A digital payment is an electronic transfer of funds directly from the buyer’s bank account or credit card to the seller.
Preparing your small business to process digital payments is more important than ever. Over 40% of Americans say they make none of their purchases using cash in a typical week, according to Pew Research.
Electronic payments are quickly becoming more common and have the potential to make your business more efficient and accessible to customers. Read our small business guide to learn how digital payments work.
Digital payments come in a variety of cashless and contactless forms. Although most digital payments are interchangeable, each type of digital payment has its own use case, pros, and cons that we’ll explore further.
Choosing not to accept a common form of payment can put small businesses at a competitive disadvantage. Accepting card payments requires a payment system, including a merchant account for your business and a point of sale (POS) 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 small business bank account. So what are the pros and cons of accepting credit or debit cards?
Mobile payments are transactions that use a mobile device, such as a smartphone or a smartwatch, to pay for goods or services. You can make payments in different ways, such as using a mobile app, a QR code, a contactless card, or biometric authentication.
A digital wallet is an application that allows you to store and use your payment information on a smart device, such as a phone or a tablet. You can use a digital wallet to pay online, in stores, or at ATMs without carrying your physical cards.
A digital wallet may also hold other digital payment methods, tickets, or coupons. Here are the advantages and drawbacks of using digital wallets as digital payment solutions.
QR code electronic payments are a method of transferring money using a two-dimensional barcode that you can scan via smartphone. You can use QR codes in various applications, such as online shopping, mobile banking, and loyalty programs.
The QR code is one of the new payment methods that strive to be more inclusive and accessible, as they do not require a bank account or a credit card. Pair a QR with a digital wallet, or lead the buyer to another form of digital payment processing.
An electronic check, or eCheck, is another form of digital payment. Money gets withdrawn from the buyer’s checking account, transferred over the ACH network, and deposited into the business’s account.
This differs 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.
Small businesses that could benefit from accepting eChecks include those that accept recurring payments. Think of landlords or daycare providers who receive payments monthly. All the customer has to do is authorize recurring eCheck payments, and those fees can get taken out automatically each time.
Cryptocurrency is a type of digital currency that operates on a decentralized network of computers, using blockchain technology to secure transactions and verify records.
Crypto is a part of the decentralized financial movement and supports peer-to-peer transactions without the need for centralized banks or financial institutions. You should consult with your financial advisor to see if accepting digital assets is suitable for your financial situation.
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Digital payments can be an important tool in helping business owners get paid faster and more efficiently– improving cash flow. Digital payments are convenient solutions for businesses and customers because they can:
Digital payment services can provide you with live payment records in real time and pair well with live bookkeeping services to ensure that you always have the latest information at your fingertips.
Digital pay might seem like a no-brainer solution for your small business. Although digital payment services can potentially be more convenient and cheaper alternatives to physical payment methods, they also have drawbacks such as:
Remember these extra fees and risks as you work with your business advisor to implement a digital payment system into your small business. Consider a payment processing cost calculator to determine how much it could cost your business before choosing a provider.
The next time your small business accepts a payment, consider how the transaction could benefit from digital payments and contactless transactions.
Whether your focus is B2B or B2C, electronic payment methods can help reduce costs and increase customer engagement. Consider integrating cashless payment options into your existing payment methods.
Although there are plenty of effective accounting methods to try, with QuickBooks, you can automate how you manage your business money and payment options– all in one place.
**Product Information:
QuickBooks Payments: QuickBooks Payments account subject to eligibility criteria, credit, and application approval. Subscription to QuickBooks Online required. Money movement services are provided by Intuit Payments Inc., licensed as a Money Transmitter by the New York State Department of Financial Services. For more information about Intuit Payments' money transmission licenses, please visit https://www.intuit.com/legal/licenses/payment-license
QuickBooks Card Reader: Data access subject to cellular/internet provider network availability and occasional downtime due to system and server maintenance. Product registration and QuickBooks Payments account required. Terms, conditions, and features subject to change. Apple Pay: Apple Pay is a registered trademark of Apple Inc. Google Pay: Google Pay is a trademark of Google LLC. PayPal and Venmo: Not currently available on invoicing through QuickBooks Online Advanced subscription. Venmo is available only in the US.
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