Cash Management · December 10, 2020

Top Electronic Payment Methods Your Business Should Know About

As a business owner, you only get paid if your customers pay regularly and on time. Providing them with convenient electronic payment methods gives you the ability to conduct transactions quickly and safely. It improves the customer experience and, at the same time, makes it easier for your business to make money.


But which electronic payment method is right for you? Should you offer more than one option? Luckily, there are more digital payment systems available than ever before, and businesses have a wide range of options to choose from.

Online card payments

Most customers prefer to pay for purchases with a debit or credit card. For an e-commerce business, accepting online credit and debit card payments means having a payment gateway built into your website and a merchant account at your bank. A merchant account is a line of credit that allows money to be transferred to your business account before the customer has actually paid their bill and allows for any potential chargebacks.

A payment gateway communicates with the credit card company to confirm funds and authorize or deny a transaction. This software application also encrypts any information submitted on your payment page to ensure sensitive customer information stays safe.

You can also accept online payments with a third-party electronic payment vendor such as PayPal or Stripe. Both are easy to use, and most e-commerce platforms allow users to add an integrated PayPal or Stripe button to the checkout process. Even Square, which is most commonly associated with point-of-sale systems for in-person payments, has e-commerce payment systems for your website.

One downside of third-party vendors is fees. Third-party vendors require a setup fee, a flat monthly fee, a flat fee per purchase and a percentage of the customer's purchase. In the case of PayPal, Square and Stripe, the flat fee is 30 cents per transaction, plus 2.9% per purchase.

Generally, having a merchant account through your bank will mean lower transaction fees than a third-party vendor, although there might be set-up or monthly fees. Checking with your bank or financial institution should be your first step.

Mobile payments

Mobile apps or mobile wallets like Apple Pay, Android Pay, Amazon Pay and Visa Checkout enable users to make purchases without having to re-enter their credit card and address information for each purchase. The result is a more seamless and convenient experience for customers, especially for those using their mobile devices to make purchases.

Security is the core of mobile payment options, which rely on layers of secure technology. Most mobile phones are already equipped with contactless data transfer systems known as near-field communication, or NFC, readers. This allows the customer to use their mobile device to buy online or even in a brick-and-mortar store that offers contactless payments. E-commerce websites built on platforms including Wix, WordPress, ShipStation and 3D Cart already have mobile payment processing options integrated into even their most basic price plans.

Accepting mobile payments is low cost or even free. Amazon Pay has a flat fee of 30 cents per transaction, plus 2.9% for each purchase. Android Pay and Apple Pay are free for both merchants and customers.

Online bank transfers

ACH processing is another popular e-commerce payment option. Customers input their bank account and routing information for electronic payments, allowing the merchant to deduct the purchase price directly from the customer's bank account without the customer having to provide a credit card number or write a check.

ACH processing works especially well for recurring and subscription payments—the customer only needs to input the information once, and the funds are automatically withdrawn. It's also very secure because the transaction takes place directly between the two financial institutions and is monitored by the National Automated Clearing House Association.

ACH processing tends to have slightly lower fees than other electronic payment methods, depending on the volume of transactions to be batched and processed. Flat fees per transaction range from $0.20 to $1.50, and the percentage per transaction is anywhere from 0.5% to 1.5%. Businesses with high volumes of transactions typically pay lower fees.

Choosing the right system for your business

Ultimately, choosing an electronic payment method—or even more than one—should be about more than cost and efficiency. It's the last point in the sales process to provide your customers with a great experience. By offering them the flexibility and convenience of multiple payment options, you increase the likelihood of repeat business.

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This information is provided for educational purposes only and should not be relied on or interpreted as accounting, financial planning, investment, legal or tax advice. First Citizens Bank (or its affiliates) neither endorses nor guarantees this information, and encourages you to consult a professional for advice applicable to your specific situation.