A customer-centric business approach focuses on customer experience一understanding and solving customer problems, optimizing customer flexibility, and offering convenience. This can help you attract and retain customers. One of the ways to achieve this is by offering several business payment options to help your clients pay for goods and services easily.
At Remitly, we’ve put together a helpful guide so you can understand the available payment methods and options for businesses in the United States.
Why business payment methods matter
Business payment methods allow you to receive payments from customers. They should provide a good customer experience by being reliable, secure, and efficient.
They should also integrate well with your point-of-sale (POS)一a system that processes business payments securely and efficiently. It uses hardware and software to manage sales and record where and when a business transaction occurs.
Offering a range of business payment methods has several potential benefits:
- Increases customer satisfaction, flexibility, and loyalty because completing transactions is easier and more convenient.
- Increases sales because you can accommodate different customers with different transaction preferences.
- Ensures better customer retention due to customer satisfaction.
- Improves efficiency, offering an alternative when a payment option fails.
- Offers security, especially when the customer is spending a large amount of money, because carrying large amounts of cash can be risky.
- Streamlines transactions and improves cash flow.
Overview of different payment options for small businesses
Acceptable legal business payment methods in the US include:
- Cash
- Checks
- Bank transfer
- Credit and debit cards
- Mobile payments
- Cryptocurrency
- Digital wallets, e.g. Apple Pay and Google Pay.
- Buy-now-pay-later (BNPL)
- Online payments, e.g. PayPal
- Direct debit
- Electronic checks
- Contactless payments using Near Field Communication (NFC) technology
Understanding types of business payment methods
These business payment options work in different ways, so it might be worth supporting several for your business to increase efficiency.
Cash
Customers pay using cash in the local currency一$ USD in America. If possible, the customer may pay exactly as billed, or pay extra and receive the difference in change.
Although popular, cash payments put the business and customers at risk of theft and loss. Transaction management may also be confusing if you don’t use a POS system and forget to update your records after each sale.
Some people worry about hygiene because cash exchanges hands often, carrying germs and disease risk. This is one of the reasons cash payments were paused during the pandemic.
Despite these challenges, 90% of US consumers continue use cash.
Checks
Check payments are popular in the US, especially for business-to-business transactions. For example, if you sell chicken to a fast food joint, they can write checks to pay for the supplies.
Unfortunately, check payments can sometimes make cash management difficult. Unlike cash, payments aren’t instant. It takes time to clear checks, even when you use the same financial provider. The average check clearance wait time in the US is two business days after you deposit it.
There is also an increased risk of fraud or refused payment if the payer makes significant errors when writing the check, such as not clearly writing the name or amount.
Checks can be expensive too. Issuing paper checks can cost up to $4 USD.
Bank transfers
Your customers may opt to pay via bank transfers in two ways一wire transfers or Automated Clearing House (ACH). Bank transfers are faster, safer, and more efficient than cash or check payments. It may be worth offering this option to retain and expand your customer base by attracting people who don’t like carrying cash or writing checks.
That said, being aware of the disadvantages will help manage your expectations.
- Some US banks charge expensive fees, especially for transfers between different banks.
- The receiving bank may hold the money until any issues are cleared or clarified.
- Daily transaction limits may affect payments, leading to failed or late transactions, affecting cash flow.
- Transfers are usually irreversible. So it’s important your customers put in the correct details to avoid sending money to the wrong person.
Digital payment solutions
With digital payment solutions, customers send money electronically without handling physical cash. Payment options include online payments, mobile payments, credit or debit card transactions, and e-wallets.
Online payments
Online payments allow shoppers to pay via the internet when they shop online or at your store. They can use credit cards, debit cards, internet banking, wire transfers, and digital wallets.
Mobile payments
Mobile payment technology works similarly to online payments一you pay via the internet. However, there are a couple differences:
- Payment is made via mobile devices, e.g. tablets and smartphones.
- You will require a mobile application to access the services. For example, installing your bank’s app from the app store.
- You may use NFC or quick response (QR) codes to complete payments.
Credit and debit card payments
82% of consumers in the United States own a credit card, making it one of the most popular payment options. A credit card is a line of credit that banks float to users, allowing them to pay for goods and services, then pay the bank back at an agreed date. Usually, these cards have limits, so a buyer’s transaction may be declined if they’ve maxed out the card.
Unlike credit cards, debit cards don’t involve borrowing money. They are linked to a bank account, allowing users to access funds to pay for goods and services without physically visiting the bank or logging in online. These cards work as long as there are funds in the bank account.
You’ll need a POS terminal with a card reader and payment software to receive money from credit and debit cards for on-site transactions.
