payment processors offer convenience and security among other benefits, they also have to be paid for.
Each participant in the payment chain – banks, credit card companies, and the payment processor – takes its share.
Here are some of the transaction fees that you should pay attention to.
Interbank commission:
This is a fee paid to the card issuer (Chase, TD Bank, Bank of America, etc.) The card issuer receives a percentage of each sale.
Commission fee:
These fees are paid to credit card associations (Visa, Mastercard, Amex).
Acquirer’s or Processor’s commission:
These fees are paid to the processor (PayPal, Square, Stripe).
Merchant Commission:
This is the commission paid to your merchant bank. The percentage charged depends on the volume of transactions, the number of sales and the industry.
The exchange, valuation, and trade fee fees are combined together and indicated as one percent. The processor commission is indicated separately.
For example, the transaction fee may be 3%, and the processor fee is $0.20 per transaction.
This is useful to keep in mind when choosing a pricing structure, which we will discuss in the next section.
Accept cryptocurrency payments.
If you don’t mind working with cryptocurrencies, this is a way to expand the reach of your activities to a wider Internet audience.
Sites like Bitpay provide all the necessary tools to accept cryptocurrency payments online, send invoices, request payments and receive money on the go through applications.
Since cryptocurrencies are a decentralized exchange system, they have a number of unique advantages for business.
You can accept payments from anywhere in the world without charging a fee for currency exchange or banking transactions. In addition, the risk of fraud is reduced.
Use payment links.
Payment links are secure, exchangeable URLs or QR codes that connect to personalized payment forms. They can be added to emails, texts, chats or messenger apps.
You can even insert them directly into quotes and invoices to speed up payments. International payment platforms such as Rapid make it easy to send payment links for cross-border transactions.