Choosing a convenient method to accept payments online is crucial for your eCommerce success. However, how to choose the right one? It’s high time you learned how to collect money online. We analyze the three most common ways merchants get paid and give valuable advice on accepting payments online.
Table of Content
- Accept credit card payments online
- Accept electronic money
- Accept remittance system transfer
- Accept cryptocurrency
- Accept payments through ACH processing
- Accept payments via mobile phone
- What payment option is the best?
- How to start accepting payments online
- List of documents to open a merchant account:
Accept credit card payments online
Almost 75% of customers prefer to pay via a debit or credit card, both online and in person. Thus, credit card payments come first. Visa and MasterCard are the most popular types of credit card brands. Therefore, including them as your payment option is a must.
Local credit card options should not be underestimated as well. You should offer them according to your target audience’s GEO. This way, you will increase the chances of conversion. The government is the body in charge of credit card payments.
What is the difference between credit card payments, mobile banking, and QR code?
Some people believe that mobile banking, credit card payments, and the QR code scanning are three different things. In fact, it all falls under the category of credit card payments. Why is it so? Though payment methods vary, the money is transferred from the customer’s credit card to the merchant’s bank account. Thus, they are all considered to be credit card payments.
What are the advantages of credit card payment processing?
- Ability to get “live” money. Simply put, you don’t need to convert funds, unlike with PayPal dollar or crypto. All the money is paid to you by a bank or a financial institution of your client.
- The automated payouts. Unlike in PayPal, you don’t need to apply for a payout manually. The money is automatically transferred to your bank account. The regularity of payouts depends on the PSP of your choice. Generally, you get the money once a week or so.
What are the disadvantages of credit card payment processing?
- High transaction fees. Though varying from a PSP to PSP, credit card transaction fees are considered the highest. Your business type is the main factor shaping the fee structure. Merchants who sell cakes pay lower fees than those who offer escort services. The high level of chargebacks and possible risks are to blame.
Accept electronic money (PayPal, Skrill, WebMoney, Stripe).
The electronic aggregators like PayPal, Skrill, WebMoney, and Stripe are the alternatives to credit card payment processing. The critical difference is that clients don’t need a credit card to accomplish the payment. They log into the aggregator account and pay from it. Unlike in credit card payment processing, the entire process is regulated by the eminent, not the government.
What are the advantages of electronic money payment processing?
- Low transaction fees. If comparing the credit card payment processing, electronic money providers have more affordable prices.
- Brand awareness. The majority of people know what PayPal is. Brand awareness decreases possible concerns and helps clients pay.
- Easy integration. To accept credit card payments, you need to adjust your website. In case of PayPal, Skrill, e.g., the integration does not require any tech efforts.
What are the disadvantages of electronic money payment processing?
- Quasi money. Merchants can’t get the “live” money straight away. Instead, they get so-called quasi money like a PayPal dollar. Later, businessmen have to convert that money into real dollars. That leads to conversion risks.
- Restricted countries. Though popular, electronic money services only function in specific areas. Merchants from Africa, Asia, Eastern Europe, and the Middle East are often restricted from using them.
- Manual payouts. Usually, the payouts should be submitted manually. That takes time and effort.
- Payouts limits. PayPal allows you to withdraw a limited amount of money. That is a part of the security policy of a company. Sometimes, the company also requires an approvement from a customer who paid for your services. Thus, don’t think that aggregators give more financial freedom than banks.
Accept remittance system transfer
This is the easiest way to get funds from a customer. The core principle behind remittance systems is the bank-bank-bank-bank transfer. Simply put, money is transferred directly from the client’s bank account to the merchant’s bank account. The two most popular remittance systems are SEPA and SWIFT. You can integrate both options on your website as a payment method.
What are SWIFT and SEPA?
SWIFT is a global remittance system that is regulated by American Financial Services. It mostly processes dollars and is used by U.S. merchants.
SEPA is a European remittance system. It only allows euro transfers what makes it unfavorable for American-based companies. However, it is not regulated by American Financial Services. It gives SEPA users more flexibility and financial freedom. The payment processing fees of SEPA are high. However, they are favorable for those merchants who accept large sums (thousands of dollars and more).
What are the disadvantages of SWIFT and SEPA?
- The payment transfer takes up to three days. The plus is, you get the natural money and don’t need to convert them. However, for those merchants who need to ship their products immediately, such an option won’t work.
- The transaction fees are high. That might become a burden for small businesses or dropshipping companies.
A cryptocurrency is a popular option for merchants willing to accept payments online. Once the crypto payment is accepted, a merchant takes payment in crypto, as well. Later, he/she may convert them to FIAT either with the help of a merchant’s PSP or a crypto-exchange agency.
What are the advantages of cryptocurrency?
- No chargebacks. No chargebacks or refunds are possible when paying with crypto. Such a benefit makes cryptocurrency payment processing highly valued among high-risk merchants.
- Low fees. If comparing to credit card processing, the cryptocurrency transaction fees are much more affordable. As for 2019, cryptocurrency transaction fees are the lowest on the market.
What are the disadvantages of cryptocurrency?
- An absence of the E-wallet. In 2019, a large part of clients doesn’t own digital wallets. The growing demand for alternative payment methods might change the situation in the nearest future.
- Redirection on a payment page. Speaking about cryptocurrency payments, customers are inevitably redirected to their digital wallets. That decreases the chances of repeated purchases. Crypto payments inside merchants’ websites are not available today.
