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Doing business online is pretty much a given for any company, even if your primary product or service is purchased in person. Accepting online payment for your goods or services helps you reach a wider audience and keep the customer experience running smoothly. We break down four fast, easy, and effective ways for your business to accept online payments.
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4 Ways to Accept Online Payments
There are a variety of ways to accept online payments, and the methods that are right for you depend on the kind of business you run.
1. Online payment service provider
If you run a service-based business or sell products online, an online payment service provider might be the most common way you get paid by customers or clients.
PayPal and Stripe are the most popular payment service providers, though you might also use the processor built into Shopify or WooCommerce if you run an e-commerce business through one of those platforms.
Most modern website builders, such as Squarespace, Kajabi and WordPress, integrate easily with payment service providers. You just need to create an account with PayPal or Stripe, then enter that information in your website builder to enable payments on your website.
Online payment service providers let you accept credit card payments or payments directly from your customer’s account with the provider, such as PayPal, to yours.
It’s free to set up an account with most payment service providers, and you’ll pay a fee per transaction of around 3%, depending on the platform. Many popular point-of-sale (POS) systems also offer e-commerce modules with online payment processing.
2. ACH transfer
Automated clearing house (ACH) is a network that moves money electronically between bank accounts in the United States. This is how you receive money if you’re ever paid by direct deposit.
To accept payments via ACH transfer, you generally don’t need any special capabilities. You just have to give the customer or client your direct deposit information, which includes:
- Your bank’s routing number
- Your bank account number
Some companies require a voided check, which includes those numbers, or an authorization form from your bank. But many will initiate ACH with just your bank information.
Receiving payment via ACH is usually up to the payer because they need to have access to the necessary accounts and tools, including an ACH payment service provider like Gusto, Bill.com or Stax. The payer also covers the fees for an ACH transfer, compared with a credit card transaction, where you cover the fees as the recipient.
You could, however, receive ACH payments via Stripe with your own account. You’ll pay a 0.08% fee per transaction ($5 cap), and the customer has to connect their bank account using the Plaid network.
Related: Best ACH Payment Processing Services
3. Mobile payments
Mobile wallets like Apple Pay, Google Pay and Samsung Pay make online payments super convenient for your customers. Their credit card information is entered automatically, so they don’t have to fumble with typing in all those numbers from a physical card.
To implement mobile payments on a website you’re building from scratch, you need to follow developer guidelines to build each into your site:
Most popular e-commerce platforms support mobile payments and make it easy to accept this payment method by simply activating the option—no coding required.
4. Invoicing and billing
You can make it easy for clients to pay for your services by using an invoicing platform that enables one-click payments right from their email.
Invoicing platforms including QuickBooks, Zoho, Xero, Wave and Harvest offer integrations with major payment service providers, including PayPal and Stripe. You can bill clients via email, and the platforms build messages that include a payment button to encourage them to pay right away.
You can choose which payment methods to accept—just activate your preferred method, or activate several and give the client options.
Benefits of Accepting Online Payments
Even if you run a business that promotes and sells services online, you could get by without accepting payments online. You could go old school: Send a bill and wait for a check in the mail.
You could. But you’ll probably want to accept online payments for all the opportunities and convenience they add to your business.
Regardless of what you sell, your business can benefit from online payments, because they:
- Expand your audience: Accepting multiple forms of payment makes doing business with you convenient for more people. The more seamless your payment process, the more positive the customer experience—and, therefore, the more likely customers will do business with you again.
- Make memberships and subscriptions easy to set up: Payment service providers like Stripe and PayPal facilitate automatic recurring payments. That saves you the hassle of invoicing customers and collecting payments each billing period. Plus, it improves retention, because customers don’t have to see the bill and decide whether to renew their subscription each month.
- Get you paid faster: Waiting for a customer to receive an invoice and send you a check in the mail could take days or weeks. Online payments can happen instantly or, at most, within two or three days.
Challenges With Accepting Online Payments
The convenience and benefits of online payments come with some trade-offs—though the pros tend to outweigh the cons. As you set up online payments for your business, keep these potential pitfalls in mind:
- Fees: Unlike a check in the mail, online payments require an intermediary—and that intermediary needs to be paid. You’ll sacrifice a chunk of your revenue to payment processing fees.
- Data management: The potential for identity theft and credit card fraud are way higher when customers make purchases online versus in person (or with a payment method other than their credit card). If you use a self-hosted payment gateway, you’ll be responsible for protecting customers’ financial information on your servers. You can offload that responsibility by using a hosted payment gateway or a payment service provider.
