Shoppers nowadays have a plethora of choice when it comes to making a payment.
They can use their watch, smartphone, card, face, fingerprint, and even car keys (we’re not joking!).
With so many options and touchpoints, there also appears to be an increased opportunity for merchants to cater to more customer needs, helping decrease cart abandonment and increase customer retention.
At Pomelo Pay, our 25+ payment methods allow businesses to accept the most important payment methods and open up to new markets.
Talking about payment methods, here’s what we’ll be covering in this comprehensive guide:
- What is a payment method?
- List of top payment methods
- What is the most common method of payment?
- What are the different online payment methods?
- What is the safest method of payment?
- Why accept more payment methods?
- How to choose the best payment method
- How to accept several payment methods
What is a payment method?
Payment methods refer to the ways your customers can buy your product or service. When you purchase something at a shop, you can usually decide to pay by cash, card or mobile phone.
When you buy something online, you’ll also probably see a dropdown list of all the payment options allowing you to pay by card, direct bank transfer, e-wallets or even crypto! In 2021, you may be surprised to hear that there are over 200 types of payment methods!
Since we offer 25+ payment methods, it’s worth understanding the different ones available.
Let’s look at a list of the top ones.
List of payment methods
Cash is the original and oldest payment method: the physical coins and notes you’ll find in your wallet, an ATM or at the bank.
But over the past couple of decades, cash payments have decreased by 15%. Although they are the cheapest way to accept a payment, many businesses tend to prefer the security and convenience of online payments.
In the UK, 98% of the population owns a debit card, and it’s the most popular payment method for both online and offline purchases.
The biggest benefit of using debit cards is the extra layer of security when completing a payment.
Not only do customers have to input a personalised PIN code, but each payment must go through a card network such as Visa and Mastercard. This ensures purchases are not fraudulent and come from a verified bank account.
Accepting debit card payments usually requires using a card machine, also known as a POS machine.
Credit cards are funded by banks and building societies, with the customer paying with borrowed money rather than a bank account. Credit cards have a pre-approved limit and are later paid back by the customer (with interest) over time.
Credit cards allow customers to spread payments across time, as well as earn rewards and points for their spending.
As for the merchant, credit cards operate similarly to debit cards. They require inputting a PIN, payments go through a card network and there is the additional layer of protection provided by the credit card company.
Credit cards are the second most popular payment method after debit cards, with UK residents completing 340 million transactions in 2019.
Bank transfers are popular amongst B2B transactions and larger payments such as wholesale orders.
In the UK, you need an account number and sort code to send a bank transfer, and an IBAN and SWIFT code for international transfers.
Although bank transfers are popular, they are often less secure than other payment methods; that’s because there is no card network in place to monitor the transaction, and therefore cannot be recalled if there is an error. Bank transfers are also a lot more manual and time-consuming to process.
Direct debit payments are scheduled and automated payments, typically used for household bills and in subscription payment models such as TV subscriptions. The customer sets up a direct debit mandate with their bank to ensure monthly payments are on time, every month or week.
Over 4 and a half billion payments were made through direct debit in 2019, with the Direct Debit scheme offering a full refund guarantee for any mistaken payments.
Direct debits are another popular payment method for businesses, since they guarantee a monthly income. Although it increases customer retention, direct debits are not applicable to every business and similarly to bank transfers, don’t have the added security of a card network.
Mobile payments refer to payment methods that use your phone. These could be remote, in-person, or contactless payments. Examples of mobile payments include mobile wallets, qr codes and payment links.
Launching under a decade ago, mobile payments are one of the newest payment methods available, but are quickly rising in popularity, with Google and Apple Pay boasting over 300 million users combined.
That’s because they are an incredibly convenient payment method and due to biometrics, are often considered more secure than other payment methods.
Two of our most popular mobile payment solutions at Pomelo Pay are QR codes and payment links, which are both channels that enable credit/debit card payments as well as Apple and Google Pay.
Mobile payments: e-wallets
Mobile wallets are virtual wallets (also called e-wallets) that store your customers’ payment information and allow them to pay online and in-person.
Examples of mobile wallets are Apple Pay, Google Pay, Alipay and WeChatPay: they essentially allow customers to store money on their phone and then use it to complete a payment using biometrics.
Mobile wallets are a popular payment method since they are convenient, secure and often a lot cheaper since wallet to wallet transactions are usually free.
- Is Apple Pay Safe?
- Is Google Pay Safe?
