Shoppers nowadays have a plethora of choice when it comes to making a payment.
They can use their watch, smartphone, card, face, fingerprint, and even car keys (we’re not joking!).
With so many options and touchpoints, there also appears to be an increased opportunity for merchants to cater to more customer needs, helping decrease cart abandonment and increase customer retention.
At Pomelo Pay, our 25+ payment methods allow businesses to accept the most important payment methods and open up to new markets.
Talking about payment methods, here’s what we’ll be covering in this comprehensive guide:
- What is a payment method?
- List of top payment methods
- What is the most common method of payment?
- What are the different online payment methods?
- What is the safest method of payment?
- Why accept more payment methods?
- How to choose the best payment method
- How to accept several payment methods
What is a payment method?
Payment methods refer to the ways your customers can buy your product or service. When you purchase something at a shop, you can usually decide to pay by cash, card or mobile phone.
When you buy something online, you’ll also probably see a dropdown list of all the payment options allowing you to pay by card, direct bank transfer, e-wallets or even crypto! In 2021, you may be surprised to hear that there are over 200 types of payment methods!
Since we offer 25+ payment methods, it’s worth understanding the different ones available.
Let’s look at a list of the top ones.
List of payment methods
Cash is the original and oldest payment method: the physical coins and notes you’ll find in your wallet, an ATM or at the bank.
But over the past couple of decades, cash payments have decreased by 15%. Although they are the cheapest way to accept a payment, many businesses tend to prefer the security and convenience of online payments.
In the UK, 98% of the population owns a debit card, and it’s the most popular payment method for both online and offline purchases.
The biggest benefit of using debit cards is the extra layer of security when completing a payment.
Not only do customers have to input a personalised PIN code, but each payment must go through a card network such as Visa and Mastercard. This ensures purchases are not fraudulent and come from a verified bank account.
Accepting debit card payments usually requires using a card machine, also known as a POS machine.
Credit cards are funded by banks and building societies, with the customer paying with borrowed money rather than a bank account. Credit cards have a pre-approved limit and are later paid back by the customer (with interest) over time.
Credit cards allow customers to spread payments across time, as well as earn rewards and points for their spending.
As for the merchant, credit cards operate similarly to debit cards. They require inputting a PIN, payments go through a card network and there is the additional layer of protection provided by the credit card company.
Credit cards are the second most popular payment method after debit cards, with UK residents completing 340 million transactions in 2019.
Bank transfers are popular amongst B2B transactions and larger payments such as wholesale orders.
In the UK, you need an account number and sort code to send a bank transfer, and an IBAN and SWIFT code for international transfers.
Although bank transfers are popular, they are often less secure than other payment methods; that’s because there is no card network in place to monitor the transaction, and therefore cannot be recalled if there is an error. Bank transfers are also a lot more manual and time-consuming to process.
Direct debit payments are scheduled and automated payments, typically used for household bills and in subscription payment models such as TV subscriptions. The customer sets up a direct debit mandate with their bank to ensure monthly payments are on time, every month or week.
Over 4 and a half billion payments were made through direct debit in 2019, with the Direct Debit scheme offering a full refund guarantee for any mistaken payments.
Direct debits are another popular payment method for businesses, since they guarantee a monthly income. Although it increases customer retention, direct debits are not applicable to every business and similarly to bank transfers, don’t have the added security of a card network.
Mobile payments refer to payment methods that use your phone. These could be remote, in-person, or contactless payments. Examples of mobile payments include mobile wallets, qr codes and payment links.
Launching under a decade ago, mobile payments are one of the newest payment methods available, but are quickly rising in popularity, with Google and Apple Pay boasting over 300 million users combined.
That’s because they are an incredibly convenient payment method and due to biometrics, are often considered more secure than other payment methods.
Two of our most popular mobile payment solutions at Pomelo Pay are QR codes and payment links, which are both channels that enable credit/debit card payments as well as Apple and Google Pay.
Mobile payments: e-wallets
Mobile wallets are virtual wallets (also called e-wallets) that store your customers’ payment information and allow them to pay online and in-person.
Examples of mobile wallets are Apple Pay, Google Pay, Alipay and WeChatPay: they essentially allow customers to store money on their phone and then use it to complete a payment using biometrics.
Mobile wallets are a popular payment method since they are convenient, secure and often a lot cheaper since wallet to wallet transactions are usually free.
- Is Apple Pay Safe?
- Is Google Pay Safe?
Mobile payments: payment Links
Payment links are an easy and convenient way to accept payments remotely. Businesses essentially send their customer a link via text or email, and the customer just needs to fill in their card details to complete the payment securely.
Not only is this an incredibly versatile payment method, but sending a link directly to your customers’ mobile phone means they pay a lot more quickly.
