Digital payment options and how to accept them

What are digital payments?

Digital payments, also called electronic payments, are payments in which the payer and the payee exchange funds digitally. Payments are made electronically and transferred directly from the buyer’s bank account or credit card to the seller. That means no handing over a credit card, writing a check, or exchanging cash for change.

Depending on how the seller receives funds, the money might go straight to the bank or be held until transferred.

Why are digital payments important?

Digital payments can be an important tool in helping business owners get paid faster and more easily, improving cash flow. Digital payments are convenient for businesses and their customers. They also improve the safety of financial transactions, reducing the risks associated with physical exchanges of funds.

Advantages of accepting digital payments

• Digital payments help business owners get paid faster.
• Digital payments are often more convenient for the customer and improve the buying experience.
• Digital payments can be safer and more secure than cash.
• Digital payments may increase sales and profits.
• Digital payments are part of a digital process that may assist with tracking inventory, budgeting, monitoring cash flow, and gaining business insights.

Getting paid faster is one potential benefit of accepting digital payments. And that increased speed may trickle down to affect every part of the business positively.

With digital payments, buyers can pay easily and immediately. For instance, if they’re shopping online and have added a card to their mobile device, all their payment information may auto-fill. That reduces the hassle of purchasing, which, in turn, creates a better shopping experience. The buyer may reward the business by shopping there more in the future, boosting profits over time.

For business owners, digital payments deposit faster, reducing the time it takes for money to arrive in the business’s account. Compare a digital payment with a check. One could be in your account in hours. The other might be in the mail for days—once the person paying finds a stamp.

Plus, quicker payments mean more ready cash, which may improve business cash flow. Even when cash is low, business owners still have expenses like payroll, inventory, rent, and utilities. But it’s difficult to pay for those big expenses when money comes in slowly. Digital payments can speed up the process and put money back in business owners’ hands immediately.

Then there’s the impact of digital payments on everything else. For example, when you connect your online payments system to your inventory, you can track in-stock items in real time. Connect it to your invoicing tool , and you may be able to set up automated reminders for clients or customers who need to make payments.

Another benefit of electronic payments is that they reduce the risks associated with cash exchanges. Digital payments can be more hygienic than physical cash payments and are at less risk of theft

Digital payment methods and how to accept them

Business owners can accept digital payments through two main methods: debit or credit cards and eChecks.

Debit and credit cards

Debit cards and credit cards are the preferred methods of payment for 80% of consumers, according to a 2017 TSYS survey. But in 2020, QuickBooks Payments found that 1 in 5 small businesses around the globe doesn’t accept credit cards. Choosing not to accept a common form of payment can put these businesses at a competitive disadvantage.

Accepting card payments requires a payment system, including a merchant account for your business and a point-of-sale or payment portal to facilitate transactions. Payment gateways provide a secure pathway for payments to move from your customer’s bank account to your merchant account and, eventually, your business bank account.

So what are the pros and cons of accepting credit or debit cards?

Pros

Convenience: Most people have one or the other but probably both. What’s more, many mobile users already have a credit or debit card on their device. Accepting debit and credit cards can make it easier to add that information and complete the purchase faster.

Speed: You and your customer will know in moments if a transaction has gone through. Typically, payments made using a debit or credit card only take a day or two to process.

Sales: Whether you’re accepting payments online or in stores, allowing people to pay with a card may increase your sales. You won’t have to turn anyone away for not having cash or a check on hand.

Cons

Fees: Watch out for transaction fees, processing fees, or any fees your selling platform might tack on in exchange for card payments. You may be able to set up a merchant account to avoid transaction fees, but watch out for merchant fees.

Chargebacks: A chargeback happens when the customer makes a fraudulent payment or disputes a credit card payment. If the buyer disputes a purchase, their credit card company may hold you accountable for the bill.

Fraud: Credit cards put consumers and businesses at risk of fraud.

eChecks using ACH Processing

An electronic check or eCheck is another form of digital payment. Money is withdrawn from the buyer’s checking account, transferred over the ACH network, and deposited into the business’s account. This is different from taking a picture of a paper check and depositing it using your mobile device. With an eCheck, the buyer must authorize payment transactions via a contract, accepting terms and conditions, or another way.

Small businesses that could benefit from taking eChecks include those that accept recurring payments. Think landlords or daycare providers who receive payments monthly. All the customer has to do is authorize recurring eCheck payments, and those fees can be taken out automatically each time.

Benefits of accepting eChecks

1. They’re faster. Payments process faster than physical checks. The customer doesn’t have to wait long to get their new balance, and the business owner gets paid quicker.
2. They’re secure. Not only does the money transfer through a secure bank connection, but the customer has to verify the payment, reducing the risk of fraud.
3. They’re sometimes cheaper. Unlike credit or debit cards, eChecks incur minimal fees.

4 ways to facilitate digital payments

1. Mobile apps and digital wallets

Mobile payment apps facilitate payments for goods and services. One NerdWallet survey found over 4 in 5 people—especially between the ages of 24 and 39—use a mobile payment app or digital wallet. Apps and wallets include PayPal, Apple Pay, Venmo, and Zelle. If that’s a group within your business’s target demographic, mobile payment apps may be a good investment.

There are several reasons why people who use payment apps love them.

1. They’re easy to use. Once they set up an app, the user doesn’t have to enter their payment information again. Using the app requires little more than a few taps.
2.  They’re versatile. 53% of respondents in the NerdWallet survey say they’ve used apps on a mobile phone to make online purchases through a retailer. 43% have used an app to pay back a friend or family member. And 40% have used an app to pay bills. Many fintech apps also include mobile banking tools and other financial services.
3. They go where you go. You can accept payments on-site or remotely, and you’ll appreciate being able to pay and get paid on the go in the future.

