Making payment options simple and safe for your business customers
Choosing payment options can be a delicate balance. There are a variety of ways to accept online payments, and the methods that are right for you and your customers depend on the kind of business you manage. Take a closer look at the pros and cons of different payment options—including some new options—to determine what makes the most sense to accept.
Unless you run an online business or only sell high-cost goods and services, your customers likely expect you to accept cash. If you're considering going cashless, ensure you're not violating any local laws first. And think about how customers will react, particularly if the cashless approach could be perceived as discriminatory against unbanked customers.
Pros: Cash is king for many reasons, and accepting cash can help you avoid cash flow problems from delayed payments and protect you from some types of fraud. You also won't have to pay transaction fees, although some business bank accounts charge a fee if you deposit large amounts of cash into your account.
Cons: Cash-heavy businesses have challenges including the need for high security to track, protect, and deposit the money you receive.
Although they're not as common as they used to be, some people still prefer to pay by check. Accepting checks can be cost-efficient and relatively safe, but check fraud is also on the rise.
Pros: Checks can be a low-cost option as you won't have to pay processing fees. You can also use remote deposits to quickly and securely deposit customer checks online.
Cons: Even with remote deposits, it can take time to prepare, process, and deposit the checks you receive. You'll also have to worry about checks getting lost or stolen, bounced checks, and check fraud. Third-party services can help you detect some check fraud, but that increases your costs.
Debit and credit cards
You can accept debit and credit cards if you have a merchant services account with your business bank or by working with a payment service provider. However, you'll want to compare the various services, capabilities, and costs, especially if you're asked to sign a long contract.
Pros: Many people prefer to pay by card, especially for large purchases, as it can be safer and more convenient than cash or checks. Some people might also spend more money—or shop at your business more often—if they can pay by card.
Cons: Various service and transaction fees can eat into your margins, and passing these fees on to customers isn't the norm in many areas. You'll also have to watch out for card-related fraud. Requiring customers to insert their card to use the EMV chip or use tap-to-pay might help prevent fraud and limit your liability. Some service providers can also help with fraud prevention and processing chargebacks.
Mobile wallets, such as Apple Wallet®, Google Wallet®, and Samsung Wallet®, allow customers to add a card to their digital wallet and then quickly pay using their mobile phone or device.
Pros: Digital wallets can appeal to customers who don't want to carry or pull out their debit or credit card. They're also a very secure payment method, and the transaction might take less time to process than a card swipe or tap.
Cons: You'll need a terminal with near-field communications (NFC) capabilities to accept mobile wallets, although most modern terminals have this function. Beyond that, the costs and cons for accepted mobile wallets may be the same as for accepted card payments in general.
Peer-to-Peer payment apps
Many people already have and regularly use peer-to-peer (P2P) payment services like PayPal®, Venmo, and Zelle®. As with a mobile wallet, they might find using an app more convenient and safer than other payment types. And businesses, especially very small and mobile businesses, might benefit from accepting P2P payments.
Pros: You can also easily show or print out a QR code, email address, or $Cashtag to accept payments without any additional equipment, and you'll receive the money in your P2P account immediately. Business profiles may also have business-specific features, such as tax reporting and dispute services.
Cons: Unlike with personal profiles, you'll have to pay processing fees with your business PayPal, Venmo, and Cash App accounts. Also, you may have to pay a fee if you want the money in your P2P app account to be instantly transferred to your business bank account.
Automatic clearing house (ACH) payments are a safe way to move money directly between two bank accounts. Unless you use another app to manage the transaction, such as the P2P apps above, ACH payments likely aren't convenient for in-person transactions. However, you could set up ACH payments for business-to-business and recurring transactions.
Pros: ACH transactions tend to have lower fees than credit and debit cards, and they can be faster and more secure than checks. Getting permission to pull money directly from a customer's bank account can also be convenient if you collect recurring payments for rent, subscriptions, or memberships. Also, ACH limits may be higher than someone's credit limit.
Cons: You'll have to ask customers for their bank account details, which they might feel uncomfortable sharing. Also, similar to accepting checks, there's a chance an ACH payment could overdraw a customer's account and fail.
Buy now, pay later
Buy now, pay later (BNPL) services have emerged as a popular financing alternative to credit cards, and some consumers are using BNPLs for everyday purchases. Unlike with credit cards, consumers generally don't need good (or any) credit to qualify, and they might not pay any interest or fees on a pay-in-four BNPL.
Pros: The BNPL sales pitch is that accepting BNPLs can lead to more and larger sales—and some businesses experience this boost. The BNPL provider will also manage the customer accounts, payments, and collection process, and you might receive the full purchase amount upfront.
Cons: Although no interest or fees appeals to consumers, it's only possible because you're paying the BNPL provider. The transaction fees can vary, but expect to pay more than you would for a card or P2P transaction.
Learn more about payment options
Today, customers have a lot more flexibility in how they can pay and they often value convenience. So, it makes sense to explore your payment options and decide what’s the right fit for your business.