Thanks to payment links, David, EPC contractor, now gets paid as soon as he finishes his job. He sends the payment link the day before, completes his job and then asks his client to pay.
According to David: “We find that the time scales are better, customers get what they need on time, and we get paid on time.”
Read the case study: How this Business Owner Uses Pomelo Pay to Get Paid Instantly
Mobile payments: QR code payments
QR code payments are a great way to speed up in-person transactions. You’ve probably seen them on restaurant tables and outside cafes as more people prefer ordering online.
The process is simple: customers scan the QR code, a notification pops up that takes them to a separate payment page where they fill in their details and then complete the payment. They can also choose to pay with their preferred e-wallet on their phone, such as Google or Apple Pay.
With QR codes, business owners can also turn their smartphones into a card machine. This makes it a lot cheaper to accept payments, and also speeds up order processing.
Tiziania, owner of a mobile food business, offers QR code payments to those who want to skip the queue. With QR codes, she’s effectively doubled the amount of orders she can serve.
Read the case study: How This Mobile Food Business Doubled Their Orders With On the Go Payments
Alternative payments refer to a number of different methods, including:
- “Buy now, pay later”
- Digital currencies (such as crypto currencies)
- Prepaid cards
While some of these methods seem outdated or too new, and are commonly referred to as “alternative payments”. In some cases it’s worth adding them as a payment option, although it really depends on your target market.
What is the most common method of payment?
Debit card payments are the most common payment method, currently accounting for 42% of all online and in-person payments.
This is followed by a mixture of cash, direct debit and credit card payments - although, it’s worth noting that mobile payments are growing at the highest rate. Cheques are the least common form of payment.
What are the different online payment methods?
Online payments are used when the customer is not present, for example if the store is based online and does not have a brick-and-mortar location. Online payment methods include:
- Direct debits
- Bank transfers
- Mobile payments
- Payment links
- QR codes
- Digital currencies
- “Buy now, pay later” programmes
What is the safest method of payment?
Not only are they the most common payment method, but debit and credit cards are the also most secure means of payment.
The major reason for this is because each card payment must go through a card network such as Visa or Mastercard.
Card networks ensure that the payment is from a valid bank account and that the transaction happens securely. If there is an issue with the payment, both the merchant and the customer can contact the card network to resolve the dispute.
Using a licensed payment services provider such as Pomelo Pay adds an extra layer of security.
Read more: What is a Payment Service Provider (PSP) and Why Should You Partner with One?
Why accept more payment methods?
Offering more payment methods means offering a much better checkout experience to your customers.
Would you complete a payment if your favourite method wasn’t available? Most customers will cancel a purchase if their preferred payment method doesn't turn up.
As our cofounder, Simon Verraest, recently explained in an interview:
“For a very long time, businesses were deciding how they wanted to accept payments. But the customer may have specific reasons for choosing a certain payment method and there shouldn’t be any friction by merchants offering a multitude of options.
For example, someone might want to use their British Airways Amex for points or cashback, use their Visa for purchase protection, or even use Alipay or WeChat Pay for a better Forex rate if they use a local wallet.”
Not only that, but with digital payments you get a lot more insights. By using multiple touchpoints and integrated payments, you can get a 360 view of all your payments. With one single system, you get a snapshot of how your business is doing at any time of the day.
Instead of having to connect to another system, both you and your customers see payments as seamless.
With more payment options, your customers are more likely to complete a payment, effectively decreasing cart abandonment rate and growing your business.
How to choose the best payment method
The right payment methods for a new craft business might be totally different to the best payment methods for a restaurant, e-commerce shop or construction company.
That’s why it’s important to think about which payment methods are the best for your business.
Here is a table summarising the best payment methods:
How to accept multiple payment methods
How can you offer multiple payment methods without having to partner with a separate payment facilitator for each one?
Two words: payment gateway.
With a payment gateway, you can accept several multiple payment methods by simply partnering with one company. The payment gateway is a piece of software that integrates into your website, and processes payments from start to finish.
Read more: Why You Should Use a Payment Gateway for Your Website
Pomelo Pay is a payment service provider (PSP), which means you can accept a wide range of payments through these various payemnt channels including:
- Credit card
- Debit card
- QR code
- Payment link
- Apple Pay
- Google Pay
- & many more!
By accepting multiple payment methods with one gateway, your payments are unified: you can accept payments in-person, through your website and remotely, all through one system with Pomelo Pay. We have built our system to consolidate your customers preferred payment method.
These modern tools make it a lot easier to track all your payments, reconcile transactions and make data-driven decisions - while bridging the gap between online and offline. If you have a Wordpress website, you can also integrate Pomelo Pay using WooCommerce.