2. Pay-enabled invoices

If yours is a service-based business that already sends customer invoices, consider accepting payments online. Like other digital payment options, pay-enabled invoices offer convenience and speed.

On the customer side, it’s a lot easier to submit a payment digitally than write a check, find a stamp, and mail the payment. Pay-enabled email invoices cut out all of that. Instead, customers pay by card or enter their bank information. Who knows? The ease of it may tempt them to pay early.

And some email invoicing tools go beyond sending a simple invoice. They may track when or if a customer has viewed the invoice. Some can also send automatic reminders to the customer until they pay the invoice. For business owners who don’t like having to follow up with clients to collect a payment, such tools can save time and stress. Plus, daily payment reminders can help your business get paid faster.

Another benefit of pay-enabled email invoices is that some tools allow businesses to customize each invoice. That may include logos, fonts, and more. And sending invoices online saves businesses the cost of paper and postage.

3. Manually keyed-in card information

If you haven’t yet optimized your business to accept payments through an online portal, that’s OK. You can still jump on the digital payments bandwagon by taking debit or credit card information over the phone.

The caveat to this option is that taking cards over the phone can put you and your business at risk of fraud. Should you choose to accept digital payments this way, be sure to do your research on how to avoid fraud.

One tip is to get both the customer’s billing and shipping addresses. If the ZIP codes don’t match, ask them why. And if you are shipping something to the customer, consider requiring their signature upon delivery. Establishing a paper trail may help deter potential fraudsters.

4. Card readers and mobile card readers

Card readers don’t just sit by the register anymore. These days, mobile card readers can go anywhere the business goes. Simply plug the device into your smartphone to create a mobile point-of-sale.

If your card reader is still beside the register, you may still be able to wow your customers by offering contactless payments. Rather than swipe, customers can tap their phone or card to the card reader or hover it above. The nice part about this option is the customer can skip the burdensome step of digging a card out of their wallet.

Plus, these devices, called Near Field Communication (NFC) readers, may be a more hygienic option. The customer never has to touch the device, unlike traditional card readers that ask customers to verify their payment or enter a PIN. The only downside is the customer must have a mobile payment solution set up on their phone to use an NFC reader.

Frequently asked questions about digital payments

Are digital payments safe?

In a word, yes, but it’s always good to stay cautious. Customers will want to be sure their payment method is legitimate, especially in the case of mobile payment apps. For businesses, accepting digital payments is quite safe, though you’ll want to keep an eye out for fraudulent behavior. Sometimes, business owners are held accountable for paying credit card companies back for fraudulent purchases.

Why are digital payments better than cash?

When it comes to physical businesses, accepting cash is important for accessibility, among other things. In some places, the law requires it. But digital payment methods have their place at the checkout counter, and they’re king in online spaces.

The reason for this is ultimately two-fold: Digital payments are quick and convenient. Customers often prefer digital payments because they take little effort. Save a card to your device, and payment fields may even auto-fill, so the purchase takes mere seconds.

And that speed is essential for both the customer and the business. When customers have a better experience, they’re more likely to come back. Plus, digital payments process quickly, so business owners get money faster, which can impact cash flow positively.

When will I receive my money after accepting digital payments?

Depending on the payment method, digital payments can take one to three days to process and deposit. Some mobile apps will make money available sooner if they hold the amount you’ve been paid inside the app. You should be able to use the money in the app as soon as it shows up to pay for other things.

With QuickBooks Payments, credit card deposits typically land in your account the next business day. If you signed up for the next-day deposit plan for bank transfer (ACH) payments, your bank transfer deposits will, too, so long as you make deposits by 3 PM PT.

How do pay-enabled invoices work?

Pay-enabled invoices are another tool that’s becoming more common. Business owners can create and fill out their invoice then select when and how they want the customer to pay. When the customer receives the invoice via email, they can input their payment information to pay online. The invoice might have a “pay now” option where the receiver can input their credit card, debit card, or bank transfer information.

That’s certainly the case for QuickBooks users who can send pay-enabled invoices by email to their customers. Upon opening their online invoice, the customer can select “Pay now” and choose to pay by credit, debit, Apple Pay, or ACH bank transfer. It will depend on which payment option the business owner selected. After the payment has been initiated, the business’s books will reconcile automatically, and your money will be auto-deposited into your bank account.

There are a lot of upsides to using pay-enabled invoices, particularly compared to sending invoices by mail. It depends on the system you’re using, but online invoices are often trackable. Your system may be able to tell you if the invoice has been delivered and if the recipient has viewed it. Mailed invoices can be lost along the way or accidentally shuffled into a pile of junk mail.

In QuickBooks, users can see when a customer has viewed their invoice. It’s also possible to send automated reminders, letting the customer know they have an invoice to pay.

How to use QuickBooks Payments to accept digital payments

If you’re looking to accept digital payments and need a secure, trustworthy partner, QuickBooks Payments can help. QuickBooks payment services allow users to accept credit cards, debit cards, and ACH bank transfers. And they can facilitate payments online, over the phone, and via an app.

For businesses with a physical location, accepting digital payments through QuickBooks is still simple and sensible. Use the free mobile card reader to take debit or credit cards. Your sales will appear in QuickBooks automatically.

The best part about QuickBooks Payments? All payments you accept online or via app appear directly in QuickBooks, so you don’t miss a thing. QuickBooks Payments also handles reconciliation, matching payments with open invoices so that you have more time to focus on your business.