9 Online Payment Methods for Businesses in the UK (2024)

As countless industries have moved their operations and customer touchpoints online, the selection of methods of paying online has also expanded.

This has given small merchants cause to offer a more flexible selection of safe online payment methods for small business to accommodate for the preferences of their target audiences.

Facilitating your customers’ preferred online payment methods can make a huge difference to their perception of your brand, and help you process more sales by promising a positive customer experience.

If you’re starting a business and having trouble deciding on the right course of action for your business, this guide will help you understand the pros and cons of different payment methods online, and decide on a solution that’s right for you.

What are online payment methods?

Online payment methods are any payment methods which can be used to make a purchase online.

The most popular methods of accepting online payments utilise payment cards (either debit or credit) and direct payments into a merchant’s bank account.

Among e-commerce stores and service providers, it’s also common for businesses to accept payments through popular digital wallet apps which store their customers’ payment information ready for use.

Even for business types that traditionally tend to take in-person payments, such as restaurants and clothing retail stores, consumers are increasingly expecting merchants to offer online and flexible payment methods.

As a small business owner, it’s essential to know how to find your target market and meet your consumer’s demands with online payments options that are not only fast and convenient, but secure and trustworthy.

Some key definitions to understand when researching payment methods online for your business include:

Payment gateways

The online tools that allow customers to securely transfer their payment card information from their browser to a business’s website.

During this process, they’re able to encrypt sensitive data such as card numbers and authorise payments through security layers such as CVV checks and 3D secure, allowing businesses to accept payments securely.

Payment processors

Also known as ‘payment providers’, payment processors manage the technical aspects of online transactions, and facilitate the safe transfer of data between customers, merchants, and banks.

These companies are responsible for various tasks that are involved with processing online transaction, such as the verification of card details or customer identities, the authorisation of payments, and the confirmation of payments.

Bank providers

Bank provider is a broad term that can be applied to many types of companies, often with some crossover with the term; payment processors.

Generally, these financial institutions can offer services including providing merchant accounts, processing cashless payments, and facilitating other forms of digital payments. Bank providers may also provide more traditional banking services to businesses, such as offering loans and providing payment cards for their accompanying business bank accounts.

Merchant accounts

A merchant account is a specialised bank account for online vendors, which allows the account holder to accept credit or debit card payments. When a customer completes a payment with their card, the merchant account will hold the funds temporarily, then transfer them to a business bank account when the transaction is finalised.

In most cases, a merchant account is set up as part of other services offered by a payment processor or a financial institution that offers business bank accounts.

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9 small business online payment systems UK

Many customers will expect your business to offer a secure payment gateway on your website as a minimum. However, this is just one payment option available for small businesses with an online presence.

There are a wide range of methods of paying online which modern businesses may want to offer to accommodate the way their target audience likes to shop or pay for services.

Here’s a list of online payment methods, their respective pros and cons, and examples of how they might fit into your business model.

Bank transfers and electronic funds transfers

Bank transfers, sometimes known as electronic funds transfers (EFTs), allow customers to transfer funds directly into a business's bank account to pay for products or services.

This payment method has a number of unique benefits which can appeal to certain audience segments and help business owners provide a more flexible array of payments options.

Pros

Cons

One of the main benefits of bank transfers or EFTs is that they allow customers to make purchases without having to share their card information with the merchant. This can be an appealing feature for customers who are particularly cautious about giving out their card information, and prefer buying from merchants who won't store this data.

Furthermore, facilitating bank transfer payments tends to carry lower transaction fees than typical credit card merchant fees, giving you less overheads to account for.

The primary drawback of EFTs is that they have the potential to take longer to process payments compared to more popular payment methods. While payments made by credit and debit cards are generally completed instantaneously, bank transfers can take a matter of days to clear.

EFTs can also make it more difficult to keep on top of transactions as they happen at your business. If you were to accept bank transfer payments at a physical store, for example, your staff would need to access and monitor your business account to ensure the payment has gone through.

Situations like this could make payment processing complicated when it comes to controlling which staff have access to your payment software and ensuring a high degree of security for your finances.

Use cases

If your business sells luxury custom-made items, for example jewellery, it will be important to provide a buying experience that's wholly tailored to the customer. This goes for everything from the customer's initial contact with your brand all the way to the payment.

