What are the best online payment apps for small businesses?

As of December 2023, 27.6% of all purchases in the UK were made online. That number has only increased, with more and more customers preferring online payments.

If you’re starting your own business in the UK, then, you’ll need to be able to take online payments. In this article, we take you through the basics and summarise some of the best online payment platforms for small businesses available.

How to take payments online

There are a few different ways that small businesses can handle online payments.

• Bank transfers are simple and understandable, but can seem unprofessional.

• Direct debits allow customers to set up recurring payments, such as subscriptions and repeating invoices. They’re not designed for one-off payments, but work well if you’re collecting repeat payments.

• Mobile payments allow customers to pay using their mobile, either on a website or at a point of sale.

• Point-of-sale (POS) payments are payments taken at your physical location or online counter.

• Online card payments are the most popular way for small businesses to take online payments, and they’re what we’ll be focusing on here.

Card payments are handled through online payment systems and can be made using a debit or credit card or directly from a customer’s bank account.

We’ll look at how to set up a payment system below, but you should know from the outset that however you do this, you can adopt a payment structure that suits your business. You have options that range from fixed monthly fees to pay-as-you-go models.

Typical fees are:

• set-up: £20–£50 

• transactions: 10p–30p per transaction 

• percentage of monthly sales: 1.9%–4.0%

How do online payment systems work?

An online payment system is usually made up of three elements:

• a payment gateway, which sends payments to the processor 

• a payment processor, which handles the actual transaction 

• a merchant bank, into which the customer’s funds are deposited before they are transferred to your business bank account

All-in-one payment platforms provide all these elements in a single package, making them a great solution for small businesses. 

Benefits of online payments

Using online payments has numerous benefits for small businesses. Some of the most important advantages include:

• Convenience and accessibility: online payments offer customers the convenience of making transactions anytime, anywhere, using various devices such as computers, smartphones, or tablets.

• Faster Payments: unlike traditional payment methods like cheques, which can take days or even weeks to clear, online payments enable instant or near-instant transfer of funds.

• Security: Payment card industry regulations require all online payments to be SSL (secure socket layer) encrypted. Most systems will have their own SSL certificate, while website builders like Squarespace or Wix make it easy for you to get your site SSL certified.

• Cost efficiency: electronic payments often incur lower transaction costs compared to traditional methods like paper checks. Businesses can save money on processing fees, mailing costs, and other expenses associated with manual payment processing.

Mobile payment systems

As smartphone security improves, more and more people are using their mobile devices for payments. Adopting these payment systems for your small business can make dealing with customers easier and quicker than ever.

Types of mobile payment include:

• QR code payments - customers have to scan a QR code to open a payment window

• mobile-to-mobile payments - allow for quick and secure payments using a mobile number but are less common for a business

• magnetic secure transmission (MST) and near-field communication (NFC) payments - these require a physical device

Each of these is useful for in-person transactions, but mobile payments are also available online. Many online payment apps allow customers to use their mobile to complete their purchase, and most browsers allow mobile users to enter their card details as they would on a desktop.

How to set up an online payment system

When it comes to setting up an online payment system, businesses have several options.

Opening a merchant bank account

A merchant bank acts as a go-between, taking care of things like authentication.

Businesses choose the card companies they’ll work with and set up an account. When customers pay, they send money to the merchant bank, which then releases it into the business’s account.

The major advantage of this method is that it works out cheaper in the long term, as the merchant bank’s monthly and transaction fees are generally lower than those involved in other options.

However, merchant banks usually require you to sign a multi-year contract, and the process can be time-consuming.

Using an e-commerce platform

Many payment platforms for small businesses, like eBay and Etsy, have built-in payment processors. While you’re unlikely to see many big businesses using these sites, they can be perfect for small shops or self-employed sole traders.

Using an online payment app

An online payment app is perhaps the best option for small businesses, as it lets you get set up and start accepting payments quickly and easily. 

While transaction fees are high, using online payment apps can actually be cheaper for new businesses than setting up a merchant bank account.

Tips for deciding the best online payment service

If you need help deciding which online payment system is best for you, consider the following questions:

• Does this payment app suit my business model (e.g. ecommerce or subscription)?

• Will my customers recognise this payment system?

• Does this app offer the payment options that my customers expect?

• Is this payment system affordable for my size of business?

• Do I expect to be taking international payments?

• Can this payment system connect directly to QuickBooks?

Startups.co.uk and Merchant Savvy offer helpful comparisons of secure payment systems that might be suitable for your small business.

Best online payment apps that integrate with QuickBooks

Consider these online payment apps for your small business - all of them can integrate with QuickBooks.

PayPal - probably the best for international payments

Pros:

• Available worldwide: doesn’t confine your business by location

• One of the most trusted online payment apps

• Offers discounts on ecommerce platforms

• Offers business solutions including the PayPal Business Debit Mastercard and PayPal Here Card Reader

• A PayPal account is optional for your customers

Cons:

• Doesn’t have a shopping cart functionality

• Relatively expensive fees on PayPal Wallet and American Express payments

GoCardless - probably the best for recurring payments

Pros:

• Offers a very low fee of 1-1.4% + 20p per transaction, capped to a maximum of £4 on domestic payments. 

• Uses Direct Debit to automatically collect recurring payments such as subscriptions, instalments and invoicing every time they’re due.

