Top 10 Payment Methods: Which One is Right for Your Business?

Napoleon

— 11 min read
Top 10 Payment Methods: Which One is Right for Your Business?

Today, the bigger population shops online, from groceries and furniture to clothing. Paying for goods or services online is a process that needs utter safety and security for the buyer and the businessman. 

As a business owner, you should add numerous reliable payment methods to your business to ensure the customer pays for goods or services with ease. Plus, since online payments involve sensitive data, you must ensure that the customer’s information is safe and will never get into the wrong hands. 

Besides security and ease of payment, the method you add to your eCommerce store or website must be practical and cost-effective. You don’t have to add one payment method, but as many as you add, make sure they’re all easy to use.

Today, the majority of online businesses accept numerous payment methods; direct wire transfers, credit cards, debit cards, or bank-to-bank transfers. Combining the right payment methods for your business will streamline the sales process for the business and your customers alike. 

Online payment solutions make it convenient for customers to make payments. Suppose you’re just launching your new business. Foundeck welcomes you to its comprehensive guide on the top 10 payment methods.

From this article, you’ll know the options you can choose from to help you determine which one is right for your business. 

What Is a Payment Method?

A payment method is a way to pay for a transaction after buying goods, subscriptions, or services. Some of the most common payment methods available to use in your business include: 

  1. Debit cards
  2. Cash
  3. Prepaid cards 
  4. Check
  5. Mobile payments 
  6. Wire transfers
  7. Credit cards 
  8. Mobile payments 
  9. Electronic transfers 

Your business needs a trusted payment solution that makes the customer experience seamless and enjoyable. With a good, reliable method, you have more control over revenue in your business. 

Top Payment Methods for Your Business

Here are the top payment methods you can use for your business.

1. Cash

Cash (notes and coins) is on the decline but is still the most popular and cost-effective payment method around. Ideally, cash payments happen at a point-of-sale system. 

However, in the recent past, cash payments haven't been as rampant as before, paving the way for digital payment methods. Accepting cash payments in your business means you receive the money immediately, and there are no overhead costs. Thus, the payment method is ideal for small businesses with slim profit margins since other methods, like credit cards, charge fees, which can be costly. 

Running a business on a cash-only basis simplifies responsibilities in a small business, but it can also pose some challenges. For instance, when COVID-19 was a threat, cash was considered not so clean and also a way of spreading the virus. These pros and cons are related to the cash payment method:

Advantages of Cash:

  1. No transaction fees
  2. Diligent accounting skills will help you avoid audits

Disadvantages of Cash:

  1. The business is susceptible to theft, making it a high-risk business, especially when transacting in large sums
  2. Mismanagement of business cash
  3. Counting money is time-consuming and tiring
  4. Customers who only have cards to pay can find it inconveniencing

2. Check 

A cheque is a document issued by a customer to settle a debt or pay for goods or services. The document is signed by the person issuing to authorize the transfer of a certain amount of money from their bank account to the seller’s or business account. 

Historically, cheques are unpopular due to the time it takes to process the money (3-5 business days). However, the time it takes to process a check has been shortened to one or two working days, depending on the bank. 

Checks indicate the date of issue, payer’s account number, receiving account, and a signature to authorize the payment transfer. 

Checks are common among small business owners; all they have to do is open a business bank account and then start receiving checks for services rendered or products sold. 

It’s a rule of thumb to accept a check indicating the exact amount someone owes you. If in doubt, you can ask a third party to verify the legitimacy of each check your business receives to avoid legal issues or losing money. Both consequences can be expensive, and there might not be a guarantee of repayment.

Advantages of using Check payment:

  1. No upfront fees
  2. A clear record of transactions
  3. Easy to carry around, especially for large transactions
  4. A check can be intercepted in case it’s lost or misplaced

Disadvantages of using Check payment:

  1. A high risk of receiving a fraudulent or bounced check
  2. Depending on the bank, it can take a few days to mature

3. Debit Card Payment

Debit card payments are a primary payment method for many to pay for goods or services. 

Using a debit card is a convenient way to facilitate a smoother checkout process. Plus, it allows for the seamless transfer of large amounts. Hence, a business that accepts debit card payment, even if it’s one type of card, makes it easy for customers. 

Small business owners benefit from card payment as it broadens their customer base and legitimizes the company. Mostly, card payment deposits are reflected in your business account, quickly improving your cash flow. However, card payments come at a cost to business owners; flat fees, incidental fees, and credit transaction fees can take a toll on the business unless you pass some of these charges to customers. Your services or product prices might have to be higher. Different card companies set their rates, meaning they vary from MasterCard to Visa Card.

Consumers can dispute credit card charges if they’re unhappy with your product, and chargebacks can be made to your account anytime without a signal. When profit margins are tight, they can push your small business into losses. In case of any credit card fraud, some banks might hold you, the business owner, liable, which can tarnish your business reputation as a result. 