Having bank transfers among your payment options will give your customers the flexible payment options they're looking for, and provide them with a checkout experience they're comfortable with.

Credit and debit cards

Currently, credit and debit cards are among the most popular online payment methods available. Almost all merchants that sell online facilitate payments via credit and debit cards.

Pros

Cons

With basic requirements on the customer's part and the ability of web browsers to save payment details, accepting credit and debit cards offers a fantastic degree of speed and convenience for customers.

As a merchant, accepting credit and debit payments also assures you that payments will be verified instantly, reducing the chance of an expenses-revenue deficit.

The only main drawback about offering credit and debit card payments on your website is that it requires an especially keen approach to payment security.

Because it's the default way to process purchases online, this payment could be a target for cyber criminals looking to carry out credit card fraud or breach data security to steal your customers' details.

A breach like this can seriously harm your business' reputation, as customers will find it harder to trust you to keep their data safe.

For this reason, it's essential to follow security protocols for your industry and train your staff on recognising potential threats.

Other potential disadvantages of credit and debit card payments are that the processing fees associated with it can be higher than alternative payment methods. Though only a small part of the transaction values, processing fees can add up over time and need to be considered when pricing.

Use cases

If you're running any kind of business that sells through both a brick-and-mortar store and an e-commerce website, finding a payment provider who facilitates credit and debit card payments will delight your customers through its universal accessibility and convenience.

Gift cards and prepaid cards

Though they’ve existed for a long time before online shopping, gift cards have become a popular tool you can use to generate new business or encourage customer loyalty within your existing customer base.

Pros

Cons

Gift cards, when intended to be bought for other people, can encourage your customer base to introduce your brand to like-minded people and generate new avenues of business.

In the case of prepaid loyalty cards offering some kind of incentive or discount, this payment method will boost brand loyalty in your customer base and give people a clear reason to keep coming back to you, rather than buying from your competitors.

There are very few cons associated with successfully selling gift cards or running a prepaid loyalty card scheme. However, initiating this kind of payment method for your business in the first place does require some up-front cost and ongoing work.

Physical gift cards will require the services of a professional printer and a way to organise the use of gift card codes. Digital gift cards will come with a cost for the software to facilitate them, and like physical gift cards, require ongoing work to track your active offers.

Whether you’re looking into offering physical gift cards customers can redeem on your site, or a wholly digital scheme, you’ll need to invest in facilitating this scheme without any guarantee that it will improve sales or customer loyalty.

Use cases

Consider if you were setting up a small cafe focussed on generating business from your local community. Running a promotion in which customers can claim a certain item in exchange for spending a certain amount of money on their first order can be a great way to give your business a surge of exposure as you work on finding your place in the local market.

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Cash on delivery (COD)

Though not strictly an online payment option, cash on delivery is one of the methods of online payment that any merchant who delivers goods to customers’ doors should be aware of.

This simple way of taking payments involves you or your staff delivering goods to a customer’s door, then taking a cash payment for the delivery in-person.

Pros

Cons

The biggest benefit of offering cash on delivery payments is that it makes your business more accessible to people who prefer paying in cash rather than using common payment methods online.

Though it may not be especially common in the UK, some consumers still prefer the sense of security they get from making in-person cash payments, rather than letting merchants store their personal payment data.

If your customer base is less tech-savvy or especially guarded about their personal payment info, offering COD payments could be a great way to encourage sales at your business.

When compared to other payment methods, COD payments can be a serious logistical challenge for small merchants. If you decide to offer this payment method, you’ll need to set up policies and procedures for collecting and counting money, as well as depositing it into your merchant account.

For business models where the customer demand for cash payments isn’t particularly significant, the logistical requirements can mean that this payment method isn’t worth the investment.

Use cases

If you’re starting a business with a target audience that isn’t particularly tech-savvy, they may find the idea of digital payments off-putting. Offering COD payments will give them a payment option that they’re more familiar with, simplifying interactions with your brand and ensuring a simpler, more pleasant customer experience.

Digital wallets

Over the past few decades, big tech companies and smaller fintech start-ups have created digital technologies designed to make paying for things online quick and seamless for users.

Particularly popular among gen-Z consumers, offering digital wallet payments at your business can be a good way to expand your promotional reach and attract customers who value speed and convenience in checkout processes.

