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Running a business

Electronic payments: What they are and how to accept them

Say goodbye to jingly pockets, wallets stuffed with creased bills and cheque books. Payments are trending away from cash and paper cheques.

Electronic payments are becoming more and more prevalent, and businesses that fail to accept these payment methods risk losing customers and falling behind.

But what do you need to know about electronic payments? This guide has answers to your questions—including what these payments are and how to accept them.

What are electronic payments?

Electronic payments are when a customer pays for a product or service electronically, rather than exchanging physical cash or a paper cheque.

Electronic payments are especially common for ecommerce retailers who complete online transactions and need their customers to pay online. However, electronic payments can also happen in person through a debit card or credit card payment.

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Types of electronic payments

Let’s look at electronic payments a little more broadly. Typically, these payments fall into one of two categories:

  • One-off payments: as the name implies, this is a single, one-time payment. For example, if a customer uses a credit card to purchase a cake at a bakery, that’s a one-off electronic payment.
  • Recurring payments: electronic payments can also occur on a repeated schedule, which means that a customer payment is made automatically on a set date. For example, say you offer monthly website maintenance to clients. You might therefore deduct an agreed payment from their bank account on the last business day of each month.

Now that you understand the different payment frequencies, let’s look into the different electronic payment methods. There are three common types.

Credit cards and debit cards with credit card icon

Credit cards and debit cards

Debit and credit card payments are the most common electronic payment methods.

For these payments, payment details maybe entered manually during a checkout process but are typically the physical card is processed at a point of sale (POS) system.

There’s usually a debit or credit card processing fee, which the business owner needs to pay. Accepting a Visa or MasterCard debit transaction may cost a business around 0.5–1 per cent of the transaction value. Credit cards usually have a higher cost for businesses and may cost up to 1-1.5 per cent for Visa and MasterCard, and between 1.5–2 per cent for an American Express card payment. However, credit and debit card payments typically will clear into your bank account faster than other electronic payment methods.


  • It’s the most commonly used payment type, which means customers will expect it.


  • It has payment processing fees.

eCheck (Direct Debit transfer)

An eCheck is a lot like when a customer pays with a real, paper cheque. The difference? Instead of filling out that slip of paper, they enter their bank account information—mainly, their BSB and account numbers—into a website.

The money is then taken directly out of their bank account to pay for the purchase, so this is more commonly called a “direct debit”. Be aware that banks can take several days to process and clear this type of payment, so you likely won’t get the money immediately.


  • It has lower fees than card payments or BECS direct deposits.


  • It’s not as familiar or as convenient to customers as card payments.

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  • It is very fast – payments appear almost instantly between one bank account and the other.
  • Eliminates the need for cash with a safe and quick transfer between accounts.


  • It’s not as familiar to customers as card payments.
  • Requires online or mobile banking access.
  • if your bank account does not contain enough funds to cover the bill total, you may get charged a fee by both the financial institution and the biller.

ACH transfers with bank icon

Benefits of electronic payments

The payments landscape is becoming increasingly cashless with many people thinking there should be a move to an entirely cashless system.

But why? Well, electronic payments offer a number of advantages to both businesses and consumers.

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1. Greater convenience and efficiency

Electronic payments are quick and easy for the customer. That’s important as customers continue to demand higher levels of convenience.

On the business side, electronic payments are easier for you, too. Those payments go straight to your POS system, which simplifies your bookkeeping and omits a lot of manual entry.

2. Boosted revenue

You’ll need to cover some processing fees when accepting electronic payments, and those can feel daunting. But even with that added expense, offering these different payment methods can mean good things for your business’s bottom line.

Many experts claim that people are willing to spend more when they pay with a credit card versus when they pay with cash.

3. Improved customer relationships

More than ever, customers want options. That not only applies to choices between brands, products, and services—it applies to payment options, too.

Requiring your customers to use a certain type of payment method can make them feel trapped and lead to a negative customer experience.

Adding electronic payments to your list of acceptable payment options gives them the variety they crave and can help you close more sales.

Chart shows average processing time for different payment methods

How do electronic payments work?

Regardless of which of the above electronic payment methods your customer is using, they all technically work the same way.

Electronic payments are processed using an electronic funds transfer (EFT). It’s exactly what it sounds like: funds are transferred from one account to another electronically.