Advantages of Debit Card payments:

  1. Easy way to make large payments
  2. Fast and convenient at checkout
  3. You don’t have to keep a lot of cash at your store
  4. Any customer, including foreigners, can make payments

Disadvantages of Debit Card payments:

  1. A business must invest in a Point-Of-Sale device
  2. Transaction fees may apply to all purchases
  3. You can be held liable for the use of lost customer credit 

4. Online Payments

Online payment methods transfer money electronically. They use a payment gateway to facilitate and authorize numerous types of payments that include: 

  1. eChecks
  2. Credit cards 
  3. Direct debit payments

Online payments aren’t limited to online businesses. Still, they can also be used in brick-and-mortar stores using digital wallets or mobile apps that keep credit and debit card information. Thanks to their convenience and affordability, online payments are cheaper and faster, making checkout easy for customers. 

Online payments automatically tally payments, including taxes, which saves the business owner time and also reduces the risk of error. For a business to accept online payments in their business, the fee isn’t as high compared to what credit card companies charge.

E-commerce stores collect customer information to allow them to shop and pay using online payment. Through online payment services, ecommerce stores use virtual carts to total the shopping amount and then add shipping costs before the customers can checkout. 

To sell products online, you must add a free shopping cart service to your small business to offer a good customer experience during checkout. Due to its ease of payment and affordability, online payment services are now popular among brick-and-mortar retailers. Examples of online payment methods include:

  1. Paypal is one of the most popular online payment methods with an unmatched reputation for security and risk management. It’s ideal for any business that wants to receive payments online or in person. However, before choosing it, check if your cart service is compatible for customers to pay through PayPal, PayPal credit, or credit or debit cards.
  2. Quickbooks payment is a dynamic payment method for startups. It streamlines different payment methods, which saves you time. Quickbooks is accessible by registering for Quickbooks Online or Quickbooks Money.
  3. Venmo is a Peer-to-peer (P2P) payment method with a business side. 

Advantages of Online payments:

  1. Transactions are fast and secure

Disadvantages of Online payments:

  1. Some countries might be ineligible for some online payment methods

5. Direct Debit

A request authorizing transfer of funds from a customer's bank account to a business bank account is known as a direct debit. 

Depending on the bank, direct transfers are cheap, and there are no missed payments. Some banks will charge a monthly fee, while others charge annually. Direct debit is prompt, there are no late payments, high payment success rate, and it encourages repeat payment cycles.  

Although direct debit is fast and secure, you may have to wait for some time because these transfers happen in predetermined cycles. However, you can counter this shortcoming by using Instant Bank Pay, which allows an initial payment before regular payments are collected.

Some bank transfers that go through the Automated Clearing House (ACH) network are common and involve huge purchases, like in real estate. 

Advantages of Direct Debit payments:

  1. Low processing fees may vary depending on the bank; some offer flat rates, annual or monthly fees
  2. No late payments
  3. High payment success rate 
  4. Encourages repeat payment cycle
  5. Facilitates irregular one-time payments

Disadvantages of Direct Debit payments:

  1. The first payment to your business may take a while

6. Mobile Payments

Mobile payments are apps on mobile devices like smartphones or tablets which can encompass numerous payment options, including:

  1. Digital wallet payment apps and Near-Field Communication (NFC) technology take seconds
  2. Money transfer apps
  3. Mobile card reader allowing swiping of debit or credit cards

Mobile payments can facilitate mobile transactions, as well as card or electronic money transfers.

Advantages of Mobile Payments:

  1. Customers can make large payments
  2. Convenient to use anywhere
  3. As long your phone is on you, they’re better than the card in some areas

Disadvantages of Mobile Payments:

  1. Money can be reflected in your business account after some
  2. There’s a transaction fee for each purchase or transfer
  3. If payments are made from a stolen mobile phone, you may be held responsible
  4. When customers are unhappy, they can initiate chargebacks
  5. Exceptional authentication protocol
  6. Digital wallets like NFC transfer fees are high

NFC technology allows communication between two mobile devices in the same location. Sending money using NFC is costly; you pay a percentage of 3 -5% of every transaction. 

7. Buy Now Pay Later

A buy now, pay later plan (BNPL) is a payment method offered by a loan company to a customer to allow them to purchase goods on credit. Some BNPL lenders include:

  1. Shopify
  2. Affirm
  3. Afterpay
  4. Sezzle
  5. PayPal’s Pay Later
  6. Klarna

The payment method is popular with online shoppers and some brick-and-mortar retail stores. Providing this payment option to your customers is a way of incentivizing them to keep shopping even when they’re low on cash. 

Advantages of Buy Now, Pay Later:

  1. The service extends credit even to people with bad credit scores
  2. No upfront fee is needed to use the service
  3. Customers pay the loan back in installments
  4. BNPL allows customers to spend more than they have at the moment

Disadvantages of Buy Now, Pay Later:

  1. High charges on loans on retailers mean the customer ends up paying too much for the goods.

8. Cryptocurrency

Cryptocurrency is slowly becoming a viable payment method. Some eCommerce retailers have taken a step further by including cryptos as a payment method. Services such as BitPay and Wirex offer debit card customers an opportunity to fund purchases with cryptos like Bitcoin. 

