Selecting an online payment processing system that refuses to take the payment methods your clients want to use is like trying to communicate in Chinese at a market in Marrakech: neither strategy is likely to work.
Similarly, a merchant’s point-of-sale system should match the payment options their customers prefer. Physical stores offer different payment methods than online stores. That’s why e-commerce businesses need to get familiar with online payment systems.
What are online payments?
Online payments can be submitted and processed over the Internet using credit card payments, ACH payments, wire transfers, and mobile wallet payments. In-store and online payments may share the same payment processors, but they have different point-of-sale (POS) systems. In-store payments happen at a physical checkout counter, while online payments occur through a website payment interface. Software payment solutions serve as your POS system.
Besides accepting customer payments through online payment methods, business organizations can also pay bills and payroll expenses via online payments.
Understanding how online payment works
Online payments involve the financial institutions of each side, the vendor, and the customer. They might also connect with payment service providers such as Square, PayPal, or even Zelle.
Various methods of payment have varying steps towards online payment. This is an example explanation of how an automated clearing house debit (ACH debit) internet payment operates:
- A customer makes a purchase and chooses to make payment by ACH debit.
- The ACH debit request goes from the merchant or their payment partner to the merchant’s bank.
- The merchant’s bank processes the transaction together with other ACH transactions.
- The transactions are received in batches, and an ACH operator sorts them before submitting them to the customer’s bank.
- The customer’s bank takes care of the transaction and transfers the payment to the merchant.
5 Different Types of Online Payments
Different online payment methods have different benefits for both businesses and customers. The major factors are the cost, speed, security, and the popularity of customers.
1. Credit card payments
For online payments, both businesses and individuals have commonly used credit card options. The credit card business settles the purchase debt with the merchant, and the holder either clears the entire credit card balance at the end of the billing cycle or incurs additional interest debt in the form of an APR cost. The annual percentage rate (APR) demonstrates how much the client is expected to be charged for the loan and the interest rates and fees.
Companies that accept credit cards online and in person are at an advantage because most customers prefer using them while making their purchases. Many credit card processing partners ask merchants to pay a per-transaction fee, which usually ranges from 2% to 5% of the transaction value.
2. ACH payments
One form of ACH transfer is online payments made over the Automated Clearing House (ACH) network, an electronic platform that acts as a middleman between financial institutions.
ACH transactions are processed through batch processing. While it does so, ACH payments may take longer to complete than some of the other more modern online payment methods. Credit card and wire transfer payments are processed in 24 hours; however, ACH payments last for one to three working days. Businesses often use ACH direct deposit to pay workers, and many banks offer this service for free.
3. Direct debit
Direct debit is an ACH payment method in which money is transferred between accounts using the ACH network. The merchant’s financial institution uses the ACH network to debit the customer’s bank account and credit the merchant’s bank account once the customer completes transactions for goods or services over ACH direct debit.
The ACH network usually processes direct debits within one business day, but the receiving bank may take an additional one to two business days to settle the transactions. Thus, the total transfer time might be longer than expected, ranging from one to three business days.
4. Wire transfers
Transfers of funds between banks through the Internet that do not go through the ACH network are wire transfers. Another important fact is that when compared with ACH transfers, wire transfers entail larger per-transaction restrictions and facilitate faster money transfers. Also, they come with higher per-transaction charges, which range from $20 and $30. Wire transfers are, in fact, safe, but they are more frequently exploited by scams than by the ACH system due to their fast processing. The one-to-three working day payment processing period of ACH transfers enables a company to freeze its payment in case of counterfeit operations.
5. Digital wallets
A digital wallet refers to the types of electronic payment methods that are stored on a person’s handset (such as a debit or credit card) or in the cloud (e.g., Apple Pay, Google Pay). Digital wallets let users use their current payment options without needing a physical card; they are not payment mechanisms in and of themselves. Purchases via digital wallets can be made online or in person.
Factors for Choosing Online Payment Options
Online payment options should ideally fit within your technological budget and make it simple for clients to pay you. The easiest online payment system to set up will enable your online store to launch and operate rapidly, making it the ideal choice for your company.
In summary, Electronic payment is essential in business activities for a small business firm. Primarily, credit card payments, ACH, wire transfers, and wallet options provide the opportunity to create various payment options that customers prefer. Analyzing the specifics of each payment option, such as how long it will take to process a transaction, cost implications, and security considerations, will also help you decide which payment solution to base your business around. Technology allows flexible payment solutions to supplement your customer experience, thus causing targeted growth.
Enjoy Peace of Mind with Cheqly’s Online Payment
Cheqly helps small businesses make online payments easier with services like ACH and wire transfers. They enjoy low fees and flexible options that fit their needs, plus strong security for safe transactions, which helps them grow. Sign up for Cheqly today to simplify your online payments!