Digital payments: A small business guide

Preparing your small business to accept digital payments, or electronic payments, is more important than ever. They're becoming one of the most common payment methods and have the potential to make your business more efficient and accessible to customers. 

In fact, 86% of businesses used faster or instant digital payment methods in 2023, signaling how essential digital payments have become for operational efficiency and customer satisfaction.

These include all noncash and noncheck methods, while mobile payments are made using mobile devices. Read our small business guide below to learn how digital payments work, the different types available, their benefits and challenges, and how to keep transactions secure:

What is a digital payment?

Types of digital payments

Benefits of accepting digital payments

Challenges of accepting digital payments

How to keep digital payments secure

Choose the best payment setup for your business

What is a digital payment?

A digital payment involves electronically transferring funds from the buyer’s bank account or credit card directly to the seller. These payments include all noncash and noncheck methods, as well as mobile payments that customers make using mobile devices. 

Types of digital payments

Digital payments come in a variety of cashless and contactless forms, each with its own use case, pros, and cons:

For example, a customer might complete an online purchase using their digital wallet or credit card. The entire transaction happens electronically, no cash exchange required, and funds are securely transferred to the business through its payment processor.

Debit and credit cards

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.

Mobile payments

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 "tap to pay" card, or biometric authentication.

Digital wallets

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. PayPal, known for its security and ease of use, is one of the most widely used digital payment platforms. 

Other popular options include Venmo, Cash App, Zelle, and Apple Pay, each offering fast, user-friendly ways for customers to send money.

QR code payments

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.

eChecks

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 and accept the 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.

Cryptocurrencies

Cryptocurrency is a type of digital currency that operates on a decentralized network of computers. It uses 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 your financial advisor to see if accepting digital assets suits your financial situation.

Benefits of accepting digital payments

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:

• Promote financial inclusion by creating more accessible payment methods for your customers
• Get paid faster by reducing the time it takes for your payments to be processed
• Enjoy the convenience of cashless transactions while improving the buying experience for your customers

Digital payments are also faster and more convenient than cash, so you receive money sooner. This helps improve cash flow and reduces the time you spend handling physical currency.

Processing times vary depending on the payment method, but most digital payments appear in your business account within one to three days. Some mobile payment apps may even make funds available immediately if they’re stored within the app.

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.

Challenges of accepting digital payments

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:

• Security risks: Like all electronic functions, digital payments are subject to cybersecurity risks and fraudulent activity.
• Technical issues: Digital payments usually require a charged electronic device with an internet connection.
• Service charges: You may have to pay an extra fee for the convenience of cashless transactions.

One way to simplify the payment process is with pay-enabled invoices. Instead of asking customers to mail a check or pay in person, you can send an invoice by email with a payment button. Customers enter their information, and you get paid directly online—reducing friction and speeding up collections.

Remember these extra fees and risks as you work with your business advisor to implement a digital payment system in your small business. Before choosing a provider, consider using a payment processing cost calculator to determine how much it could cost your business.

How to keep digital payments secure

Security is one of the biggest concerns for small businesses adopting digital payments. While providers take steps to protect transactions, you can strengthen security on your end, too.

Best practices to keep your business and customers safe:

• Choose payment processors with built-in fraud detection, encryption, and compliance with PCI DSS (Payment Card Industry Data Security Standards).
• Require two-step verification for logins to prevent unauthorized access to your accounts.
• Keep your POS systems, payment apps, and mobile devices updated to guard against security vulnerabilities.
• Train employees to recognize phishing attempts, suspicious transactions, and unsafe payment practices.
• Digital payments give you live transaction data—monitor it regularly to identify unusual activity in real time.

With these safeguards, you can reduce risk while still enjoying the speed and convenience of digital payments.

Choose the best payment setup for your business

The next time your small business processes a payment, think about how digital and contactless transactions could enhance the experience.

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. While many effective accounting methods are available, QuickBooks lets you streamline and automate managing digital payments.

With QuickBooks Payments AI Agent, you can take things a step further. The agent helps you get paid faster, stay on top of bills, and keep cash flow healthy. Optimizing invoicing and payment collection makes your payment process more efficient, so you spend less time chasing payments and more time growing your business.

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-licenses/.