• A flexible option for businesses with recurring payments - also allows for changes in price. 

• Customers provide details and authorise future payments just once.

• Integrated into QuickBooks Online, saving hours of admin time.

Cons:

• Payments usually take a few days longer than cards to process so are less well suited to one-off purchases.

• Only available in the UK, Ireland, USA, Canada, Australia, New Zealand, Denmark, Sweden and the Eurozone

Zettle - best for point of sale payments

Pros:

• No monthly fee or lock-in contracts 

• Accepts almost any payment method, including Amex, contactless and smartphones

• Fast set up means you can start selling straight away 

• Zettle Reader charges quickly for all-day battery life 

• Super-fast transaction speed processes a payment in seconds

Cons:

• Bank deposits take two business days 

• 1.75% transaction fee may be expensive on high ticket items 

Shopify Payments - best for e-commerce websites

Pros:

• Offers everything you need to start selling online, including web hosting, a shopping cart, payment processing, a blog and an SSL certificate

• Offers customisable themes for your online shop

• You don’t need a credit card to join

Cons:

• Gets more expensive if you want to use an external gateway

Amazon Pay - best for ease of use

Pros:

• Quick and frictionless checkouts

• Customer details are verified with Amazon

• Enables you to complete transactions on your own site

• No hidden costs, lock-in or monthly fees

Cons: 

• Can be expensive for smaller businesses

Dwolla - probably best for flexibility and integration options

Pros:

• Wide variety of integrations offered, allowing for multiple payment structures such as instalment payments, recurring charges, and multiple-stage interests.

• Competitive monthly fees compared to other online payment systems.

• Flexible platform that allows businesses to customise payment setups according to their specific needs.

• integration with existing systems and processes, enabling smooth adoption for businesses of all sizes.

Cons: 

• While competitive, the monthly fee associated with using Dwolla may still pose a financial barrier for smaller businesses with limited budgets.

• Requires some technical expertise to fully leverage its customisation options.

• Limited availability of features compared to more comprehensive solutions. This may require businesses to supplement Dwolla with additional tools for certain functionalities.

Due - probably best for comprehensive features

Pros:

• Due offers a broad range of features and services, including time-tracking, invoicing, and secure online payments.

• Provides access to virtual wallets, allowing businesses to securely store cash online and manage transactions efficiently.

• Can offers seamless integration of payment processing with invoicing and time-tracking software.

• reporting tools provide insights into financial performance, helping businesses make informed decisions.

Cons: 

• Limited customisation options compared to more specialised solutions.

• May not offer the same level of advanced functionality or scalability as dedicated payment processing platforms.

Stripe - probably best for global sales

Pros:

• Offers lots of APIs and customization options, allowing businesses to tailor their checkout experience and scale up as their business grows.

• Supports over 135 currencies and multiple payment types, enabling businesses to accept payments from customers worldwide.

• Integration with e-commerce platforms and other business systems.

• Transparent pricing structure with competitive transaction fees.

Cons:

• Transaction fees and additional charges may add up for businesses with high transaction volumes or complex payment processing needs.

• Limited customer support options compared to some other payment processing providers.

How long do online payments take to process?

Although the specifics may vary, merchants usually receive a payment anywhere from 24 hours to three days after customers send it. This means that online payments aren’t just quick for customers, but can usually get the money into your business’s account more quickly than if you were depositing cheques or cash.

Enhanced payment solutions with QuickBooks

QuickBooks seamlessly integrates with leading payment service providers, such as GoCardless and PayPal, offering small businesses the flexibility to accept payments directly from online invoices via debit or credit card. Use our online payment services to streamline your invoicing process, improve cash flow, and enhance the overall payment experience for your customers. 

Whether it's managing recurring payments with GoCardless or making one-off payments with PayPal, we provide small businesses with the tools they need to drive growth.

Try QuickBooks UK today.

Online payment solutions FAQs

How do online payment systems work?

An online payment system typically consists of three main elements: a payment gateway, a payment processor, and a merchant bank. The payment gateway acts as an intermediary, transmitting payment information securely between the customer, the merchant's website, and the payment processor. 

The payment processor then handles the actual transaction, verifying the payment details and transferring funds from the customer's account to the merchant's account. Finally, the merchant bank, also known as an acquiring bank, receives the funds from the payment processor and deposits them into the merchant's bank account.

How can I set up an online payment system for my business?

Setting up an online payment system involves several options tailored to different business needs. One approach is to open a merchant bank account, which offers lower long-term costs but requires signing a multi-year contract and a lengthy setup process. Alternatively, businesses can use e-commerce platforms like eBay or Etsy, which have built-in payment processors suitable for small shops or sole traders. 

Another option is to use an online payment app, which provides quick and easy setup, although transaction fees may be higher initially.

Which online payment apps integrate with QuickBooks?

Several online payment apps seamlessly integrate with QuickBooks, allowing for direct payments from invoices. These include PayPal, renowned for its global accessibility, GoCardless and Zettle.

What’s next for your business?

We hope you’ve found this guide to online payments useful. If you need more help in the process of starting your own business, our latest questionnaire can provide you with a personalised to do list to ensure you don’t miss out on any crucial steps. Complete the questions honestly to see exactly where you’re at.