Did you know the United Kingdom has Europe's most advanced e-commerce market? Yes, in 2023, the country was expected to have nearly 60 million e-commerce users. As a UK business, this is a perfect place to start marketing your products and services.
If you start an online store, you're opening up the potential for over 60 million users to visit and purchase. Sure, it's unlikely all 60 million will wander onto your site, but you will reach the perfect audience if you have a strong product and business ethos.
Before launching your business online, there are various elements to consider, like payment methods, payment providers, etc. Assuming you're in the process of setting up your online store, you're going to need to know a thing or two about online payment methods.
In this article, you'll learn all about online payment methods, and we've made a list of the best ones you can so your potential customers can use to make online payments.
What Is an Online Payment Method?
When you shop online or run an online shop, you need a way people can pay for a product.
An online payment method is an electronic transfer of money via the Internet. At checkout, the customer chooses the most suitable payment method and pays for the products from their bank account or other payment methods.
When shopping in person, you use cash in your bank account or a digital wallet like Apple Pay, Google Pay or Samsung Pay. When you shop online, you can make a broader range of online payments, such as using your credit card, PayPal account, a Buy Now, Pay Later agreement, and many others.
Pros and Cons of Accepting Multiple Online Payments
There are standard online payment methods, but there are benefits to allowing different payment gateways on your online shop.
Pros
✔️ Customer satisfaction: Not all customers trust paying by card; they can pay online comfortably by giving them multiple payment methods. Having options shows you care for your customer base and will increase customer satisfaction.
✔️ Analytical data: You can identify customer shopping patterns from analytics and insights provided by payment gateways and use them to inform business decisions. You'll receive multiple data sets depending on how many online methods of payment you add to your store.
✔️ Backup: Multiple options can be a backup if one payment gateway is down. If you only accept payments from a bank account and there is a system error, you could lose customers.
✔️ Boost sales: Multiple online payment methods open your store to a more extensive customer base. You can take national and international customer payments with the right payment gateway.
✔️ Increased conversion: Including widely accepted payment systems and local ones, you can encourage more people to buy from your store as you accommodate more people worldwide.
Cons
❌️ More IT resources: The more payment systems you have, the more technical and IT resources are needed. You'll need to learn more about the different methods or employ someone to help you run them smoothly.
❌️ Potential integration issues: If you use multiple payment service providers, there could be issues with integrating new online payment services into your site.
❌️ Higher costs: Using multiple online payment service providers is a costly undertaking. There are fees included, such as processing, technical, and integration fees. There is also the cost of getting a merchant account with each payment service provider on top of processing payment charges.
The Different Types of Online Payment Methods
1. Credit and Debit Cards: One of the Most Popular Online Payment Methods
Accepting payments with credit or debit cards is essential and should be the first payment method you add to your online store.
Taking debit and credit card payments is the standard for online shops. Most, if not all, online retailers accept online payments via credit and debit cards. It's a standard payment method that works and is easy to set up.
Customers simply enter their card details at checkout to pay for the items in their online basket. The cards are tied to customer's accounts, so the purchases are made through bank transfers.
The most popular payment service provider is WorldPay. The WorldPay payment page allows you to accept all major credit and debit cards and PayPal.
If you choose the online payment processor WorldPay, they offer an online payment gateway in over 116 countries so that you can reach international and national customers. You'll get an online merchant account and can provide a pay-by-link service if you don't have a website.
2. Mobile Payments: Pay With Apple Pay, Samsung Pay, and Google Pay
Mobile payments are becoming a popular payment method. Most smartphones have a built-in payment wallet, such as Apple Pay, Samsung Pay, and Google Pay. Customers can make payments in-store and make most payments online with mobile payments. Mobile payments are convenient, fast and secure, so they will help increase customer satisfaction.
You can use some of these payment methods on different devices, such as Apple Pay on any iOS device such as Mac, Apple Watch, and iPad.
The checkout process of using mobile payments is quick as it prompts the customer to accept the transaction as soon as they click the mobile payment option. This method automatically inputs all the needed details, such as email address, bank account details and any other necessary transaction information.
Accepting online payments from a mobile device will give you access to actionable data. You can learn how often customers visit your online store, how much they spend and their preferred payment method. Not everyone uses mobile payments, so it's a good idea to have this payment option as a secondary method, not a primary one.
3. Gift Card Payments: Attracts More Customers
If you're a business that offers gift cards, you could add the option to use the gift cards on your website. If you sell products that would do well as gifts, for example, stationary, you could offer gift cards that your customers can buy for their loved ones.
There are different gift cards you can offer:
- Physical gift cards: You can usually buy these in-store or online. They can be used online and in person.
- eGift cards: A digital gift card sent to a customer electronically via email, SMS or a mobile app. You can typically only use these cards for online shopping.
- Open loop: Open loop cards are usually generic by Visa or Mastercard so that you can use them almost anywhere. They're similar to using a debit or credit card, but you can only use the balance on the card.