How is that different from a BECS direct debit? Well, a BECS direct debit is a type of EFT. EFTs are a broader category that includes a variety of different electronic payments—including BECS direct debit, debit or credit card payments, eCheques and wire transfers.

So, the gist is that money is electronically moved from bank account A to bank account B. But there are a number of players and moving parts involved in this process, depending on the electronic payment method that’s being used. Here are a few payment processing terms you should know:

  • Payment gateway: think of this as the messenger between where the sale is made and the bank. The payment gateway encrypts payment information and passes that information between the payment processor and the merchant account.
  • Payment processor: this receives the payment details from the payment gateway, analyses that information and then approves or rejects the payment. Many payment systems combine a payment processor and gateway in one.
  • Merchant account: you’re required to have a merchant account to process card payments. When a customer pays with a card, the money lands in your merchant account, where it’s processed by a third party. Once that’s processed, the money moves from the merchant account to your normal business bank account.

Now that you know who’s involved in the process, let’s give a quick overview of how this works. Imagine that you have an ecommerce site where customers can order your handmade candles:

  1. A customer submits their credit card information on your website to purchase a variety pack of your scented candles.
  2. Their payment information is submitted to the payment gateway.
  3. The payment gateway encrypts the customer’s credit card information so it can be securely sent to the payment processor.
  4. The payment processor reviews those details to ensure everything is in order and then approves the payment.
  5. The payment processor tells the payment gateway that the payment is approved.
  6. The customer is notified with a confirmation page or “success” message, and then you fulfil their candle order.

It sounds like a lot of information bouncing back and forth, but amazingly, this entire payment process happens in just a few seconds.

How long do electronic payments take?

When it comes to accepting electronic payments, many business owners understandably want to know how long they need to wait to get their money. The answer depends on the type of electronic payment that’s being processed:

Processing times in table to be updated as per below

  • BECS direct debit: typically clear into a business’ bank account within one to three business days, depending on your specific financial institution’s rules.
  • eChecks: typically clear within three to five business days
  • Credit card or debit card payments: typically are processed within one to three business days. Some banks will process overnight.
  • OSKO: between complying banks, transfers happen almost immediately.

Electronic payments aren’t instantaneous, so make sure to keep that in mind as you manage your business cash flow.

How to accept electronic payments

You want to accept electronic payments. Now what? Getting up and running is relatively simple. You’ll need to do the following:

  • Sign up for a merchant account: remember, this is a necessity to accept card payments, regardless of what payment gateway or processor you use. Start by talking to your current bank about merchant account options for your business.
  • At that same time, ask your bank about accepting BECS payments and if there are any fees associated with that.
  • Get the correct tools: you’ll need a payment gateway and a payment processor. Keep in mind that many platforms (including QuickBooks) combine both of these tools into one easy-to-use solution.
  • Include electronic payments in your checkout process: once you have those core elements set up, you need to give customers the option to pay electronically. Depending on your type of business, this might include:
  • Adding a card reader to your POS system so you can accept electronic payments in person;
  • Creating an online storefront with the option to accept various types of electronic payments from customers;
  • Using an invoicing tool that lets you enable different electronic payment methods so customers can pay an invoice using the best option for them.

Done? You’re ready to accept electronic payments from your customers. That wasn’t so bad after all, was it?

Common questions about accepting electronic payments

We’ve already sunk our teeth into a lot of frequently asked questions about electronic payments, including:

  • What are electronic payments?
  • Why should my business accept electronic payments?
  • How do electronic payments work?
  • How long do electronic payments take?
  • How do I accept electronic payments?

However, there are some questions you should be asking as you evaluate your options for POS systems, payment gateways and processors, and merchant services providers. Here are some to add to your list:

  • What fraud protection and other security options are offered?
  • What kinds of payments are accepted?
  • What fees are associated with electronic payments?
  • Are there different fees for different credit card types?
  • Are they compliant with the Payment Card Industry (PCI)?
  • What countries and currencies are supported?
  • Is there a monthly transaction limit?
  • How does processing refunds work?
  • Is there a fee for processing refunds?

Carefully consider the options available to you, and you’ll accept electronic payments in a way that works well for your customers and for your business.

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