Not sure which Pomelo Pay feature is best for you? We have a very friendly support team whose job is to help you find the payment method that is best for your business. Simply contact us to learn more about Pomelo Pay’s 25+ payment methods and which one might fit your business best.
We hope this payment methods guide was useful and you now understand the importance of offering multiple payment methods. Although it can be overwhelming at first, using the best payment methods will translate into better security, faster processing times and most importantly of all: increased revenue.
Ready to get started? Create a Pomelo Pay account for free!
How do I decide which type of payment method to use? ›
- Total cost of ownership.
- Customer preference.
- Involuntary churn & failed payment rates.
- Trust and safety.
By and large, credit cards are easily the most secure and safe payment method to use when you shop online. Credit cards use online security features like encryption and fraud monitoring to keep your accounts and personal information safe.What is main payment method? ›
The number of ways in which merchants can collect payments from their customers, for example, credit cards, digital wallets, direct debit, offline payment, etc. In a store, perhaps you use cash, credit cards, or mobile payment options like Apple Pay.Why are there different types of payment systems? ›
Banks have developed various payment methods to facilitate the exchange of money that stimulates the growth of commerce, helps economic development and facilitates flexibility with lower transaction costs with security. Various payment systems exist today, ranging from cheque, wire transfer, cards to online transfer.Which payment method is the best for paying globally? ›
A wire is the simplest global payment method because it requires no middleman to handle the transfer, and the fastest method, as funds are received by the payee on the same day, or within 1-2 business days.What are the different payment methods for online transaction? ›
- Credit/Debit card payments: As a global payment solution, by enabling payment acceptance via cards merchants can reach out to an international market. ...
- Prepaid card payments: ...
- Bank transfers: ...
- E-Wallets: ...
- Cash: ...
- Mobile payments: ...
- Cryptocurrencies: ...
- Ecommerce payment gateway:
When it comes to B2B, the most common payment method is bank transfer. BACS is used to make direct payments from one account to another.What do you think are the key factors to consider when selecting a payment app? ›
- Proper Credit Card Encryption. ...
- Ability to Easily Handle Sales, Plus Process Returns. ...
- A Report-Generating Feature. ...
- Capability to Create Digital Receipts.
Merchants send batches of authorized transactions to their payment processor. The payment processor passes transaction details to the card associations that communicate the appropriate debits with the issuing banks in their network. The issuing bank charges the cardholder's account for the amount of the transactions.What are the 2 most common methods of payment? ›
What is the safest method of payment? Not only are they the most common payment method, but debit and credit cards are the also most secure means of payment.
What is the global payment system? ›
A global payments system is a means for companies and merchants across the world to send and receive payments in different currencies. In order to streamline the process and avoid hefty conversion fees, this is usually done by way of a global payment processor.What is the most secure online payment method? ›
1. Credit cards. The most familiar form of online payment is also one of the most secure payment methods. Credit card transactions are encrypted, which means the details are jumbled up and encoded.Which method is very popular for online transaction? ›
Credit and debit cards are still the most commonly used method for payment worldwide.What is traditional payment system? ›
What are traditional payments? Traditional payments are those where transactions primarily happen with the help of cash. The other instruments include cheques, demand drafts and letters of credit.What is nature of payment? ›
For payments attracting TDS, the relevant nature of payment is defined by the department with associated tax rate, section, payment code, and threshold limit. While creating a TDS Nature of Payment, you can press Ctrl+C to select the required nature of payment.Why is payment system important? ›
Payment systems are essential to the effective functioning of financial systems worldwide. They provide the channels through which funds are transferred among banks and other institutions to discharge payment obligations arising from economic and financial transactions across the entire economy.What is a payment model? ›
An Alternative Payment Model (APM) is a payment approach that gives added incentive payments to provide high-quality and cost-efficient care. APMs can apply to a specific clinical condition, a care episode, or a population.What is digital payment system? ›
A digital payment, sometimes called an electronic payment, is the transfer of value from one payment account to another using a digital device such as a mobile phone, POS (Point of Sales) or computer, a digital channel communications such as mobile wireless data or SWIFT (Society for the Worldwide Interbank Financial ...What form of payment is the most common? ›
“Data from the Federal Reserve's Diary of Consumer Payment Choice shows that cash remains the most frequently used payment instrument, accounting for 31% of all consumer transactions.” So much for the comment that “cash is going away, and pretty quickly too!”Which country has the best payment system? ›
Norway. According to the World Bank, with 98% of its citizens having embraced the debit/credit card system, Norway could be the first country in Europe to declare itself cashless. Furthermore, data shows that in 2021, only between 2 and 3% of transactions at the point of sale in Norway were carried out using cash.