- Closed loop: Gift cards are designed solely for your business and can't be used anywhere else. The idea is to incentivise customers to return and create brand loyalty.
Offering gift cards as a payment method is a great way to expand your customer base. If someone is given a gift card for your store, they can explore your products. Gift cards create brand loyalty and are an excellent way for customers to introduce their loved ones to your business.
4. Prepaid Card Payments: Works Like a Debit or Credit Card
Prepaid cards are a type of open-loop card. Customers can buy a prepaid card that carries Visa or Mastercard branding, top it up with money and use it like a debit or credit card. Anywhere that uses the Mastercard network typically accepts these prepaid cards. Prepaid cards are great for travelling or if you're trying to stick to a budget.
If you accept Mastercard on your online shop, you may already be able to accept prepaid cards.
5. Buy Now, Pay Later: A More Affordable Way to Pay
Buy Now, Pay Later (BNPL) services is a payment option that has become more popular recently. More than one-third of Brits have used BNPL services in 2023. The most common services are Klarna and PayPal.
How BNPL services work is you'll receive the total payment amount from the provider, and the customer will pay them a certain amount over a certain period. So, even though the customer is buying now and paying later, you will be paid upfront, and the debt is between the service and the customer.
Depending on who your website provider is, you may be able to add this option using a plug-in. By allowing this popular payment method, you enable more people to buy from your store now. Many people may wait until payday, and the customer may not return to your online store. Having a BNPL service could increase sales.
6. Digital Currency: Not Accepted as Legal Tender in the UK
Paying with a digital currency like cryptocurrency has become a recent payment method online. Not many stores will allow you to pay with Cryptocurrency like Bitcoin or Ethereum, but some online stores do. In the UK, cryptocurrency is legal but is not legal tender.
However, other stores worldwide allow digital currencies to be used to make purchases. So, if you’re not a UK business, you may be able to offer digital currency as a payment method.
How to Choose the Right Payment Method
We've shown six of the most popular payment methods, but you don't need to offer them all. You can, but you may find some redundant.
We've compiled a short list of factors to consider helping you decide which payments you should accept:
- Transaction fees: Payment fees will be different between methods. Some are more expensive than others, and to employ them all may cause you to pay high fees. If you choose a payment method you know will be used, the costs will be worth it. Look at what works for other businesses and your customers and decide which methods are worth the charges. Consider any potential monthly fees.
- Market standards: Use market research to decide which payment method to offer. Ask your current customers how they prefer to make online payments and use the results to help you decide. Understand the spending habits of your target audience and use this to help influence your payment process.
- Security and fraud prevention: You must ensure that all online payments are secure. Safety is non-negotiable, so only accept payments that offer you and your customer protection against fraud. Secure online payment processing is a must with all online retailers.
- Compatibility: You will want to create a seamless payment process, so you can achieve this by using a payment method that's easy to integrate into your current online store. If you need help integrating a payment method, consider getting additional technical assistance from online payment providers or choose a more straightforward payment form.
How to Add Online Payments to Your Shop?
Setting up a new online payment method can be challenging work. Depending on the site you use to host your store, it could be easy to add different payment methods.
For example, you can utilise Shopify payments if you run a Shopify store. All you need to do is go to Settings from your Shopify Admin page, click the Payments option, and add the available supported payment systems.
You may have to work more if your online shop is hosted elsewhere. You must contact the right online payment service provider to negotiate adding online payment services to your store.
Adding multiple payments can get expensive with all the fees involved, so it could work out better for you if you choose a provider that offers numerous options. It saves you time and makes integration easier.
You can start offering multiple payment options with these steps:
- Merchant bank account: You need to open a merchant account. A merchant account differs from a business bank account. A merchant account is where your funds go from customers to be authorised before they arrive in your account. Merchant accounts have transaction fees, monthly minimum fees, and more. Examples include Zettle, WorldPay and Stripe.
- Pick your payment gateways: Depending on the merchant account provider, you will usually gain access to multiple payment gateways, so you won’t need to outsource a third party. A payment gateway moves customer money into your merchant account and helps send all the essential information between banks. You can choose a third-party provider such as PayPal’s integrated gateway, Stripe and Square.
- Get yourself a tech expert: Having a tech support member on your team will make the overall process smoother. If anything goes wrong or needs setting up, you can delegate duties to someone who knows what they’re doing, so it saves you time and lets you carry on with other business matters. If you’re struggling to set up a payment system, always contact tech support from your or the payment provider’s team.
With the above points, you can smoothly set up multiple payment methods for your online business.
Final Thoughts
Accepting online payments can open your business to more customers. Only some people want to pay for services directly from their bank accounts, and by allowing multiple online payments, you can put your customer's minds at ease.
It's not a secret that customer satisfaction is a huge factor in a business's success, and if you can achieve that with multiple online payment methods, you're already on to a good start.
Remember, as a small business, you don't need to offer every payment method. You can start off with one or two and then add more as your business grows.
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