Mobile payments: payment Links
Payment links are an easy and convenient way to accept payments remotely. Businesses essentially send their customer a link via text or email, and the customer just needs to fill in their card details to complete the payment securely.
Not only is this an incredibly versatile payment method, but sending a link directly to your customers’ mobile phone means they pay a lot more quickly.
Thanks to payment links, David, EPC contractor, now gets paid as soon as he finishes his job. He sends the payment link the day before, completes his job and then asks his client to pay.
According to David: “We find that the time scales are better, customers get what they need on time, and we get paid on time.”
Read the case study: How this Business Owner Uses Pomelo Pay to Get Paid Instantly
Mobile payments: QR code payments
QR code payments are a great way to speed up in-person transactions. You’ve probably seen them on restaurant tables and outside cafes as more people prefer ordering online.
The process is simple: customers scan the QR code, a notification pops up that takes them to a separate payment page where they fill in their details and then complete the payment. They can also choose to pay with their preferred e-wallet on their phone, such as Google or Apple Pay.
With QR codes, business owners can also turn their smartphones into a card machine. This makes it a lot cheaper to accept payments, and also speeds up order processing.
Tiziania, owner of a mobile food business, offers QR code payments to those who want to skip the queue. With QR codes, she’s effectively doubled the amount of orders she can serve.
Read the case study: How This Mobile Food Business Doubled Their Orders With On the Go Payments
Alternative payments refer to a number of different methods, including:
- “Buy now, pay later”
- Digital currencies (such as crypto currencies)
- Prepaid cards
While some of these methods seem outdated or too new, and are commonly referred to as “alternative payments”. In some cases it’s worth adding them as a payment option, although it really depends on your target market.
What is the most common method of payment?
Debit card payments are the most common payment method, currently accounting for 42% of all online and in-person payments.
This is followed by a mixture of cash, direct debit and credit card payments - although, it’s worth noting that mobile payments are growing at the highest rate. Cheques are the least common form of payment.
What are the different online payment methods?
Online payments are used when the customer is not present, for example if the store is based online and does not have a brick-and-mortar location. Online payment methods include:
- Direct debits
- Bank transfers
- Mobile payments
- Payment links
- QR codes
- Digital currencies
- “Buy now, pay later” programmes
What is the safest method of payment?
Not only are they the most common payment method, but debit and credit cards are the also most secure means of payment.
The major reason for this is because each card payment must go through a card network such as Visa or Mastercard.
Card networks ensure that the payment is from a valid bank account and that the transaction happens securely. If there is an issue with the payment, both the merchant and the customer can contact the card network to resolve the dispute.
Using a licensed payment services provider such as Pomelo Pay adds an extra layer of security.
Read more: What is a Payment Service Provider (PSP) and Why Should You Partner with One?
Why accept more payment methods?
Offering more payment methods means offering a much better checkout experience to your customers.
Would you complete a payment if your favourite method wasn’t available? Most customers will cancel a purchase if their preferred payment method doesn't turn up.
As our cofounder, Simon Verraest, recently explained in an interview:
“For a very long time, businesses were deciding how they wanted to accept payments. But the customer may have specific reasons for choosing a certain payment method and there shouldn’t be any friction by merchants offering a multitude of options.
For example, someone might want to use their British Airways Amex for points or cashback, use their Visa for purchase protection, or even use Alipay or WeChat Pay for a better Forex rate if they use a local wallet.”
Not only that, but with digital payments you get a lot more insights. By using multiple touchpoints and integrated payments, you can get a 360 view of all your payments. With one single system, you get a snapshot of how your business is doing at any time of the day.
Instead of having to connect to another system, both you and your customers see payments as seamless.
With more payment options, your customers are more likely to complete a payment, effectively decreasing cart abandonment rate and growing your business.
How to choose the best payment method
The right payment methods for a new craft business might be totally different to the best payment methods for a restaurant, e-commerce shop or construction company.
That’s why it’s important to think about which payment methods are the best for your business.
Here is a table summarising the best payment methods:
How to accept multiple payment methods
How can you offer multiple payment methods without having to partner with a separate payment facilitator for each one?
Two words: payment gateway.
With a payment gateway, you can accept several multiple payment methods by simply partnering with one company. The payment gateway is a piece of software that integrates into your website, and processes payments from start to finish.