What payment method dominates online transactions today? ›
U.S. e-commerce payments trend: Digital wallet and contactless card use in the US is on the rise. Cards are the dominant online payment method in the U.S., used for 47 percent of all e-commerce transactions,41 or $348.74 billion in annual online sales.What are the different mobile payment methods? ›
- Card-based payments.
- Mobile Wallets.
- Contactless Payments NFC (Near Field Communication)
- Carrier Billing (Premium SMS or direct carrier billing)
- Direct transfers between the payer and payee bank accounts on real-time based operations.
Digital payments can increase an entrepreneur's profitability by making financial transactions with customers, suppliers, and the government more convenient, safer, and cheaper. Paying wages digitally benefits employees and is safer and more cost-effective for employers.What is a local payment method? ›
Local Payment Methods allow customers to pay with banks, wallets, or other means that operate only in specific regions of the world.What is the best way to choose a small business payment? ›
- Accept Credit Cards Securely. ...
- Explore Mobile Payment Options For Small Business. ...
- Offer Affordable ACH, or eCheck, Options. ...
- Add Easy Email Invoicing. ...
- Set Up An Online Storefront. ...
- Create An Online Payment Gateway. ...
- Make It Easier With Recurring Payments.
- Research retailers online to make sure they're legitimate.
- Make sure the website is secure.
- Know your rights and the company's returns policy.
- Keep software and virus protection up-to-date and use strong passwords for online accounts.
- Don't use public wi-fi. ...
- Pay using a credit card. ...
- Be smart.
These terms refer to the number of days in which a payment is due. For instance, Net 30 (or N/30) means that a buyer must settle their account within 30 days of the date listed on the invoice. Using Net 30 terms, if you date your invoice March 9, clients are responsible for submitting payment before April 8.What are the payment terms? ›
Payment terms provide clear details about the expected payment on a sale. Often, payment terms are included on an invoice and specify how much time the buyer has to make payment on the purchase.What is payment method name? ›
A payment method is a way that customers pay for a product or service. In a brick-and-mortar store, accepted payment methods may include cash, a gift card, credit cards, prepaid cards, debit cards, or mobile payments.What are the means of payment? ›
Means of Payment means banknotes and coins (cash), and deposits and credit on an account with a financial institution or a similar institution which can be operated by means of payment instruments.
What is the payment policy? ›
The payment policy is the set of rules or directions that guides a customer to make the bill payment. It is the guideline that is set so that there is no issue between the customer and the seller. The payment policy is framed so that there is complete clarity in the minds of the customer.What is FOB on an invoice? ›
Free on Board (FOB) is a term used to indicate when the ownership of goods transfers from buyer to seller and who is liable for goods damaged or destroyed during shipping. "FOB Origin" means the buyer assumes all risk once the seller ships the product.What are most common payment terms? ›
- PIA - Payment in advance.
- Net 7 - Payment seven days after invoice date.
- Net 10 - Payment ten days after invoice date.
- Net 30 - Payment 30 days after invoice date.
- Net 60 - Payment 60 days after invoice date.
- Net 90 - Payment 90 days after invoice date.
- EOM - End of month.
Payment terms are the conditions surrounding the payment part of a sale, typically specified by the seller to the buyer.What are 50/50 payment terms? ›
A business owner may specify a "50/50" term, which means that a 50% deposit is payable on receipt of an order, and the balance is due on the customer's receipt of the product or service ("50% deposit, balance on delivery").What is the difference between payment terms and payment method? ›
Typical payment methods used in a modern business include cash, checks, credit or debit cards, money orders, pay orders, bank transfers and online payment services such as PayPal. on the other hand payment terms are the terms set by the seller under which a seller will complete a sale.Which payment method is the best for paying globally? ›
A wire is the simplest global payment method because it requires no middleman to handle the transfer, and the fastest method, as funds are received by the payee on the same day, or within 1-2 business days.Which method is very popular for online transaction? ›
Credit and debit cards are still the most commonly used method for payment worldwide.What are different online payment methods? ›
There are various types and modes of digital payments. Some of these include the use of debit/credit cards, internet banking, mobile wallets, digital payment apps, Unified Payments Interface (UPI) service, Unstructured Supplementary Service Data (USSD), Bank prepaid cards, mobile banking, etc.What is nature of payment? ›
For payments attracting TDS, the relevant nature of payment is defined by the department with associated tax rate, section, payment code, and threshold limit. While creating a TDS Nature of Payment, you can press Ctrl+C to select the required nature of payment.
What is traditional payment system? ›
What are traditional payments? Traditional payments are those where transactions primarily happen with the help of cash. The other instruments include cheques, demand drafts and letters of credit.What is mobile payment method? ›
Mobile payments (which encompass mobile wallets and mobile money transfers) are regulated transactions that take place through your mobile device. That is, instead of paying for items with cash, cheques, or physical credit cards, mobile payment technology allows you to do so digitally.