20 Digital Payment Options for Small Business Transactions – Latest News

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Now more than ever, it’s vital for businesses to accept digital payments. The question is which method of doing so best fits your company’s needs.

Some small businesses end up paying far too much for a processing arrangement because they don’t have enough information about the process, the players, and what’s involved.

We’re here to help you avoid that by providing all the up-to-date knowledge you need to make an informed, profitable decision about this central detail of your business finances.

What Are Digital Payments?

Digital payments are anything that’s not a paper check or cash in the till. They represent moving funds from a customer’s account into your own. Once upon a time, credit card transactions weren’t digital payments. Then point-of-sale machines were invented, and credit and debit cards became digital.

When you sign up with a digital payment processor, they collect your banking information and streamline transfers to and from your bank. When a customer makes a purchase, the processor collects the customer’s banking information, then communicates with your bank and theirs to authorize a transfer of funds.

From your point of view, the transactions, encryption, and permissions are automatic and invisible. You just see changes to your bank balance as each transaction goes through.

Accepting digital payments has several key advantages:

  • Payments hit your bank accounts faster than with a check, and faster even than accepting cash.
  • Digital payments are more convenient for most modern customers.
  • Nobody can rob your store and run away with a bag full of digital payments.
  • Many digital payment processors offer robust, real-time financial tracking to give you more and better control over your finances.
  • If you structure payments properly, digital payments can create more predictable cash flow over the life of your business.

Further, research shows that cash-only businesses miss out on sales if they don’t accept digital payments. A 2018 Pew study found that 29% of U.S. adults and 41% of high-earning adults make no cash purchases during a typical week, and the number of Americans who don’t carry cash is rising each year.


Kinds of Digital Payment

Although there are multiple ways to accept digital payments, and each has many vendors willing to help you do so via slightly different methods, there are only two payment methods by which funds move in digital payments.

Cards

Debit and credit cards have been the standard option for making online purchases and digital payments since before the turn of the century, and need no introduction.

Accepting them in your business requires signing up with some kind of credit card processing portal that allows for secure, instantaneous communication between your bank and the issuing bank.

The benefits of accepting cards for digital payments for your customers center around convenience. The payor almost certainly has multiple options in both debit and credit cards available at any time. For your business, the speed with which the transaction increases your bank balance is the main draw. Funds will usually clear in just 24 to 48 hours.

Cost and risk are the major disadvantages of accepting cards for digital transactions. Fees can be high, sometimes hidden, or even predatory. Further, the fallout for chargebacks and fraud tends to land on you, the vendor, rather than on the bank or the customer in the event of a disputed charge.

eChecks (ACH)

You might have heard eChecks called ACH Processing. ACH stands for Automated Clearing House, which is an electronic network between U.S. financial institutions. International eChecks instead use the Society for Worldwide Interbank Financial Telecommunication (SWIFT) network, but they work the same way.

With both networks, the buyer signs a contract authorizing a one-time or recurring transfer of funds, then the network makes that transfer as instructed in the contract.

An eCheck is slower and less convenient to set up than a card transaction, but the funds become available nearly instantaneously. Fees tend to be cheaper than card transactions. Because the customer has to sign a contract, the fallout for fraud lands on them or their bank, not on you.

The disadvantage of eCheck processing is that it’s far less convenient for you and the customer than using a card. The contracts can be long, and they require the customer to have or know offhand their banking information.


4 Categories of Online Payment Platforms

To accept digital payments via card or eCheck, you need a way to communicate with the customer’s bank for authorization, and with your own bank for acceptance. This happens in one of four ways.

1. Mobile Apps/Digital Wallets

In the beginning, there was PayPal, an online-only payment processor that let people make Internet purchases before a fully realized infrastructure was complete. It wasn’t a bank or a communication and verification service like Visa or Mastercard. It was something new, even though at its beginning Paypal was for desktop devices only.

Fast-forward a quarter century, and PayPal is available as an app on your phone, as are other contenders like Zelle, Cash, and Apple Pay. These options are fast, convenient, and available to customers any time they’re near their phones. If you both have an account with the same app, you can process a payment.

2. Pay-Enabled Invoicing

A pay-enabled invoice adds code to the file when you bill a client. That code creates either a form for filling out payment information or a button that leads to your payment processing provider.

Beyond saving time and money compared to paper billing, pay-enabled invoices also speed up payment and simplify tracking who has paid and who hasn’t. These make it extremely easy for a customer to pay what they owe you, automating the process for you both and even automating reminders, the addition of late fees, and similar bookkeeping tasks.

3. Manual Card Entry

Think back to the last time you placed an order over the phone and gave a customer service agent your credit card number or banking information. The representative was completing manual card entry. You perform manual card entry when you make an online purchase through a website that has its own payment portal on the site.

This method has the advantage of flexibility, requiring the customer to have nothing more than a valid credit or debit card. It is the most open to fraud, however, so it’s smart to establish a strong paper trail, double-check billing and shipping information, ask for ID when possible, and to do business with a payment processor that offers fraud protection.

4. Card Readers

In the old days, a card “reader” was a physical machine that took a carbon impression of a credit card. Those impressions, along with the transaction information, were submitted to the bank in a manner similar to checks. Next came point-of-sale machines, connected to the burgeoning Internet and stationed next to the cash register.