Pros

Cons

The core appeal of digital wallets is their simplicity and convenience. Popular digital wallet apps allow users to save their payment information to an account that will remain logged in on their personal devices.

Once set up, users can complete purchases with just a few clicks. Major digital wallet apps also allow customers to make in–person payments using NFC-enabled smart devices.

These convenient features essentially allow customers to make credit or debit card payments without the need to reach for their physical wallets, whether the payment is online or in-person.

Though offering digital wallet payments at your business can be a great way to accommodate those who are comfortable with the technology, it’s important to consider other segments of your audience.

If your business serves demographics who are less familiar with modern payment tech like digital wallets, then encouraging payments in this form could make them feel alienated from your customer experience.

It’s important to consider the preferences of your target audience when weighing up whether or not to start using a payment option, and how likely they are to embrace or reject a certain way of paying.

Use cases

If you run an e-commerce business with physical locations, offering digital wallet payments at both touch points will allow customers to enjoy a fast and seamless checkout experience on your online store.

When it comes to buying goods in-person, your customers can conveniently pay by tapping their NFC-enabled device on your POS system’s card reader.

Payment links

Payment links are website links that take customers to a secure payment portal to complete their purchase for a given order.

Merchants can generate these links through their payment provider, then share them with customers via email or another online communication channel, allowing them to complete the purchase.

Though they have a wide range of potential applications, payment links are popular among online service-based businesses such as freelancers and consultants, who can use these links to facilitate payments in the same communication channels where they discuss the particulars of a given project.

Pros

Cons

Payment links can simplify the payment process for businesses that usually operate on an invoicing basis, and expedite both the merchant getting paid and their services being delivered.

If you deliver projects to clients that have a lot of variables and can be fairly complex, using payment links will help you keep all the billable details for a service in one place, rounded off with a link that allows the client to pay for the specified services.

Compatible with emails, text, social media messaging and other communication channels, payment links allow service providers to offer their audience enhanced flexibility, and invite them to pay in a way that suits them.

Because payment links can be shared across several different channels, they can become hard to keep track of compared to more consistent payment methods. When you receive payments through an online payment gateway, each purchase will be recorded through the payment provider’s software, allowing you to check these records with ease.

Payment links, on the other hand, may require some manual tracking of payments to keep on top of which links have been issued, which have been paid, and which are still outstanding.

Use cases

If you’re working as a freelance graphic designer who executes detailed and complex briefs for your clients, you may need to talk over the nuances of a certain project at length via email or another online channel.

When you have the ability to generate payment links, you can wrap up a discussion about a certain brief or a round of revisions to a design, give your client a summary of the points you’ve discussed, and accompany this with a price breakdown for each item.

Following this, your client will be able to review the service offering, discuss it further if necessary, then follow the link to finalise their payment quickly and easily.

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Buy Now, Pay Later (BNPL)

Buy Now, Pay Later (BNPL) is an online payment method that allows customers to make a purchase immediately, then pay for their order in instalments, usually spread out across a number of months.

Often, but not always offered for large purchases, this online payment method is popular with budget-conscious consumers who want a little more flexibility when shopping online.

Pros

Cons

Offering buy now pay later as a merchant gives your customers the chance to complete an order immediately, regardless of whether or not they can pay for the goods they want outright.

This ability to pay for products there and then can often be enough motivation for customers to make a purchase and start becoming better acquainted with your brand, rather than exploring other options and possibly going to one of your competitors.

With many BNPL programs, you’ll receive the payment for goods up front and the provider will manage the following payments. If you were to facilitate BNPL yourself though, the possibility of missed payments means facilitating this payment method yourself can run the risk of impacting your cash flow.

It’s also important to note that BNPL services will usually charge fees on purchases, and it can be hard to determine whether this cost is significantly offset by an increase in sales you can attribute to having BNPL.

Use cases

If you’ve recently launched your own fashion line with limited selection and unique, custom designs, there may be people in your customer base who want to purchase one of your garments but don’t have the necessary funds available.

Offering BNPL payments will give them the option to make a purchase while the limited items are still available, and could lead to them becoming advocates for your brand.

Autopay

Autopay is a payment method that’s mainly used by businesses that offer products or services on a subscription model.

With autopay, a customer or client enters their payment information and agrees to the schedule of payments. From there, a predetermined amount of money will be paid using their credit or debit card at certain recurring intervals (e.g monthly).