Read more: Why You Should Use a Payment Gateway for Your Website
Pomelo Pay is a payment service provider (PSP), which means you can accept a wide range of payments through these various payemnt channels including:
- Credit card
- Debit card
- QR code
- Payment link
- Apple Pay
- Google Pay
- & many more!
By accepting multiple payment methods with one gateway, your payments are unified: you can accept payments in-person, through your website and remotely, all through one system with Pomelo Pay. We have built our system to consolidate your customers preferred payment method.
These modern tools make it a lot easier to track all your payments, reconcile transactions and make data-driven decisions - while bridging the gap between online and offline. If you have a Wordpress website, you can also integrate Pomelo Pay using WooCommerce.
Not sure which Pomelo Pay feature is best for you? We have a very friendly support team whose job is to help you find the payment method that is best for your business. Simply contact us to learn more about Pomelo Pay’s 25+ payment methods and which one might fit your business best.
We hope this payment methods guide was useful and you now understand the importance of offering multiple payment methods. Although it can be overwhelming at first, using the best payment methods will translate into better security, faster processing times and most importantly of all: increased revenue.
Ready to get started? Create a Pomelo Pay account for free!
How do I decide which type of payment method to use? ›
- Total cost of ownership.
- Customer preference.
- Involuntary churn & failed payment rates.
- Trust and safety.
Businesses can accept payments in different ways, which include cash, card, and cheque payments. Moreover, advanced methods like digital fund transfers, mobile payments, and other online payments are becoming popular by the day.What are the 3 major payment options? ›
The three most common types of payment in today's market are credit cards, debit cards, and cash. Credit and debit card transactions involve fees paid by merchants to the card companies, but they tend to involve larger purchase amounts than cash transactions.What is the most effective payment method? ›
By and large, credit cards are easily the most secure and safe payment method to use when you shop online. Credit cards use online security features like encryption and fraud monitoring to keep your accounts and personal information safe.What are 2 most common methods of payment? ›
The three most common types of payment in today's market are credit cards, debit cards, and cash. Credit and debit card transactions involve fees paid by merchants to the card companies, but they tend to involve larger purchase amounts than cash transactions.How many different payment types are used? ›
A payment can be made in the form of cash, check, wire transfer, credit card, or debit card. More modern methods of payment types leverage the Internet and digital platforms.How many modes of payment are there? ›
8 Payment Methods And How To Accept Each Payment Mode.Which payment system is best and why? ›
- Stripe: Best overall payment gateway. ...
- Adyen: Best omnichannel option. ...
- Helcim: Best interchange-plus pricing for businesses of all sizes. ...
- PayPal Payflow: Best for doing everything in one place. ...
- Square: Best if you also have a storefront. ...
- Braintree: Best for accepting a variety of payment types.
In general, credit and debit cards are the most widely used payment method. This is mainly due to their flexibility and level of convenience for consumers. More than half (52%) of US consumers used a debit card in the last year, with 47% using a credit card.Which is one of the popular payment method? ›
PayPal. PayPal is popular as a redirect payment gateway because of its high reputation with customers and the availability of multiple gateway options.
What is the strongest current trend in payment processing? ›
Contactless payments can apply to smartphones, debit cards, credit cards, and key fobs. More and more customers are choosing to pay with contactless payments because of how fast, convenient, and secure they are. Mobile wallets also use near-field communication technology.How many types of payment methods are there in USA? ›
Credit cards, debit cards, cash, and digital wallets are a few of the ways consumers can pay for items in 2022.Why are there different payment methods? ›
Offering a range of payment methods can reduce friction at the checkout process and encourages the customer to complete their transaction. Reducing cart abandonment can increase your conversion rate and revenue.What does EFT stand for? ›
With direct deposit or electronic funds transfer (EFT), the general public, government agencies, and business and institutions can pay and collect money electronically, without having to use paper checks.What is the most common payment term? ›
Most businesses that offer payment terms to their customers offer Net 10, Net 30, Net 60 terms, or a similar variation. This means the invoice is due within that time frame.What is the most common but least secure payment method? ›
What is the most common but least secure payment method? While every type of payment method has some disadvantages, debit cards are probably the riskiest form of payment.What is payment strategy? ›
Payment Strategies conducts applied industry research and analysis on the evolving mobile/digital payments market to identify related trends, technology models, benefits, and barriers to adoption.Which should you finance first? ›
The bigger you build your debt snowball, the closer you'll get to debt freedom. Using the same figures above, you'll start by focusing on credit card #1 since it has the lowest balance. After it's paid off, you'd move on to credit card #2 followed by the personal loan.Which 3 payment types can be used as an autopay method? ›
Autopays require a stored payment method that the system can automatically pull from. Payment Methods that are acceptable would include Credit Cards, Direct Debit, ACH, or a client's MINDBODY Account.What is an EFT payment method? ›
What is an EFT Payment? EFT payment (electronic funds transfer) is a term that includes many types of electronic payments, including ACH transfers and wire transfers. EFT payments are also called e-Payments because each transaction is completed online and doesn't include paper checks in the payment process.
