Guide to Different Types of Payment Methods
The main reason why people start a business is to earn money. You get paid for either the goods you are selling or the services you render to others. So you must factor in payments even before you consider any other plans. It is practically impossible to run your business without any hope of getting paid, so the question of payment methods arises. If you are considering which payment options to pursue, then you are in the right place.
We will be going into detail about everything you need to know about receiving payments in your business. Which options will best suit your business, and why they are the best.
What Is a Payment Method?
Before we go into the different payment methods, you must understand what payment method is about. It simply refers to the way customers can purchase your goods or services. If you are selling items, there are many ways potential customers can patronise your business. We will be looking in detail at the different methods available.
List of Payment Methods
Anyone who wants to make any purchase has several ways to do this today. Whether physically or online, you can receive money from any part of the world instantly. We have put together ten payment methods available for businesses today.
1. Debit Cards
Customers can pay for goods or services using debit cards. The popular debit cards today are MasterCard, Visa, and Maestro. When a customer pays you with their debit card, the money will immediately be deducted from their bank account if they have a sufficient balance. Debit cards come in three variations, and they all work the same way. It is easy to receive payments from debit cards. You will need the customer to put in their card details and pin, then authorisation to proceed with the transaction. The debit is done the same day, but sometimes, it could delay for about 48 to 72 hours. This is a rare occurrence, but it usually is instant.
2. Credit card
Credit cards are also another popular payment method and work similarly to debit cards. However, in this case, the cardholder may not have the money but will be buying on credit from their bank to pay back later. Usually, there is a limit for any credit card, so you can’t spend beyond that limit. The companies that issue credit cards are Visa, American Express, and MasterCard.
3. Pre-Paid card
Pre-paid cards are similar to credit and debit cards. If you have a prepaid card, it means you have already loaded the card with a certain sum of money. You can spend it until you exhaust the amount.
This type of payment method is also very popular and easy to complete. Here, customers are expected to swipe their card or phone over a card machine. With contactless payments, businesses can receive money with debit or credit cards.
5. By phone
Another way you can receive money is via your mobile phone. You can do this through wallets like PayPal, Apple Pay, and Android Pay. Moreover, people can pay via phone when they give out their card details, especially when placing an order. Merchants can also receive payments on the phone through a QR code.
Cash is the traditional way of receiving payment for goods and services. For instance, you pay with cash if you go to a retail store for candy or chocolate.
Cheques also serve as a payment method, although not many people use this method. The cheques are like paper vouchers and work for customers who operate a current account. It is also easy to receive cheques, but the problem is that they can fail if the person doesn’t have sufficient funds. It’s advisable not to accept cheques from people you don’t trust.
8. Online Payments or Online Banking
Businesses can receive payments from customers from their online banking or internet banking system. Here the customer will need to access the online banking platform by registering with their bank to complete transactions online. Transfers made via online banking automatically debit the customer’s bank account and send the money to the vendor.
Crypto, a digital currency, has gained popularity recently, and more businesses are beginning to recognise it. Customers can mainly pay with Bitcoin and Ethereum nowadays.
10. By email
Customers can pay online via their email when they receive a payment link. When opened in the email, the custom link will direct the customer to the page to complete the payment transaction.
What Is the Safest Method of Payment?
The safest payment most people can make today are with their debit and credit cards. This is because these payments are tied to reliable and trustworthy card networks like Visa and MasterCard. Besides, it is impossible to operate a credit or debit card without a bank account, so a business can quickly contact the card network when there’s a payment issue. However, other payments can be considered safe, like e-payment methods, and are available worldwide if customers reside outside your country.
How to Choose the Best Payment Method?
Now, the question most new business owners ask is how they can start receiving payments from customers. Before you can go about accepting payments, you need to decide how you want your cash flow. We have highlighted some steps to help you choose the best payment methods for your business.
Identify Different Payment Methods:
There isn’t only one suitable payment method, which you should know before making your decision. It will be best to check all your options and understand how each payment method works. It will also help if you know how these payment methods can help your business. As we have already listed ten payment methods, you can figure out how they work and if they apply to global payments or online payments, depending on the nature of your business.
Consider Your Customers
If you are choosing a payment method, it has to be convenient for your customers. Customer preference should be at the top of your decision-making list. Although the most common payment methods are debit and credit cards, some customers will like other options. In addition, some customers will want to seek other payment methods because some are more private than others. If you use a credit card usually, it will keep a record of the transactions. Some customers may not want to have this information out and instead will prefer to pay cash.
Choose Reliable Payment Methods
Now, this will depend on where your business is located and what works for your business. For instance, some payment methods will depend on electricity or telephone networks. If these are not available, it can affect your payment. If you use a POS system or card reader, for instance, which needs to be powered by electricity, in the case the internet goes off, your customer won’t be able to pay. These are some of the things you need to factor in before making your decision on payment methods.
Check the Costs
One should note that some payment methods come with hidden or additional costs. For instance, banks may have a service fee for POS systems, and even card networks charge service fees on credit cards. Another cost you should consider is the transaction cost, which the bank usually removes for each transaction done.
Calculate the Risks
Receiving payments generally comes with a risk, no matter the form. Cash payments tend to have a much higher risk because of theft as the money does not go straight to your bank account. Moreover, risks are involved when there is a mistake in the payment.
Why Accept Multiple Payment Methods
Businesses have evolved over the years, and more payment methods have become available to receive payments. With the shift towards a cashless economy, people can now pay for goods and services without carrying cash. One common feature of successful businesses is that they seek to satisfy their customers. They do this not only by the services they offer but also by making their customers comfortable. If you have a lot of payment methods at your disposal, it will be easy to attract customers.
No customer wants to go through the stress of visiting an ATM to get cash. If they can pay with their mobile wallets, by phone, or even through a QR code, they will be happy to patronise your business. You must have available as many payment methods, so you get return customers.
However, also keep in mind that the payment methods you choose should be relevant to your business. For instance, if you operate a strictly online business, you really won’t need payment options like POS or cheques. Since everything you do will be conducted online, you may want to utilise only online payment methods that apply to your business.
On a final note, now that you have an idea of the different payment methods available for businesses, you may want to look into them. It will be good to have a method to help you and your customers conduct transactions seamlessly conveniently.