When you run a business, it is imperative for you to accept different modes of payments out of customers. It will offer them the option of paying for specific goods and services in the preferred method of payment. However, it implies that you are expected to keep up with both modern as well as traditional payment methods.
As online tools continue making it simpler for businesses to connect with consumers all around the world, a number of businesses have started expanding overseas. As per a study report, it is estimated that around 70 percent of businesses are selling internationally in the modern era. While it has become easier than ever to reach out to the global audience, online businesses also have to face a new challenge -How can they address the diverse customer expectations during the checkout process? The manner in which customers prefer paying for products or services tends to vary significantly on the respective location. Therefore, it is crucial for you to create a familiar, relevant payment experience for the end customers.
As the global payment landscape has become increasingly fragmented and complex, there are several service providers making it easier for any type of business across the globe to discover as well as accept leading payment methods with the help of a single integration. As a business owner, you should be familiar with different payment methods that will effectively suit your business model as well as customer preferences.
Understanding the Different Types of Payment Methods
- Credit Cards
This is one of the most popular payment methods out there. Credit cards provide a convenient and easy way to ensure that financial transactions are both small as well as large. With the help of a credit card, clients can leverage the specific card limit from the card-issuing company to make both online as well as offline purchases.
Some credit card giants like Mastercard and American Express offer access to contactless credit cards leveraging the technology of radio-frequency identification for authenticating card information. This, in turn, helps in saving customers the overall trouble of swiping the respective cards against the card reader while making the entire process highly secure.
When customers go ahead with paying the credit card balances on a regular basis, they are eventually building up a reliable credit line. However, when they are facing issues in meeting the respective payment due dates, they will be charged specific interest. Eventually, the respective credit card rating can go down significantly.
- Debit Cards
Debit cards help in withdrawing money directly out of the linked bank account. A payment made via a debit card typically does not incur any annual fee while also not charging additional payees interest. This helps in encouraging the overall use of debit cards. However, debit cards are also available with limited access to fraud protection while not helping in building the credit score of an individual. This will make some customers prefer the option of leveraging the services offered by credit cards.
For accepting debit card payments, you are expected to comply with all the necessary regulatory requirements within the industry. You are also expected to select a dedicated payment processor for facilitating transactions made through the payment card. For in-store transactions, you will require access to necessary equipment for processing debit cards -quite similar to that of credit cards.
If you are an online retailer, you should know that you are setting up a dedicated payments page for accepting financial transactions through debit cards. It is also important to optimize the payments page for mobile devices such that customers are able to enter the debit card information directly from their mobile phones.
- ACH or Automated Clearing House
ACH or Automated Clearing House transactions tend to be bank-to-bank, electronic forms of money transfers for providing a convenient and quick way. This method allows businesses to ensure the payment to the vendors (including payroll with the help of direct deposit) while receiving payments from the respective clients. ACH payments are also referred to as bank payments or direct debit payments. To top it all, they also customers to ensure the payment directly from one bank account to another bank account.
Wire transfers and bank transfers are typically utilized for ensuring larger payments wherein cash might not be a good fit.
The ACH mode of payment for businesses is useful for enterprises like utility and mortgage companies. It is because their customers are able to launch automatic recurring transfers toward paying their bills. However, you should note that some banks go ahead with imposing limits on the total amount of money that can be transferred through a typical ACH transfer. Multiple AC payments or transactions can also trigger penalty for excessive withdrawal out of savings accounts. As you can expect some delays with respect to ACH payments, some clients might also be charged late fees in case their transfers will be completed after the due date.
For accepting ACH transfers, you are expected to sign up with the respective payment provider for supporting ACH. This offers your business access to the given ACH network while ensuring direct withdrawals from the bank accounts of the customers. You are also expected to request authorization out of the customers and gather relevant payment details -ensuring that you are verifying existing information.
Exchange of cash remains a simple mode of payment -utilized by both major companies and local markets. It is especially famous amongst older clients and customers who might be less tech-centric and wish to utilize physical currency.
Still, payment through cash is difficult in case the client wants to make multiple purchases that are quite expensive. Cash-based users are also expected to carry along the specific country’s currency while making a transaction. Ultimately, unless you are maintaining proper records, cash transactions will be carrying a higher risk of committing common accounting errors.
- Paper-based Checks
Paying through a paper check serves to be a convenient method of ensuring large-scale financial transactions. The payer can also go ahead with canceling the payment until the payee will present check to the respective bank -delivering extra security. However, it will take time for a check to ensure clearance. Therefore, it becomes an inconvenient payment mode if you are making multiple day-to-day transactions.
Businesses that consider accepting checks in the form of payments should go ahead with creating a check-based acceptance policy for the respective clients. The given policy should explain the types of ID clients paying by check, the check’s information, and the dollar limits for specific checks. All of this information should be verified explicitly.
Payments through e-checks are executed online. In the United States, business organizations leverage ACH merchant network for withdrawing money out of the checking account of the payer while depositing the funds directly into the checking account of the payee. Customers can consider validating the e-check payments by authorizing the existing transaction on the website or signing a proper contract.
The given payment mode is processed faster in comparison to the paper-based check. Moreover, e-checks might also present reduced processing fees in comparison to specific credit cards. Still, there is a possibility that online hackers might gain access to banking information of the customers. Specific computer glitches can also take place to result into faulty withdrawals.
For accepting e-checks, most businesses leverage ACH-supported merchant’s account for withdrawing funds from customers online. They are also required to provide the banking information of customers -including checking account numbers and routing numbers.
- Digital Payments
In addition to debit cards and credit cards, digital payments encompass the possibility of paying by Venmo, PayPal, and other platforms. Payments are also made possible with the help of digital wallets like smartphone and smart watches. As per a study report, it is estimated that around 82 percent of individuals in America are already making use of digital payments.
All the payments allow money to be sent between multiple accounts electronically. Customers appreciate the existing payment options for ensuring faster transaction speed and minimal dependency on cash.
Businesses that consider selecting the option of digital payments are expected to invest in the POS or Point of Sale system. This system is capable of handling multiple modes of digital payments. You are also expected to look into the ROI or Return on Investment while looking into the setup fees, flat usage fees monthly, and per purchase fees that are available with digital payment processing.
Providing a wide range of payment methods to end customers is simple when the payment API is integrating into the existing system. With the help of API, payments can be effectively integrated into other applications.