For mobile or online purchases, buyers can link their credit or debit cards to peer-to-peer payment (P2P) apps like PayPal or Venmo to send you money. P2P apps allow you to send and receive money digitally, at no cost, in most instances.
A detailed look into popular payment solutions
Business payment solutions offer ways for your business to receive money from different payment methods.
Solution 1: Payment processors and gateways
Payment gateways provide the technology needed to accept online payments. They securely collect information from customers as they make a purchase, then authenticate it. The customer enters their payment information, and the gateway safely sends the information to a payment processor.
The payment processor handles the transaction itself, and sends the money to your business. The gateway also communicates whether the transaction was successful or not.
A company can offer both services. For example, PayPal is both a processor and a gateway.
Consider payment processors and gateways to receive electronic payments from debit cards, e-checks, credit cards, and digital wallets.
Solution 2: Digital wallets and contactless payments
Digital wallets eliminate the need to carry credit and debit cards or cash. It’s an e-wallet that safely stores credit card and debit card information on your smartphone, allowing customers to make payments from it.
Payments are contactless, using NFC and QR code technologies.
Solution 3: Explore e-commerce and point-of-sale systems
How do businesses integrate their online and physical store operations for seamless accounting? It’s simple. They combine e-commerce and point-of-sale (POS) systems.
An e-commerce system captures online transactions made via your website from anywhere, while a POS captures and stores information about physical store transactions made in person. Connecting these systems to your inventory manager can allow for seamless business operations and real-time management.
Choosing the best payment methods for your business
These different business payment options all have strengths and weaknesses that may affect customers’ experience.
It’s a good idea to consider these issues before settling on your preferred payment methods for your business:
- Business needs vs customer preferences: A customer-centric approach is good as it means you can offer payment methods that customers prefer. However, the choice should also make sense for your business. For example, although buy-now-pay-later (BNPL) arrangements increase sales and keep customers, they may not make sense at the growth stage of your business.
- Transaction fees: Businesses pass some fees on to customers, which are reflected in the final product or service fee. If you choose payment options that are too expensive, you may end up charging more than the market rate, losing customers in the long run. This may be risky for online businesses because customers can use online tools to compare prices and buy from the most affordable vendor.
- Security: Some payment options are more secure than others. For example, large cash transactions could present an opportunity for fraud. Unscrupulous customers can hide fake money within the real bunch, making you an unknowing accomplice in money laundering.
- Fraud protection: Cash payments are not the only way to get defrauded. Fake checks are a common type of small business scam in the United States. You also risk chargeback fraud with credit and debit cards, where a fraudster legitimately purchases from your business, later disputing the transaction with the bank claiming that the payment was unauthorized. Unfortunately, they may get their refund and still keep your goods.
- Efficiency: Bank transfers can cause issues when it comes to refunds. For example, it’s a good idea to understand how the refund process works and if customers can receive a refund if they pay the wrong business by accident.
The role of cost-effective and secure payment processing
As you consider the best options for your business, it’s worth considering the impact that cost-effective and secure payment processing can have on your business.
Find an business payment method that works for you, so you’re able to:
- Provide quick, efficient, and safe transactions, improving user experience and satisfaction.
- Reduce operational costs一both financial and security一via lower transaction costs and reduced fraud risk.
- Improve customer trust by securely processing their financial information.
- Increase compliance with local and international regulations such as the Payment Card Industry Data Security Standard (PCI DSS) that protects sensitive card data.
- Save time with automated processes.
Future trends in business payments
Payment technology is changing at a fast pace. It’s worth paying attention to the changes that are happening and anticipating what might happen to the business payment landscape in the next few years.
For example, we’re likely to see:
- More adoptions of emerging technologies like blockchain and cryptocurrency.
- Contactless and subscription-based payment systems will be more common.
- Investment in AI and machine learning in payments.
- Voice-activated payments. Home assistants like Siri and Alexa may be able to pay businesses via biometric authentication in the future.
Preparing your small business for future payment innovations
To prepare your business for these future payment innovations, it’s a good idea to streamline your operations, read widely to understand the current landscape, and embrace fintech solutions. If possible, invest in seminars and staff training to learn the best practices, cybersecurity, and prepare for the future.
FAQ
What are business payments?
These are processes or methods that businesses use to accept payment for goods and services.
What is the ideal payment method for a business?
It should be cost-effective, secure, and provide a good user experience. The best solution for your business will depend on your specific business needs.
How can small businesses take payments?
Payment methods include credit cards, debit cards, cash, checks, bank transfers, digital wallets, and mobile payments.
How should you pay for business expenses?
The best way depends on your specific requirements. Ensure that the method has low transaction costs, is secure, and keeps a record to facilitate proper financial management.