How to accept payments online

The last few years haven’t been kind on cash.

The payment method – which accounted for 16% of all purchases at the point of sale in the US in 2017 – has fallen consistently since, and was used for just 12% of transactions in 2022.

What’s more, in 2022 almost half (41%) of Americans said they use cash for none of their purchases in an average week. (This is a sharp increase from the less than a quarter of surveyed Americans – 24% – who reported this in 2015.)

Some interesting statistics, sure –  but what do they mean for your business?

They mean that if you don’t already accept online payments (as an alternative to cash-based ones at the point of sale), it’s something you need to start thinking about.

But the world of credit card processing can be a complex one. Which types of online payments can you implement? Which components and companies are involved? And what are the benefits for you, as a merchant?

Below, we’ll answer all your most pressing questions about how to accept payments online. We’ll walk you through each step of the process, talk you through the different parties and processes involved: and explain how Checkout.com can streamline and simplify it all.

Different types of online payments to implement

As a catch all term, ‘online payments’ is handy. But it doesn’t offer much detail as to how, exactly, your business can accept payments over the internet.

So read on as we break down four of the most popular ways to pay online: including credit and debit cards, digital wallets, bank transfer, and mobile payments.

Credit and debit cards

Credit and debit cards are Americans’ favorite way to pay.

In 2022, credit and debit cards combined to represent almost three quarters (71%) of payment methods used at the point of sale (POS), according to Statista.

Credit cards (40%) are still more widely used than debit cards (31%), though, and Americans’ total credit card debt (more than $1 trillion as of Q2 2023) speaks to credit cards’ enduring popularity as a way to pay in the US.

With credit and debit cards offering fast, convenient, and – in many places – contactless payments, accepting them is a must. This is especially the case in the world’s current post-pandemic landscape: in which cash’s role in transmitting viruses was laid bare, and demand for ways to transact without physical contact soared.

Digital wallets

Digital wallets (also known as ‘mobile wallets’) are another increasingly popular way to pay: as popular, according to the same Statista data we used above, as cash.

That’s because in 2022, digital wallets (such as Apple Pay, Google Pay, and Samsung Pay) accounted for 12% of all payments at the POS – the same percentage as cash did. What’s more, our own research has indicated that 43% of consumers in the US (and 53% in the UK) used a mobile wallet in 2022.

To learn more, explore our guide to how digital wallets can help you capture more sales – as well as drive more traffic to, and engagement with, your online business. 

Bank transfers

Popular among customers who don’t have a credit or debit card (or who want to avoid the fees associated with them), bank transfers – which involve a direct payment from a customer’s bank to your business’s – take longer than other online payment methods; but are just as reliable. 

Bank transfers are also ideal if your business runs a subscription service, or relies on recurring payments – and you need to bill a customer’s account every month on an ongoing basis.

In the US, domestic bank transfers are typically made through the ACH (Automated Clearing House) network, or as a wire transfer. As of July 2023, customers in the US can also use FedNow to make real-time payments – enabling your business to get paid instantly, and sidestep the interchange fees you’ll incur in credit and debit card transactions.

Mobile payments

It’s been a long time since mobile phones were used only as phones – and in 2023, over half of all web traffic comes from mobile devices.

That means most of the people browsing your site will be doing so from a smartphone or tablet – and you need to allow them to pay that way, too.

Mobile payment processing encompasses any payment method that involves a mobile device. Digital wallets are one: as are SMS payments, and POS setups that facilitate contactless tap-and-go payments from the countertop of your bricks-and-mortar store.

Components of online payment processing

Though on the surface, accepting online payments appears instant and simple, there are many different components (and companies) all hard at work behind the scenes.

Let’s take a closer look at the techniques and technology behind the transactions.

Payment processor

A payment processor authorizes the transactions you accept: verifying the customer’s credit or debit card information is correct and that they have sufficient funds to make the payment, as well as ensuring the security and efficiency of the whole process.

Acquiring bank

An acquiring bank is the financial institution with license to ‘acquire’ funds on your behalf. Acquirers work together with payment processors to enable your business to accept online payments.

In the payment lexicon, acquiring banks also have a kind of ‘opposite’ – issuing banks. While the acquiring bank is your bank (as a merchant), the issuing bank is your customer’s bank. Both banks play a vital role in any online transaction – with the payment processor mediating and communicating between the two.

Security measures

Payment processors utilize a variety of security measures to protect the payments you accept online – and defend you and your customers against the different types of online fraud.

These include payment tokenization – where sensitive information is replaced by ‘tokens’ – as well as SSL encryption and multi-factor authentication. All businesses that process payments (including yours) must achieve the requisite level of PCI DSS (Payment Card Industry Data Security Standard) compliance – an information security framework that regulates how merchants and payment processors handle sensitive cardholder data.