These days, any phone or tablet can use a plug-in or Bluetooth reader that lets cards swipe, chip, or tap in and take the payment. This added convenience lets you take your processing to trade shows and on-site calls, as well as making in-house sales easier for servers and other personnel on the floor.


Key Digital Payment Options

Some platforms for accepting payments use only one of the methods described above. Others use all four. Some offer wide suites of features, while others focus on delivering scaled-down models at a discounted rate. Below are the 20 best platforms today, at least one of which should work for your company’s needs.

1. Authorize.net

  • Categories Offered: Pay-enabled invoicing, manual entry, card reader
  • Price: 10 cents per transaction plus a 10-cent daily batch fee and $25 per month (if you have your own merchant account), or 2.9% plus 30 cents per transaction and $25 per month (if you use Authorize.net merchant services)
  • Pros: Very flexible, can be customized to almost any e-commerce site, strong anti-fraud features
  • Cons: No web store help, requires some technology savvy to operate
  • Best For: Businesses with an existing web store
  • Worst For: Businesses with existing merchant services, as the extra transaction fees aren’t worth the convenience

Authorize.net is a simplified option that provides payment gateways for your existing e-commerce platform.

You set up an account, and they give you code to insert into the pages of your web store or into your invoices. The code allows simple, customizable checkout that links to credit cards, debit cards, and most payment apps. Their mobile payments card reader allows point-of-sale transactions as well

Unlike many other options on this list, Authorize.net provides a merchant services account or works with you if you already have one through another vendor.


2. Chase Merchant Services

  • Categories Offered: App payment, manual entry, card reader
  • Price: 2.6% plus 10 cents per transaction, with possible volume discounts
  • Pros: Can negotiate high volume discounts, gives preferential access to Chase and JP Morgan Chase financial services, including loans
  • Cons: Navigating customer service at a bank this size requires “a particular set of skills”
  • Best For: Large and enterprise-level businesses with multiple locations and those requiring stable, reliable transaction handling
  • Worst For: Low-volume companies, especially those with no other ties to Chase or JP Morgan Chase

Digital payment processing started with the big banks, as they moved to point-of-sales machines. Many of those banks lagged behind, resting on the laurels of their near-monopoly.

Chase was one of the first and remains the leading major bank to compete with the app- and web-driven digital payment processors with its Chase Merchant Services. It offers all the standard services, with few if any surprises.


3. Amazon Pay (Checkout By Amazon/Amazon Payments)

  • Categories Offered: Manual entry
  • Price: 2.9% plus 30 cents per transaction, with discounted rates beginning at $3,000 in sales per month
  • Pros: Immediately makes your digital payment acceptance as flexible as Amazon.com, including allowing your customers to use their Amazon credit card
  • Cons: Does not work with other merchant services, and the code is somewhat inflexible
  • Best For: Companies that want the power of Amazon but have their own website
  • Worst For: Companies with existing merchant services through another provider

Checkout By Amazon/Amazon Payments is one of two options Amazon offers for businesses to accept digital payments. You sign up for an Amazon account, and Amazon provides a copy-and-paste code for you to insert a buy button on your own website.

When the customer clicks on that button, it takes them to Amazon.com to complete the transaction. Amazon pays you along with any other money Amazon owes you from sales, affiliate commissions, and other business you do with them.


4. Amazon Pay (Log In and Pay)

  • Categories Offered: Manual entry
  • Price: 2.9% plus 30 cents per transaction, with discounted rates beginning at $3,000 in sales per month
  • Pros: Combines the flexibility of Amazon with keeping customers on your own website
  • Cons: Adds extra steps and hassle as compared to hosting your own payment options
  • Best For: Companies unable or unwilling to set up their own merchant services, companies who already make the bulk of their sales via an Amazon platform
  • Worst For: Companies with existing merchant services, as this simply creates a redundant expense

Amazon’s second option for digital payments also provides copy-and-paste HTML code for insertion into your e-commerce store.

In this case, the payee stays on your site throughout the entire transaction, and Amazon collects and sends you their name, email address, and postal code. This not only lets you collect payments but also sets you up to market directly to those customers later.


5. Dharma

  • Categories Offered: App payment, card reader
  • Price: 0.15% plus 7 cents per transaction, plus a $20 monthly fee
  • Pros: By far one of the least expensive options on this list, nice suite of business financial services
  • Cons: Limited scope of services compared to many other providers
  • Best For: Small-to-medium sized businesses looking to keep costs as low as possible
  • Worst For: Businesses with complex operations, businesses with high enough volume to qualify for bulk rates with a larger service

Dharma is an all-inclusive merchant services and digital processing outfit focusing on small-to-medium businesses.

Dharma can handle most transaction types and offers low-to-medium cost lines of credit with payments taken directly from sales receipts. It offers a wide array of ways to access its services, with equally easy systems and equipment for retail, e-commerce, restaurant, and business-to-business (B2B) clients.


6. Dwolla

  • Categories Offered: App Payment, with an email function that works similarly to pay-enabled Invoicing
  • Price: Free below $10, and 25 cents per transaction for higher amounts
  • Pros: Very low fees, ability to pay via email
  • Cons: Only offers one way to pay
  • Best For: Businesses with recurring invoic

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