- Fluctuation. You might lose on a swing. The exchange rate of FIAT is to blame. It is not stable and tends to change unexpectedly. You might lose money when doing the payout of crypto in euro or dollars.
Accept payments through ACH processing
Another popular online payment method is a payment with electronic checks. The technology of Automated Clearing House (ACH) is an electronic transfer between banks. Payments are sent from the sending bank to the Federal Reserve System, and then, to the receiving bank. ACH transactions usually take 2-3 business days and are rather affordable.
Benefits of ACH payments for small businesses
ACH processing fees
The transaction fees of a traditional payment system might be high. It is because many parties are involved, and all of them charge some fees. Besides, there are also some additional charges may be. Among them are interchange fees, fraud fees, recurring fees, chargeback fees, double-conversion fees, etc.
In this case, accept online payments through ACH processing is like a helping hand. It offers much more transaction fees for any business type. The amount of transactions doesn’t matter, and you will always pay not more than 1% for each.
So while saving some extra money on payment transaction fees, a merchant can monitor every payment they receive instantly.
Easy ACH onboarding
One of the prevalent factors that force users to set up ACH processing is a user-friendly environment. If you are a merchant, and you want to use the ACH transfers to send or receive payments, you need only banking information from your clients.
Manual processing and payment of bills are no longer necessary, and, also, it does not require additional efforts.
Clients only need to enter the required data, after which they will be able to pay at any time interval. The required amount is debited from the account automatically.
No more expired credit cards
Credit cards are often the subject of fraud, and this fact causes banks to change their numbers. Also, the validity period of credit cards is limited, unlike bank accounts and routing numbers, which have remained valid for many years. If it’s necessary to find a specific transaction, it will be much easier to have a bank number unchanged.
Accept payments via mobile phone
Mobile payment is also a popular way to send/accept online payments. This service you can use to pay for popular services from your mobile account. You can recharge a gaming account, pay utility bills, Internet bills, television, fines, pay off loans, and put money into your account. Data security protocols ensure safe transaction flows on the Internet and confirmations that are made via micro-calls to your mobile phone.
Benefits of mobile payments for businesses
To proceed a transaction via cell phone, the only required thing is to press a few buttons on your smartphone and confirm the payment with a fingerprint. This technology helps customers to make hassle-free payments and increase loyalty to a merchant. Credit cards are not necessary anymore.
Of course, data security standards are a top priority when it comes to money flowing. And almost all mobile banking applications use a unique code for each transaction called token. Token is a unique combination of numbers. With this ID, the system identifies a cardholder and provides transactions. Thus, your personal credit card information is safe.
Each transaction uses a token with a one-time security code. Even in the case of data leakage, cardholder’s data will be withdrawn as a symbol sequence that is entirely useless for scammers.
Of course, people sometimes lose their smartphones, or somebody can steal them, but no one could use it. With a global expansion of personal data security, people tend to hide their personal information in advance. That is why all smartphones are protected with PIN-code, biometric authorization, etc.
In developed countries, most large retail chains support different types of mobile payments. Indeed, it is not always what users have. If you are in a large city, you will likely find where to pay using your smartphone.
What is the best way to pay online?
There is no right or wrong answer to such a question. It all depends on your business needs and goals. Thus, the best solution for processing payments is individual. Here are some tips on choosing the best way to accept payments online:
- Low-risk small business owners that sell inside their countries benefit from using credit cards. Finding a local bank is a win-win option for them. It will smooth the application process.
- High-risk business owners benefit from crypto and electronic payment solutions. Sometimes, they require a foreign bank due to their country regulations.
- Both low and high-risk business owners who sell internationally need to offer a wide range of payment options. When choosing a PSP, make sure that it accepts a variety of currencies and payment options.
- Those who target millennials and Gen Z audience should include mobile banking. This is the most popular payment method among young adults.
- Using SEPA is beneficial for European merchants who deal with large amounts and high-risk industries.
- Using SWIFT is a good solution for Americans running low and middle-risk businesses.
How to start accepting payments online
To start accepting payments online, you’ll have to take three steps:
- Create an e-commerce website.
- Choose a PSP (payment system provider)
- Apply for a merchant account.
To open a merchant account, you’ll have to collect a list of documents and submit an online application. Once the application of yours gets approved, you get a payment gateway. It is the unique software that encrypts the information provided via a payment page. Right upon the payment gateway setup, you can accept payments online.
List of documents to open a merchant account:
Here is a list of documents to open a merchant account and start accepting payments:
- Certificate of incorporation. The paper shows the main aspects of company formation. It usually includes legal address, name, and type of the corporation.
- Certificate of incumbency (or equivalent). The document holds the information about the company’s owners – their names and positions they occupy.
- Passports’ copies of all company owners and officers with their signatures. The scanned copies of directors & officers’ passports.
- Application. Usually, it is an online form on a PSP’s website.
- The processing history. Different PSPs have different requirements. However, high-risk business owners always need to provide at least six months of processing history.
- License. Attach a license issued by your country’s responsible body.
- Turnover. Clarify your turnover amount so that the payment processor connects you to the most appropriate bank.
From crypto to debit cards, Ikajo International accepts 150+ payment methods. Reach us out for an individual consultation on payments. We are here to provide you with a safe payment solution that will make your revenue grow. By the way, we also offer recurring billing for free.