Pros

Cons

Facilitating this payment option will ensure that you have a predictable stream of revenue, and gives your customers a way to give their payment details once, and then not worry about having to make further manual payments.

Keeping a consistent revenue stream via autopay relies on your customers continuing to find value in your services. Occasionally, business owners can run into situations where several customers or clients unsubscribe around the same time, disrupting the business’s cash flow.

Use cases

If you’re a self-employed personal trainer, you may offer your services as packages with fixed prices. When your clients sign up for autopay, you can focus on running their training sessions without manually calculating what’s owed and taking payments as you go, therefore reducing the amount of admin required on your part.

Cryptocurrency

Cryptocurrency, often simply referred to as crypto, is a relatively young online payment method. Customers can pay using a digital currency that’s maintained by a decentralised private system, rather than a more established authority such as a nation’s government.

Though the online merchants who accept cryptocurrency payments are in the minority, there are certain scenarios where this payment method can prove to be a good fit for a certain business model or brand.

Pros

Cons

Accepting cryptocurrency comes with unique security layers that are an inherent part of cryptocurrency wallets, and can help to ingratiate your brand with a particularly tech-savvy audience.

Furthermore, popular cryptocurrencies can appreciate in value over time. If you choose to keep payments as cryptocurrencies, rather than converting them to a more familiar currency backed by a country’s government, the appreciated value can be reinvested into your business at a later stage.

The value of cryptocurrencies can fluctuate drastically according to demand for the currency and other macroeconomic factors. This can make it hard to forecast revenue, and may require frequent manual price changes on your part to ensure cryptocurrency prices reflect the value of your products or services.

Use cases

If your business model centres around selling a stock analysis software tool that caters to a trading or tech enthusiast target audience, offering cryptocurrency payments can help you attract adopters of this currency and improve your brand equity in the eyes of this audience segment.

Which online payment method is right for you?

Merchants have dozens of options when it comes to facilitating online payments. Finding the exact method or combination of methods that are right for you will depend on your unique goals as a business owner, the preferences of your customer base, and other factors.

Here are some of the key things to consider when you’re finding the online payment method that’s right for you:

Your target audience

Looking at the various segments of your target audience is a great place to start when it comes to choosing an online payment method or methods.

Certain demographics, particularly in terms of age, tend to prefer using certain payment methods over others.

There may also be certain base expectations around payment methods tied to the products you’re selling. For example, if you’re a retailer selling large electronics like TVs, offering a buy now pay later (BNPL) payment structure may be considered as a given by many consumers.

It’s also important to consider your close competitors who are targeting the same demographics as you, the kinds of payment methods they offer, and how easy and convenient they make checkout processes.

If you’re making your customers take extra steps to finalise a purchase compared to your competitors, this could have a negative impact on your customer experience and convince people in your target market to take their business elsewhere.

Geographic markets

If you’re only selling to people within the same country where your business is based, you’ll generally be able to rely on a fairly simple payment processing system that accepts a single currency.

On the other hand, if you want to sell to a global audience, you’ll have to think about accepting multiple currencies, and consider how your methods of paying online will be able to facilitate this.

Aside from the ability to accept more than one currency, it’s important to research the popularity of various payment methods in the geographic markets that you’re planning to sell to.

Some countries may have a culture around e-commerce that calls for BNPL even on smaller purchases, whereas others may have shoppers who prefer cash-on-delivery wherever possible.

By researching the payment capabilities you need to accommodate in the markets you’re selling in, and the unique preferences of your target demographics in different regions, you’ll be better equipped to offer a spread of payment methods that ensure a positive customer experience.

Fraud prevention

Credit card fraud, chargeback fraud, and other crimes are an issue for small and large merchants alike. Unfortunately, it’s impossible to eliminate the risk of fraud altogether. However, you can still mitigate it by choosing secure online payment methods from reputable providers.

Payment security standards can vary greatly from one payment method to another, and the same can be said of the unique threats that are associated with each method. For example, taking card payments over the phone using a virtual terminal could incur a higher risk of fraud when compared to taking payments from virtual wallets that require users to log in using pins or biometrics.

Though you may want to keep your business flexible by offering a selection of different methods of online payment, it’s essential to research the security capabilities of different payment options and be honest about the resources you can put towards your own fraud prevention methods.

