What are the best payment methods for small businesses to accept?

Learn more about the range of payment options available to your small business

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October 5, 2023
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What are the best payment methods for small businesses to accept?

Finding the right payment methods for your business is a key element of your strategy for success. 

With limited resources and tight margins, every transaction and every customer counts. That’s why it’s important that the payment methods you choose make life easier rather than adding to your administrative burden. You also need to factor in your growth ambitions by implementing those that can scale easily. 

In this article, we explore the best payment methods for small businesses, which factors small businesses should consider when accepting payments, and how best to implement those payment methods to drive success. 

What is the best payment method for small businesses?

There are several payment methods particularly suited to SMBs, including:  

Cash payments

Cash use is declining dramatically, set to account for just 10% of global point-of-sale (POS) transaction value by 2025. However, there are good reasons to accept cash as a small business, primarily regional variations in use. Cash transaction value will still be as high as 31% in the Middle East & Africa and 24% in Latin America in 2025. So, if you accept in-person payments in these regions, it makes sense to retain cash as an accepted payment method. 

Additionally, a study from the European Central Bank (ECB) found that cash is still the most popular means of payment for small-value, in-store purchases, and that the majority of consumers still think cash is “important or very important”, citing its anonymity and privacy as key advantages. Clearly there’s still a benefit to accepting cash for small brick-and-mortar businesses that take a high proportion of low-value transactions. 

Finally, you aren’t charged transaction fees for accepting cash from your customers, and, rather than having to wait for funds to settle in your account (as with online methods), the money is available immediately. This makes cash a great option for small businesses, where keeping costs down and cash flowing is a daily struggle.  

Check payments

Checks authorize the transfer of funds from your customer’s bank account to your account. Like cash, paper checks are increasingly unpopular as a payment method, though eChecks, their digital equivalent, still have a place in the online payments world. For small businesses, eChecks offer a number of advantages. For example, transaction fees are significantly lower than card payments (around $0.10 and $1.50 per transaction), and, as they rely on highly secure national clearing houses, they’re a very safe way to accept payments.  

Credit card payments

Credit card payments are quick, convenient, and widely used. They also allow your customers to finance the purchase of expensive items, which broadens your reach and revenue potential. 

The one downside is that card transaction fees can be anywhere between 1.5% and 6%, which puts a premium on accepting them. However, the ongoing popularity of cards trumps any cost considerations - you’d be sacrificing far more in lost revenue by not accepting them than you would end up paying in fees. Additionally, there are ways to limit the impact of those fees. For example, you can select a fee pricing model that’s most cost-effective for your business model. A flat fee model is transparent and predictable, which is useful when you have a low transaction volume, but you might find a tiered model is more suitable if your transaction volume increases. 

Another thing to consider with cards is the chance of chargebacks and fraud. But by working with a secure payment processing solution, you can limit your exposure to these risks.

Check out our dedicated guide to accepting credit card payments if you'd like more information.

Online payments & email invoicing

Online payments include any method that relies on the internet, such as online card payments, bank transfers, eChecks, and digital wallets. Even for the smallest businesses, having an online presence and the ability to accept ecommerce payments is essential if you want to be competitive in the modern economy. Also, issues like cost and complexity, which have previously been major barriers for small businesses with online ambitions, are a thing of the past thanks to modern payment processing solutions.  

Email invoicing is another online payment method that has big advantages for small businesses, especially independent contractors and those in service-based sectors. You can email a click-to-pay invoice directly to your customer, which they can review and then instantly make a payment.   

Mobile payments

Mobile payments include digital wallets (like Apple and Google Pay), in-app purchases and money transfer apps. 

The main argument in favor of digital wallet payments for small businesses is that they’re extremely popular, already accounting for 49% of all global ecommerce transaction value. As with card payments, although fees can be high, accepting digital wallet payments is essential if you want to take advantage of every opportunity to drive revenue and customer loyalty.  They’re also extremely secure, which reduces your chance of becoming a victim of fraud, the impact of which is far greater for smaller businesses.

If you’re an app-based small business, which can be a highly cost-effective way to build a customer base, enabling in-app purchases is a great way to provide a streamlined payment experience. 