What are payments basic concepts? ›
Payment is the exchange of money, goods, or services for goods and services in an acceptable amount to both parties and has been agreed upon in advance. You can pay with cash, a check, a wire transfer, a credit card, a debit card, or even cryptocurrency. The way money works now, you can pay for things with cash.Why digital payment is better than cash? ›
Digital payments are lightning-fast. It enables money transfer round the clock, is relatively secure, provides convenience, is trackable, and provides several mutually attractive deals that have given tremendous opportunities for new aggregators to come into existence.What are two methods of payment without using money? ›
Alternative methods of payment are means of making a payment other than cash. Alternative methods of payment (AMOP) include payments made using a credit or debit card, loyalty program points, cryptocurrencies like bitcoin or digital wallets like Google Pay or Apple Pay. Another popular AMOP is Venmo.What system of payment is widely used today? ›
Credit and debit card: This is one of the most commonly used and oldest payment methods worldwide. It's a card that slides into a payment terminal, which charges a specific amount of money to it.How do Millennials use their payment options? ›
Also known as Generation Y and the Net Generation, millennials are more likely than Gen X or baby boomers to use mobile wallets that include credit, debit and prepaid cards. About 75% of millennials have a PayPal account, and frequently split bills or pay using a P2P payment app like Cash App, Venmo or Zelle.What are the trends in payments in 2023? ›
In 2023, regulatory scrutiny and product innovation will broaden consumer payment choice, intensifying competition among providers. Global funding for payments startups fell 49% last year, signaling a more cautious approach by investors amid high levels of economic uncertainty.What are the four major payment networks? ›
The four major credit card networks are American Express, Discover, Mastercard and Visa.Why is online payment the best? ›
One of the biggest benefits of online payments is that they can provide valuable information about customers and their behavior – the products or services they click on, what device they are using to make a purchase, what payment methods they prefer, and how long (and where) they linger on your website.What is USA most used payment method? ›
In general, credit and debit cards are the most widely used payment method. This is mainly due to their flexibility and level of convenience for consumers. More than half (52%) of US consumers used a debit card in the last year, with 47% using a credit card.What is the 4 party model in payments? ›
the payer (often referred to as the cardholder), the payee (often referred to as the merchant), the payer's payment service provider (often referred to as the issuer) and. the payee's payment service provider (often referred to as the acquirer).
Which country has best payment system? ›
- India – 46.8 billion.
- China – 18.5 billion.
- Thailand – 9.7 billion.
- Brazil – 8.7 billion.
- South Korea – 7.4 billion.
- Nigeria – 3.7 billion.
- UK – 3.4 billion.
- US – 1.8 billion.
1. PayPal. Paypal is an eCommerce payments platform designed to help people and companies to send and receive payments without providing financial information.Why is Visa better than Mastercard? ›
While both of these offer benefits for purchase protection and insurance, travel benefits and emergency services, Visa Signature offers significantly more of them to their cardholders. Visa Signature members have access to features like roadside dispatch, extended warranties, a Global Entry statement credit and more.What is a payment matrix? ›
Payment Matrix means the table detailing the schedule and commitment level of the Organiser set out in Schedule 2; and. Sample 1. Payment Matrix means the payment matrix attached as Schedule 4 to this Agreement.What are payment categories? ›
What Are the Main Types of Payments? Traditionally, cash, debit cards, credit cards, and checks were the main types of payments. Now, more advanced forms of digital payments are becoming more popular. This includes online payment services, digital currencies, and electronic transfers.What is the payment pattern? ›
A payment pattern refers to the time distribution of. cash flows that arise from credit sales at a point in time. A monthly payment pattern can be characterized by the. proportion of credit sales in a given month that become. cash flows in that month and a series of subsequent months.Which app is most used for payment? ›
PhonePe rules the payment app sector with 47.8% market share followed by Google Pay (33.6%) and Paytm (13.2%).