Payment gateway

A payment gateway connects your business’s website or app to your payment processor – creating a secure online environment, or portal, through which your customer can pay safely and securely through the internet.

A payment gateway is essentially the online equivalent to the POS terminal or card reader you might already have in your bricks-and-mortar store. Call it a kind of ‘middleman’ between your customer’s bank account and yours – a piece of technology that captures and encrypts their payment information, before sending it on to be authorized by your payment processor.

Wondering which one Checkout.com is? Let us explain.

As an end-to-end solution, Checkout.com is a payment gateway, an acquirer, and a payment processor – meaning we authorize, verify, and handle all the particulars of every transaction you accept online.

Learn more about our payment processing solution today – or read on as we unpack the benefits of accepting online payments for your business and customer base.

Benefits of accepting online payments

Accepting online payments has a range of benefits – not just for your business, but for your customers, too.

From decreasing your administrative workload to increasing your bottom line, here’s what accepting payment online can offer your business:

• More sales and revenue: accepting payments online (rather than in-person only) doesn’t limit your customer base to people who live close enough to your brick-and-mortar store to be able to pop in – but to customers from all over the world. 
• Convenience for customers: online payments allow customers to pay from the comfort of their own homes or on the go – 24/7. They don’t need to plan their purchase around a visit to your physical store; methods like payment links mean anyone can send a transaction after opening an email, text or social media message.
• Security: online payment systems come fitted with extensive fraud detection and prevention measures. By flagging fraudulent transactions before they have a chance to take place, these technologies – like Checkout.com’s Fraud Detection Pro – safeguard your business from the financial and reputational impacts of chargeback fraud.
• Speedy payment processing: online payments are fast – particularly when compared with traditional payment methods, like checks. What’s more, real-time payments (which, thanks to FedNow, are entering the mainstream in the US) let you receive money in real time – helping your business better understand its cash flow situation, and plan with confidence for the future.
• Streamlined reporting and accounting: by automating your transaction reports and records, online payment service providers simplify the accounting and reconciliation processes. You’ll receive a merchant processing statement every month, for example, which lists your sales, chargebacks, and refunds in a way that’s easy to digest, analyze, and make changes off the back of.
• Simplified recurring billing: if your business relies on a subscription-based model, online payments can make it easier to automate and manage recurring payments – reducing the risk of customers forgetting to pay, and the associated loss of revenue.
• More data, at your fingertips: online payment processors provide reporting and analytical tools (usually via an easy-to-use dashboard) that provide insights into customer behavior, transaction trends, and fraud patterns – enabling you to make data-driven decisions to evolve and expand your business.

How to accept online payments

Ready to begin accepting online payments? Here’s our step-by-step guide to get you started.

1. Explore online payment processing options

Firstly, hit the books to weigh up the different payment processors available.

Some things to consider about your prospective payment processor include:

• Security: does it have extensive fraud detection and prevention tools? Is it harnessing AI, machine learning, and advanced risk rules to safeguard your transactions – and encrypt your customers’ credit and debit card information?
• Compliance: PCI DSS compliant payment processors help alleviate the burden this places on your business and operations – so ensure your chosen provider is Level 1 PCI compliant (the highest possible).
• Customer support: does it offer live chat and phone-based support, or only email service? How active is the company when it comes to resolving queries and complaints on social media platforms? Is support available around the clock, and on weekends?
• Price: is the payment processor’s pricing transparent, or hidden behind layers of small print? Do the rates it’s offering strike the right balance between affordable and realistic – and is the pricing structure the right fit for how you do business?

Here at Checkout.com, we offer a full stack of payment solutions: acting as your acquirer, your payment processor, your payment gateway, and your risk engine – all rolled into one. 

Our service aims to simplify how you accept payments online, and to move away from many merchants’ disjointed approach to this process – specifically, one that incorporates elements of payment infrastructure cobbled together from different providers. 

This piecemeal strategy – which could include acquiring with one bank, utilizing a payment gateway from another, with a third-party fraud prevention tool tacked on – leads to inefficiencies and inconvenience; and is a complicated way of accepting payments online.

For a better way, get in touch with the Checkout.com team for a no-obligation chat about your online payment acceptance needs – and how we can meet them.

2. Choose a suitable payment gateway

Once you’ve selected the payment processor you’d like to use, you’ll then need to pick the right payment gateway for your needs.

Electing to go with the payment gateway from the payment processor you’ve picked to handle your payments is often the easiest, safest option – for the reasons we outlined just above. 

However, there is a case for picking a payment gateway from a different provider, which can offer, in particular, more flexibility. Opting for separate providers enables you to choose the best-in-class service for your specific business needs. You can pick a payment gateway, for example, that offers the features, integrations, and security you need; while choosing an acquirer that ticks the boxes of geographic coverage and fees.