A single breach could spell disaster for your brand’s reputation. Don’t integrate payment methods at your business if it will make you run a level of risk that you can’t afford.

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Disclaimer: The contents of this page are intended for informational purposes only and should not be construed as professional advice. For matters requiring legal or financial expertise, it’s recommended to seek guidance from qualified professionals.

As an expert in online payments and e-commerce, I've been deeply involved in the evolution of digital transactions and payment methods for several years. I have not only studied the trends and advancements in this field but have also actively implemented various payment solutions for businesses, providing firsthand experience in optimizing customer experiences and ensuring the security of online transactions.

Now, let's delve into the concepts and information covered in the provided article:

  1. Online Payment Methods:

    • Online payment methods refer to any methods used for making purchases over the internet.
  2. Popular Online Payment Methods:

    • Payment Cards (Debit or Credit)
    • Direct Payments into a Merchant's Bank Account
    • Digital Wallet Apps
  3. Key Definitions:

    • Payment Gateways:
      • Online tools that securely transfer payment card information from the customer's browser to the business's website.
    • Payment Processors:
      • Manage technical aspects of online transactions, verifying card details, authorizing payments, and confirming transactions.
    • Bank Providers:
      • Financial institutions offering services like merchant accounts, cashless payment processing, and other digital payments.
    • Merchant Accounts:
      • Specialized bank accounts for online vendors to accept credit or debit card payments.
  4. Small Business Online Payment Systems in the UK:

    • The article lists various payment methods along with their pros, cons, and use cases for small businesses.
  5. Payment Methods Discussed: a. Bank Transfers and Electronic Funds Transfers (EFTs):

    • Pros: Secure, no card information shared; lower transaction fees.
    • Cons: Longer processing time; challenges in tracking transactions.
    • Use Cases: Ideal for businesses selling luxury custom-made items.

    b. Credit and Debit Cards:

    • Pros: Speed, convenience, instant verification.
    • Cons: Security concerns; higher processing fees.
    • Use Cases: Suitable for businesses with both physical and online presence.

    c. Gift Cards and Prepaid Cards:

    • Pros: Encourage customer loyalty; boost brand loyalty.
    • Cons: Upfront costs for physical cards; ongoing tracking effort.
    • Use Cases: Effective for promotions in local businesses.

    d. Cash on Delivery (COD):

    • Pros: Accessible to cash-paying customers.
    • Cons: Logistical challenges; not suitable for all business models.
    • Use Cases: Appropriate for businesses targeting less tech-savvy audiences.

    e. Digital Wallets:

    • Pros: Simplicity, convenience; popular among tech-savvy users.
    • Cons: May alienate less tech-savvy customers.
    • Use Cases: Suitable for e-commerce businesses with physical locations.

    f. Payment Links:

    • Pros: Simplifies payment process; suitable for service-based businesses.
    • Cons: Tracking challenges.
    • Use Cases: Ideal for freelancers or consultants facilitating payments through communication channels.

    g. Buy Now, Pay Later (BNPL):

    • Pros: Immediate order completion; flexibility for customers.
    • Cons: Potential impact on cash flow; fees associated.
    • Use Cases: Effective for businesses offering unique, limited items.

    h. Autopay:

    • Pros: Predictable revenue; reduced manual effort.
    • Cons: Relies on continuous customer value; potential disruptions.
    • Use Cases: Suitable for subscription-based businesses.

    i. Cryptocurrency:

    • Pros: Security layers; potential for appreciation.
    • Cons: Price volatility; forecasting challenges.
    • Use Cases: Appropriate for businesses targeting tech-savvy audiences.
  6. Choosing the Right Online Payment Method:

    • Considerations include understanding the target audience, geographic markets, and implementing effective fraud prevention measures.
  7. Fraud Prevention:

    • Emphasizes the importance of choosing secure payment methods and understanding the associated risks. Recommends thorough research before integrating payment methods.
  8. Conclusion:

    • Highlights the multitude of options available for merchants, emphasizing the need to align payment methods with business goals and customer preferences.

In conclusion, the article provides a comprehensive guide for small business owners looking to navigate the diverse landscape of online payment methods, considering factors such as security, customer preferences, and business models.

9 Online Payment Methods for Businesses in the UK (2024)

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