Online payments have become increasingly popular over the past few decades as more and more consumers prefer to pay for goods and services online. With the rise of e-commerce, online payment methods have evolved to offer a variety of options to consumers. This article will overview the most popular online payment methods, including credit, debit, eCheck/ACH, alternative, eWallets, BNPL, open banking, and more.
Types of Online Payments
Online Payment Methods Table of Contents
Technology has created many different services in the financial industry. Below are some of the most common online payment methods and some up-and-coming.
Credit Cards: Credit cards are one of the most popular online payment methods. They are widely accepted by merchants and provide consumers with the convenience of making purchases without carrying cash.
Debit Cards: Debit cards are also prevalent. They are similar to credit cards, but withdraw funds directly from the cardholder’s bank account, rather than placing the transaction on a line of credit that is paid by the customer at a later date.
eChecks/ACH: eChecks and ACH payments are processed by the Automated Clearing House. They are an electronic form of a paper check. These payments allow consumers to pay directly from their bank account without needing a credit or debit card. These payments are also less expensive to process, so they’re great for consumers and merchants alike.
Alternative Payment Methods
Alternative payment methods include PayPal, Google Wallet, and Apple Pay. These methods allow consumers to link their bank accounts or credit cards to their digital wallets. This makes online payments simple and easy. It also provides an extra layer of security.
eWallets: These digital wallets allow consumers to store and manage their money online. They can be used to make online payments and transfer money to other users. Examples of eWallets include Venmo and Zelle.
Buy Now Pay Later (BNPL): The buy now pay later method is gaining popularity with many online retailers. It allows consumers to pay for goods or services over a period of time. This is especially popular with large-ticket items such as furniture and electronics.
Open Banking: Open banking is a newer online payment method that is gaining popularity in several countries. It allows consumers to share their financial information with third-party providers, such as fintech apps. This enables them to make payments from those apps and manage their money from multiple accounts all in one place.
Online Payment Methods for Small Business
Merchants and small business owners also have a wide range of options from which to choose. In most cases, it is in the business’s best interests to offer a variety of payment options to their customers. It typically attracts a larger customer base with differing payment method preferences.
Some popular options for small businesses include credit and debit cards, PayPal, Square, and Stripe. These methods are easy to set up and use in daily operations. They provide a convenient way for small businesses to accept payments and service a variety of consumer preferences. As a small business owner, you may want to consider some or all of the following options:
- Credit and Debit Cards
- Automated Clearing House (ACH) and eChecks
- Alternative Payment Options
In addition to these popular payment methods, you can speak to your processor to learn what else is available. Many processors have a robust list of options that can be made available in your payment portal for your customers to use.
During your conversation with the processor, be sure to ask for the fee schedule. Not all payment types cost the same amount to process. It’s important for a business owner to know how much it will cost to process some of these types of payments. In some cases, offering a specific type of payment method may not make sense financially.
What are the Most Popular Online Payment Methods?
According to a study by pay.com, the four most popular online payment methods in the US are credit cards, debit cards, eCheck/ACH, and digital wallets. Merchants widely accept these methods and widely used by consumers. Whether you’re just getting started or you’ve been in business for years, you may want to consider some of these payment types.
Studies also show that younger consumers adopt newer payment methods more widely. Conversely, established payment methods are more likely to be used by old consumers. You may want to consider the demographics of your customer base before finalizing your choice of payment methods. Generally speaking, it’s a safe bet that most of your consumers will be comfortable with a credit or debit card.
What are the Best Online Payment Methods?
The best online payment methods are the ones that are cost-effective and easy to use. You want to offer convenience and variety to your customers, but not so much that it makes your business difficult to run, or costs too much money to process. Here are the three best payment methods from an efficiency and cost-effectiveness standpoint:
- Credit and debit cards are widely accepted and used but tend to cost a little more to process. However, even though they can cost more to process, the cost of not offering this option could be far more detrimental to your business.
- eCheck/ACH payments are not as popular as cards but are still familiar to a large number of consumers across the globe. These are fantastic because most people know how to use them, and they cost less to process than card payments.
- Alternative payment methods have also gained a ton of popularity in recent years. Offering these options to consumers can increase your credibility as a company that stays on the forefront of technology.
Final Thoughts
Online payment methods continue to grow and evolve every year. Some merchants constantly chase the next “shiny object” or new up-and-coming payment options. While that can prove to be fruitful for your business, it’s still smart to offer the basics, as well. The more familiar your consumers are with your payment options, the more likely they are to complete that purchase and not abandon the shopping cart.