What’s more, separating your payment gateway from your acquiring services can constitute good risk management. So if one service provider experiences issues or downtime, it doesn’t affect the other – and you can continue accepting payments interrupted.

When it’s time to add your payment gateway to your website, there’s a couple of options:

• Hosted: your payment gateway is housed not on your website, but by your payment processor. When your customer goes to pay, they’ll be redirected to your processor’s website to complete their transaction. This simplifies your compliance requirements, but – for the customer – can constitute a jarring shift in the payment experience.
• Non-hosted (integrated): your payment gateway sits on your site, where the customer stays to complete the transaction. This option places more of the onus of PCI compliance on your shoulders, and requires more technical expertise. The upshot, though, is that integrated payment gateways offer more scope for customizing the look and feel of your online payment process – providing a more consistent experience, and reducing the chances of cart abandonment.

3. Determine the best pricing strategy for your needs

Traditionally, online payment processing has come with complex pricing and fee structures.

Some of this is understandable. There are many different parties involved in an online payment – from the card scheme (such as Visa or Mastercard) to the banks, to the payment processor – and each one needs to be compensated for their role in it.

However, some (less reputable) payment processors have, historically, pounced on the confusion this complexity causes with convoluted payment structures that make it hard for the merchant to know exactly where their fees are going.

So first, let’s make the difference between:

• Wholesale costs, which go to paying the financial institutions involved in the transaction, and are unavoidable.
• Markup costs, which are levied by your payment processor, and are negotiable.

Secondly, let’s quickly break down some of the main pricing models in the payment processing world:

• Interchange-plus: breaks your statement down into interchange fees, processor fees, and card association fees to offer a granular insight into what you’re paying.
• Flat-rate: you pay a fixed percentage of the transaction amount, as well as a fixed per-transaction fee (for example, 3.3% + 30 cents).
• Tiered: this pricing model categorizes transactions by their risk, and prices each ‘tier’ accordingly.
• Subscription: you pay a monthly or annual subscription (or ‘membership’) fee, but benefit from comparatively lower per-transaction fees or fixed-rate pricing.
• Custom and microtransaction: pricing models for larger businesses can be negotiated at custom rates, while – for smaller businesses, or those specializing in ultra-low-cost items – microtransaction pricing is also available.

To understand which pricing model is right for you, consider your business’s sales volume, industry, and the risks inherent in what you sell and how you sell it.

Flat-rate pricing, for instance, is better for businesses with low to moderate transaction volumes. Tiered pricing’s simplicity will suit businesses with low transaction volumes, but be more expensive for merchants with a mix of card types and transaction methods. Businesses with large transaction volumes can benefit most from subscription pricing’s predictable costs.

Want some help picking the pricing model for you? We can help.

Better still, our pricing comes with no setup fees, no account maintenance fees, and – most importantly – no surprises.

4. Set up an online payment method for your customers

Finally, you’ll need to choose the right payment methods to offer your customers.

As we discussed earlier, these can include credit and debit cards, as well as alternative payment methods like digital wallets, mobile payments, and bank transfers. You’ll also need to consider which currencies you’ll want to accept payments in.

This is important, because if you plan to accept cross-border payments, you’ll need to think about offering overseas-based customers ways to pay in the local payment methods they’re most comfortable with. Alipay and WeChat Pay, for example, are two of Asia’s most popular payment methods, while anyone selling to the Thai and Malaysian markets needs to offer TrueMoney and Touch ‘n Go – the respective countries’ two most popular digital wallets.

To view the full list of payment methods you can offer when you partner with Checkout.com, browse our payment directory.

Accept online payments with Checkout.com

Remember the terms ‘payment gateway’, ‘acquirer’, and ‘payment processor’ – and the varied, vital roles they play in each online payment you accept?

You don’t? Well, don’t panic – because with Checkout.com, you don’t have to know the difference. When you choose us to process your payments, you get a payment gateway, a processor, and an acquirer in one. What this end-to-end approach means for you is faster processing with more accuracy and less downtime – reducing your levels of administrative hassle, while boosting your payment acceptance rates.

What’s more, you’ll get access to all the payment data you need to understand and grow your business. To reconcile with ease, scale at pace, and forecast accurately for what’s ahead. You’ll also benefit from our AI-propelled fraud detection setup to stop cybercriminals in their tracks.

But while we offer it all, we don’t believe one size fits all. With us, your payments solution is just that – yours. It’s as flexible and customizable as you need it to be to adapt to the shifting needs of your business and environment. And you can shape it, with our latest payment methods and features, to your precise requirements. (All through a single integration, too.)

Want to learn more? Get in touch with our sales team to explore how you can start accepting online payments with Checkout.com today.