We are living in an era of ever-evolving changes in payment systems and methods, and one of the most important factors for online businesses is how to accept payments online. The process of collecting money from customers, depositing the funds into your bank account, and authorizing the purchase can be tricky. This article will help you decide which method will work best for your company, so you can confidently focus on more aspects of your business than just payment processing.
What Is Payment Processing?
Payment processing is a service that allows businesses to accept credit or debit cards from their customers. Businesses can purchase point of sale (POS) terminals, online billing platforms, and other related hardware and software to process these transactions in-store or online. Whether you are a small business owner with a physical retail store; an accountant rendering services for clients; an independent professional providing design or photography services; or any company seeking to increase its cash flow by accepting payments on the spot at the time of sale- you will likely be able to find an affordable option for payment processing.
When a customer pays to a merchant, the processor helps ensure that the customer has sufficient funds in their account or good credit to pay for the transaction before sending it through. The process can also include signing receipts, charge reversals, and other tasks associated with processing credit and debit cards.
5 Methods To Accept Payments Online
- Digital Wallets: Digital wallets are the most common and convenient way to accept online payments. They store account numbers and give an opportunity to send and receive money online. Some digital wallets allow you to withdraw cash to your debit or credit card.
- Credit, Debit, Or Other Payment Cards: Many online stores accept credit cards. Your credit or debit card company is charged automatically when you buy something on their website. It’s probably the second most popular online payment method in the world.
- E-Checks And ACH Payments: E-Checks are a method to pay for goods and services online via paper check. Funds withdrawal from the bank takes 3 to 5 business days, but it’s reliable enough because it’s a direct electronic transfer from the buyer’s bank account to yours.
- Local Payment Methods: Depending on the country where you handle the business, you can find domestic payment gateways to get online or offline payments and bank transfers.
- Cryptocurrencies: Some people use cryptocurrencies to pay for goods or services on the Internet. If your clients would like to pay in crypto, it will be great for your business to find a gateway that will accept cryptocurrency.
What Do I Need To Start Accepting Payments Online?
The following are the most important items to consider before accepting payments online.
Payment Processors
The first step to accepting payments online is first to have a payment provider. This fintech company will not only process customers’ payments and send them into your bank account but also provide businesses with a one-stop payment processing solution. The best thing about merchant account providers is they typically charge a flat rate or low fee per transaction, unlike the other methods.
Payment Gateways
Payment gateways are used to receive and process customers’ payments. The processor will communicate with the gateway about any payments a customer makes. Payment gateways allow businesses to accept payments online with minimal knowledge of how they work, as it handles all of that for you. They are similar to merchant services in that they process transactions, but unlike merchant services, they are typically much cheaper and require less technical knowledge than obtaining a merchant account from a processor.
What Costs Are Involved?
While you are still deciding how to accept payments online and which type of payment processor or payment gateway to use, it’s important to understand the costs involved.
Interchange
The interchange rate is a fee that is deducted from each credit card purchase and then deposited in the merchant’s bank account when customers pay with a credit card. This normally means merchants have to pay fees for each sale, especially if their transaction volume increases (e.g., as happens with e-commerce). The interchange fee is typically processed on a monthly basis and can fluctuate from month to month and year to year depending upon the interest rates offered by the banks’ lending institutions during that period.
Flat Rate
The flat rate is a fixed-cost transaction charge that is applied to each sale. Each customer or institution can set this fee individually, but it will always remain the same. This method is typically used by brick-and-mortar merchants such as department stores, gas stations, convenience stores, and e-commerce merchants who want to process payments without worrying about fluctuating interchange rates because their transactions are all processed by one company and then pass on the cost of the transaction.
Subscription
Payment gateways and merchant services providers typically charge a monthly subscription fee for their service. While it may seem more cost-effective to use this method, it can sometimes be more expensive than other online accepting payment options because the fee is usually based on transaction volume.
It’s important to look at your business plan when deciding how to accept payments online. If you are just starting with no sales data history, then a merchant account may be a better option since you pay interchange rates based on the amount of transactions processed each month. This also allows you to scale your business up or down as needed instead of paying for extra processing that isn’t necessarily used if your sales decline during particular seasons or months of the year.
The Bottom Line
The type of merchant service, payment processor, or gateway you choose may depend on your business requirements. Before choosing one option over another, it is essential to determine your payment processing needs and choose the most suitable option that fits your needs and doesn’t cost so much that it will negatively affect your bottom line. Always weigh each method’s pros and cons before choosing a particular way to accept payments online for all aspects of your business.
