It doesn’t matter whether you’re managing a brick-and-mortar retail shop, a budding ecommerce platform, or a solo digital services business, your business has one fundamental goal: and that is to reap profits and grow.
In order to do that, you need to have a robust system that makes receiving and storing money a breeze. And when it comes to collecting payments from your customers, you’ll need to carefully choose a payment solution that fits your needs.
The right payment solution can grant you seamless and secure transactions. On the other hand, the wrong one can make transactions inconvenient, filled with delays, or riddled with data risks.
Having said that, there’s no single payment solution that’s superior against all the rest. What works for one business may not necessarily work great for another.
As such, it’s essential to consider a variety of critical factors surrounding your business and its underlying industry before choosing the payment solution for your firm. If you need guidance in the matter, then you’re in the right place.
This article will give you some key insights to help you narrow down your sights on the best payment solution for your company. Let’s take a look at these points to consider in more detail.
7 Types of Payment Solutions for Businesses
Payment solutions come in several different forms. Industries that deal with high-ticket items, for instance, may have a vastly different payment solution to that of a convenience store down the corner.
The first thing you should do before anything else is identifying the different payment solutions available to you. Each type serves a specific purpose—and the right one depends on your business’s overall setup and processes.
Despite the reliance on the underlying business system in deciding the best payment solution for the job, there are typically some types that stand above the rest in terms of popularity and reliability in their respective market.
Here are some of the most common types of payment solutions that businesses opt for, regardless of its industry and size:
- Point-of-sale systems: This system handles sales transactions and supports multiple payment methods, including widely used options like cash and credit cards. Westpac’s guide on a common feature in a POS called the EFTPOS explains how card payments work for customers transferring funds to a merchant’s account.
- Online/mobile payment gateways: Mobile payment gateways are popular payment solutions that authorise transactions between a website and a bank or e-wallet. These gateways can accept payments from various sources, provided that they’re set up and linked together.
- Mobile wallets: Apps like Apple Pay and Google Pay allow for quick, easy, contactless payments. This makes the transaction process quicker for on-site transactions.
- Cryptocurrency payment processors: A small but growing subset of businesses accepts cryptocurrencies as a valid form of currency.
- Recurring billing platforms: Ideal for subscription models, this payment solution automates monthly or annual billing for user convenience and improved retention.
- Instalment-based payments: Allow payments to be made across a period; this payment may or may not include additional interest.
- Bank transfer: Allows funds to be transferred directly from the buyer’s bank account to the merchant’s.
Running a business that operates at least one of these payment processor types can be beneficial to ensure that customers have the convenience of choice when deciding how they want to pay. This, in turn, reduces friction in the conversion process and makes it easier for businesses to close sales.
Considerations to Make When Choosing a Payment Solution
Familiarising yourself with the different payment solutions is the first step to making a decision. The next step is to consider which type best aligns with your needs.
Here are some noteworthy considerations to make when deciding on your next payment solution.
1. Consider Your Business’s Model and Goals
The first thing to consider before choosing a payment solution is your business’s overall goals and model. Your business type plays a crucial role in influencing the system that surrounds it.
For instance, a physical store would need a POS system to handle customer transactions on a daily basis. On the other hand, a purely online business may need to set up a subscription-based payment system to automate billings.
Furthermore, if you have a global reach, you should also ensure that your payment model caters to people from all countries and payment capabilities. And even if you’re not expanding to overseas territory just yet, having global expansion lined up as a business goal may warrant the need for such a payment solution.
In short, your business’s underlying industry and model dictate the best payment solution it should opt for. And as an extension, this can smooth operations and ensure continuous growth over time.
2. Align with Customer Habits and Preferences
Your customers are the fuel that keeps your business going. As such, it’s essential to keep them satisfied by choosing a payment solution that works excellently for them.
A good way to gauge customer preference is by looking at your closest competitor’s payment solutions and mirroring them for a start.
If they accept credit card and cash payments through a POS, then use those systems as well to simplify payments. If you have no direct competitors, then starting with a POS system and cash-based system is good for a start for items with easy turnover times.
Don’t just stick with your initial payment solution to carry your financial operations for the entirety of the business cycle. Consider introducing additional payment solutions based on the requests or recommendations of your customers.
Take note of their preferences and choose a payment system that reflects their habits to ensure long-term loyalty and a frictionless payment experience for both parties.
3. Prioritise Customer and Business Security
Another priority every business should make is to pick a payment solution with robust security measures. The right payment solution has robust and fortified systems that keep business and customer information safeguarded and away from prying eyes and malicious actors.
Specifically, look for providers that offer encryption and fraud detection tools in their systems. Make sure that the solution you’re choosing complies with PCI-DSS standards, as this global licensure is the stamp of confidence that shows whether a payment solution is safe or not.
For online businesses, ensure that your website is also a safe platform when retrieving recurring payments. One instance of data breach can have nasty ramifications, leading to penalties, unhappy customers, and lost revenue.
Choosing a compliant payment system is not merely a recommendation, it’s a must to ensure your reputation remains steady and your customers’ funds stay with your business and don’t get stolen or seized by external parties.
4. Review the Costs and Fees Breakdown
Each system has its own distinct pricing that set it apart from other payment types. It’s essential to be aware of these payment systems to ensure that you’re maximising your profits and minimising fee charges.
For instance, setting up a POS system typically has a high upfront payment cost because it’s a physical machine. Furthermore, its accompanying software tools may be paid out on a monthly basis. Transaction fee per swipe on these systems may also range from 1.5% to 2.5% or more.
For online payments, there’s a smaller hardware and monthly cost, but the transaction fee per swipe tend to range higher than that of a physical POS hardware.
In any case, each type of payment system will pay out a different number if each customer is charged the same amount.
Typically, customers shoulder the extra charge, but only relying on payment solutions with high transaction fees can ward off customers who may want to be charged less. It’s all about striking a good balance and picking what’s best for your business and customers.
5. Payout Speed and Cash Flow
Another crucial element to consider is the speed in which customer’s money enters your business’s books. Many businesses operate on thin margins, and maintaining a steady cash flow is crucial to ensuring that debts and expenses will be paid on time and interest-free.
Some payment solutions are bottlenecked with slower payout times, holding funds for several days at a time. This slow processing time can be detrimental to small businesses who may not be working with a large liquid capital pool.
If your business wants to operate most efficiently, then consider getting payment solutions with instant or next-day payouts. Some POS systems can be linked to local banks and process fund transfers more quickly than others, so consider using them to avoid straining your operations.
In any case, you should consider the speed in which you’d want orders to be processed and money to enter your rotating account. This will be a critical variable that can affect operations and supply chain management down the line.
We hope these tips will help you narrow your search to your preferred payment solution. All the best!