Advantages of Cryptocurrency:

  1. Crypto payments go through blockchain technology, which is untraceable
  2. Cryptos are independent of government control
  3. Using cryptos opens the business to more customers 

Disadvantages of Cryptocurrency:

  1. Cryptos are volatile, leaving merchants who accept them at risk of losses
  2. Needs robust payment infrastructure. Other payment methods, like cards, bank transfers, and mobile payments

9. Reward or Points

Some business owners install systems in their stores (online or brick-and-mortar) for customers to accumulate points every time they make a purchase. The system allows customers to shop cashless and pay with the points accumulated over time. Different eCommerce stores use varying methods to award customers based on the amount they spend or the percentage of each order. 

Advantages of Reward or Points:

  1. A great way to build customer relationships 

Disadvantages of Reward or Points:

  1. Lowers revenue earning

10. Wire Transfer

Wire transfer is a method that allows electronic money transfer from a customer account to the merchant’s business account. Networks like SWIFT or Wise transfer money between correspondent banks around the world. Wire transfer is safe and fast. In some cases, it takes hours for money to reflect as long as the transfer was completed within working hours. A wire transfer is easy; The customer provides private information of the recipient:

  1. Name 
  2. Bank name
  3. Amount to transfer
  4. Reason of transfer
  5. Routing number
  6. A unique code for the transaction

These details will depend on the bank, but there will be on-screen instructions to guide you. However, whatever information you’re prompted to provide, ensure it’s accurate, so the transaction goes through successfully. 

Before sending a wire transfer, ensure you know the rules and regulations of the country in which you’re sending money to avoid inconveniences. 

Advantages of Wire transfer:

  1. Fast and secure

Disadvantages of Wire transfer:

  1. Currency might be a challenge when it comes to the exchange point

How to Choosing a Payment Method 

Online payments are ideal for eCommerce businesses, although brick-and-mortar stores can still use them. The technology allows business owners to increase their customer base, reduce costs, and simplify the accounting process. 

However, before adding any payment method to your business, it’s smart to find a solution that meets your needs. The right payment method for your business will improve your customer base, reduce costs, and provide an unforgettable customer experience during checkout.

Different online players dominate payment methods, and they’re all structured differently. For this reason, we have put together a few factors to consider when choosing the right payment method for your business: 

  1. Price - How will it cost you? Is the payment method accessible to anyone? What are the transaction rates? 
  2. Features - What unique features can you access? What makes it unique? 
  3. Flexibility - Do customers have the option to choose? Bank transfer, mobile, debit, or credit
  4. Functionality - Does the payment processing software seamlessly integrate with your business?
  5. Security - Will your customer information be secure? Are you fraud-protected? Is the payment method secure? 
  6. Location - Is the payment method suitable for your customer's location? Ensure the payment method is available in the countries you’re dealing with.
  7. Customer preference - Does the payment method resonate with your audience, or will you be locking some customers? 

Frequently Asked Questions

Which payment method is the most successful in many businesses?

The most successful payment method in many businesses is the use of cards. You can travel abroad and pay for services or goods without struggle. 

How is a payment method good for business?

You can tell if a payment method is good for business and if it’s acceptable worldwide, like card payment (credit or debit), bank or electronic transfer. However, the ideal payment method for your business will depend on your needs, like customer preference or the nature of your transactions

Can PayPal be a payment method for my business?

You can add PayPal as a payment method for your business; PayPal business is suitable for merchants who accept payment online. However, the payment method may only be ideal for some businesses. Hence, you should research the businesses they support to ensure your customers will not be frustrated. Plus, PayPal has stringent rules on transactions, and if any of your payments are deemed suspicious, they can hold them for 14, 21, or even 180 days. 

What is the most reliable payment method for my business?

The most reliable payment method is credit cards; they’re secure and safe to use anywhere across the world. Credit cards have security features like data encryption and fraud monitors to keep customer information, accounts, and personal information safe.

You don’t have to link your PayPal to a bank account to receive payment. However, you have a choice to link your PayPal account to a mobile payment credit or debit card account to send, receive, or transfer money.

In summary

Businesses have varying financial needs. In the same way, there’s a payment method for every business. When looking to add the right payment method to your business, there’s a lot to choose from: cards, cash, mobile payments, checks, or online payment. 

Each payment method has pros and cons that you should consider before adding it to your business. Additionally, you should also evaluate other factors like features, cost of installing the payment method, accessibility across the world, and your audience’s preference. Balancing these factors will assist you in picking a suitable method for your business. 

Diversifying payment methods will not only reach the masses but also maximise your business cash flow. Ensure that whatever payment method you settle for is safe, secure, and easy to integrate into your business. 

The right payment method is needed to give your customers a good user experience in your store. Also, as you choose a cart vendor, be sure to go for a software option that supports multiple payment methods to accommodate more customers. Variety in business will spice up everything from the operations shopping experience to checkout. Kindly contact one of our experts here if you have any questions.

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