What to consider when accepting payments in SMB?

So, how should you choose which of the above methods to implement for your small business? We’d recommend prioritizing the following considerations:

  • Price - cost should certainly be a major factor in your decision-making, but it has to be weighed against other considerations. For example, while it’s great that eChecks have low fees, they’re not widely used by most consumers, while cards have high fees but are extremely popular. Whichever methods you use, look for the most cost-effective way of doing so, whether that’s by negotiating with your provider or by choosing the most suitable pricing model for your needs
  • Features - many online payment methods aren’t just a way of moving money from one place to another, they can combine a range of features that can help you to improve your payments setup, including security, data and reporting, and reconciliation support. That’s why you should opt for feature-rich payment methods where possible 
  • Scalability and flexibility - you might be a small business today but, if you have big ambitions, one day you won’t be so small, and as you change in size, so too will your needs. Choose payment methods that can scale and adapt to changing demands as your business grows. For example, the speed and convenience of card payments makes them highly scalable: because they’re a customer-initiated payment method, the administrative burden of accepting them doesn’t increase as you grow. In contrast, ‘push’ payment methods like invoicing and bank transfers are difficult to scale because they do require manual intervention. That means the administrative burden does become greater as you grow 
  • Functionality - if resources are limited, choose payment methods that are relatively simple to implement. Generally speaking, with greater complexity comes higher costs and more infrastructure, which isn’t ideal for a small business  
  • Security - small businesses can be particularly vulnerable to certain fraud threats because they tend to have less sophisticated security measures in place to guard against cyber attacks. Because of that risk, security should be paramount when choosing payment methods. Digital wallets are great because they employ a highly-effective combination of security measures, including tokenization, encryption, multi-factor authentication and device level access protection 

How can a small business accept payments?

There are many ways for small businesses to accept payments, each presenting different advantages and disadvantages. You should take the time to weigh these considerations against the unique needs of your business and your customer’s preferences.    

One of the easiest ways to start accepting payments is to work with an online payments platform. These modular, customizable solutions allow you to implement a range of payment methods according to your needs via one integrated solution. That means that, rather than having to partner with a range of providers in order to accept different payment types, you can implement everything through one API, which is highly flexible and cost-effective. 

How to set up online payment for small business

Setting up online payments for a small business involves several key steps, including:

Choose a payment gateway and payment processor

Start by selecting a reliable payment gateway provider and payment processor. Consider factors like transaction fees, ease of integration, and the types of payments they support. A payment gateway is the technology that captures and transmits payment details, like a digital POS. A payment processor as an intermediary between the acquirer, issuer, the card networks and the banks. In most cases, you need both, but you could choose a payment processor that also incorporates a payment gateway. 

Create an ecommerce website

If you don't already have one, build an ecommerce website or online store where customers can browse products or services, add them to their cart, and initiate payments. You can do this using a website builder or, if you’re looking for something more bespoke, by recruiting the services of a web designer. 

Select payment methods 

Based on the considerations outlined above, switch on the payment methods that best suit your small business and your customers. The most streamlined and cost-effective way to do this is by working with an integrated platform that incorporates a full stack of payments solutions. 

How to accept credit card payments for small business

To accept card payments as a small business you need to follow broadly the same steps that are outlined above. 

You’ll need a payment gateway and processor and a website or online storefront with a secure checkout page. In most cases, you’ll also need a merchant account, which acts as a holding pen for customer funds before they’re settled in your business bank account. However, some payment processors also offer merchant account services, meaning that, again, you won’t have to work with an additional third party.   

Choosing the best payment methods for scaling businesses with Checkout.com

As a modular and highly-customizable payments solution, Checkout.com is the perfect payments partner for ambitious growing businesses. 

We understand the need for cost-effectiveness, an easy setup, and scalability. With Checkout.com, you can pick and choose from a range of payment methods, which are easy to integrate through a single API. We also give you access to other essentials like data and reporting, fraud detection, and security. 

Discover all our business payment methods to find out more about how Checkout.com can help businesses with big growth aspirations.

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October 5, 2023 16:27
October 5, 2023 16:27