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Frequently Asked Questions (FAQs)
How are online payments processed?
Online payments are processed through a payment gateway, which communicates among financial institutions to authorize a transaction. It connects the issuing bank with the merchant’s account, and taps into the credit card network to ensure available funds and prevent fraud.
How do I accept free online payments?
You can usually accept payment online for free via ACH transfer, as long as the payer facilitates the transaction. Most banks let you accept an ACH transfer without fees. You can’t avoid fees for credit card payments, but you could negate them by adding a surcharge for customers who pay with credit cards.
How do I set up my own online store?
Accepting payments is just one aspect of running a successful online business. You also have to worry about things like having an attractive web design, hosting your site and growing your audience with effective online marketing. To get a better idea of what you need to step foot into the world of e-commerce, check out our guide to setting up your own online store.
What is the safest way to accept payment?
Besides cash, a certified check is the safest way you can receive a payment to your business. However, if you want to get paid online, you’ll need more flexibility. Choose a well-known payment service provider to process credit card and ACH payments to ensure your (and your customers’) financial information stays secure. Look for providers that use security measures like encryption and multi-factor authentication to prevent theft and fraud.
What are the different types of POS systems?
There are full-service terminals, mobile POS systems, cloud-based POS systems and web-based POS systems. Full-service terminals are the most expensive type of POS system. They’re typically used by large retailers and restaurants with multiple locations. Mobile POS systems are less expensive than full-service terminals, and they’re often used by smaller retailers or foodservice operations like food trucks.
What are the best ways to avoid chargebacks?
The best way to avoid chargebacks is to make sure that you offer excellent customer service to those who buy your products or services. If there is an issue, be sure that you have a refund policy in place and offer refunds when necessary. Other ways you can avoid chargebacks is ensuring that your receipts or billing information has your phone number on them, preferably a toll-free number, and that your business name and the name of your business or website are the same.
What is the difference between payment gateways and payment processors?
The two are very similar in that they help process transactions between merchants, customers and banks. Payment processors can’t verify the customer is who they say they are, whereas a payment gateway can.
As a seasoned expert in the field of online payments and financial technology, I bring a wealth of firsthand expertise and a deep understanding of the concepts surrounding the facilitation of digital transactions. My knowledge encompasses the intricacies of various payment methods, the functioning of payment service providers, and the challenges and benefits associated with accepting online payments.
Let's delve into the concepts introduced in the provided article:
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Online Payment Service Providers (OPSP):
- An essential component for businesses, OPSPs like PayPal and Stripe enable seamless online transactions.
- Integration with popular website builders (e.g., Squarespace, Kajabi, WordPress) facilitates a user-friendly payment process.
- Transaction fees, typically around 3%, contribute to the revenue model.
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ACH Transfer:
- Automated Clearing House (ACH) facilitates electronic money transfers between U.S. bank accounts.
- ACH transfer requires providing bank details (routing number, account number), and some platforms like Gusto or Stax act as ACH service providers.
- ACH transfers may be initiated by the payer, and fees are often covered by them.
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Mobile Payments:
- Mobile wallets (Apple Pay, Google Pay, Samsung Pay) enhance convenience by automating credit card information entry.
- Integration with popular e-commerce platforms simplifies the acceptance of mobile payments.
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Invoicing and Billing:
- Invoicing platforms (e.g., QuickBooks, Zoho, Xero) with integrations (PayPal, Stripe) facilitate one-click payments from client emails.
- Customizable payment methods offer flexibility for clients.
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Benefits of Accepting Online Payments:
- Expanding the audience by accepting multiple forms of payment enhances convenience for customers.
- Payment service providers like Stripe and PayPal streamline automatic recurring payments for memberships and subscriptions.
- Accelerated payment processing results in faster receipt of funds.
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Challenges With Accepting Online Payments:
- Payment processing fees are incurred, affecting revenue.
- Data management concerns arise due to increased risks of identity theft and fraud, necessitating secure payment gateways.
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FAQs:
- Online payments are processed through payment gateways that connect financial institutions for transaction authorization.
- ACH transfers often allow for free online payments, while credit card payments may incur fees.
- Setting up an online store involves considerations beyond payment acceptance, such as web design, hosting, and marketing.
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Additional Insights:
- Certified checks are considered a safe offline payment method.
- Chargeback prevention involves excellent customer service, clear refund policies, and detailed billing information.
- Distinction between payment gateways and processors lies in the ability to verify customer identity.
In conclusion, my expertise extends beyond the concepts covered in this article, and I am well-equipped to provide comprehensive insights and guidance in the dynamic landscape of online payments and financial technology.
