People are turning to online payments more and more, especially since the pandemic. However, the world of online payments is broad and businesses need to understand the different methods and know which option is best for them and their customers. Here is an introduction to online payments.
What are Online Payments?
Online payments are the electronic transfer of funds via the internet and can be made in various ways, from web pages and banking apps to debit or credit cards.
Online payments, in particular the recurring ones, form an important part of a business’ revenue. However, not all online payment methods are the same. Each has its own characteristics, flaws and benefits, meaning that not all of them will be suitable for every business.
Types of Online Payments
Here are just some of the common types of payment methods:
Credit Cards and Debit Cards
Customers can borrow funds from banks via credit cards and then pay the balance off entirely each month or partly each month with interest. Debit cards, on the other hand, make payments that take money directly from a customer’s account.
Apple Pay and Google Pay are two of the most popular digital wallets and allow customers to pay for their goods and services by linking their bank cards or accounts to their phones.
Buy Now, Pay Later
This option offers customers a way to immediately pay for goods and services and they are repaid in fixed monthly installments. Klarna and Afterpay are two popular companies that offer this financing.
Whilst digital wallet payments go through a third party or merchant such as Apple, bank transfers move money directly from a customer’s bank account and this is what form of online payment Open Banking is.
Which Online Payment Method is Right for a Business?
Businesses should make an informed decision before deciding which method of taking payments will work for them in the long run. Some of the things they should be considering include:
Whichever method or payment gateway you choose needs to have security as a key component. Methods such as bank transfers through Open Banking require less personal information to be added by the customer at checkout, making this idea for keeping customers feel safer.
The Customer Experience
A successful payment method can make all the difference when it comes to making online payments. If a customer finds the payment method too long-winded or complicated, they may get frustrated and end up abandoning their cart, opting to go somewhere else with a more simple process. If the payment process takes too long, sales can be lost. People are trying to buy something and this should be easy, not something to dread.
The fees for each payment gateway will vary significantly. For every payment you receive from customers, you will need to pay a small amount to your payment gateway and these costs can quickly add up. Make sure the fees are within your budget and that you compare fees before committing.
When it comes to online payments, the methods a business offers to their customers can have a significant impact on their success. The method a business chooses should be chosen depending on the preferences of their customers and the specifics of their business. Keeping the friction of a business’s payment process to a minimum can save time and money. Encouraging prompt and automated payment where possible should also have a positive impact on your cash flow.
Businesses need the reassurance that they can receive online payments reliably and securely from their customers, with minimum risk of failed payments or chargebacks that can be costly to a company.