Today, modern society is full of different payment methods. Cash, credit card, check and mobile payments have recently become the norm. So which one to choose?
We’ll look at the security, convenience, and transparency of each to help you decide which payment method to use. We also hope to guide you in your decision whether your business needs a new payment method or if you are considering switching from one type to another.
NOTE: However, if you are considering starting your own business, check out our guide on ‘How to register a company’ in United States. This will guide you through registering your business and opening a bank account.
First, let’s look at credit cards.
Credit cards have been a popular way to pay for goods since their introduction in the 20th century. Their popularity is attributed to the convenience of making point-of-sale purchases – no need to carry cash or write checks. Merely:
- swipe your card,
- enter your personal identification number (PIN),
- and you’re done!
Not to mention that cards are accepted everywhere and do not require any additional information to complete the transaction.
The convenience of using credit cards is balanced by the fact that they come with unique sets of risks for businesses. Credit card companies protect businesses against fraudulent transactions if specific security measures are followed. However, this does not eliminate all risks for the business owner.
Prepaid debit cards
Prepaid debit cards are issued by a bank or other financial institution and can be used in most places where a credit card is accepted. The advantage of using these cards is that they carry minimal risk for the merchant. The only times consumers worry about fraudulent charges is when they’ve lost their card or don’t follow basic security precautions, like logging out every time they use their card. To stay safe, remember to log out and make sure you don’t leave your card behind!
Bank transfers are the process by which a merchant can send money from one bank account to another. This is usually done by simply entering an amount and then selecting the account you want to pay from.
Bank transfers are a great choice for large purchases because of the convenience of completing a transaction and having the money appear in your account almost immediately. However, bank transfers may be too time consuming for you if your business doesn’t have a lot of customers or you rely heavily on online sales.
Cash is an almost entirely risk-free form of payment. You can pass it on to friends, pay for it at the gas station, or even give it as a gift! The only risk of using cash is if you don’t have it on you and you have to go to the bank to get some. However, this risk is counterbalanced by the fact that cash transactions are fully transparent and recorded by banks for consumer protection.
Cash is a great way for consumers to buy goods or services and for businesses to collect money from customers when remitting paychecks or bills. However, because cash transactions are not electronic, your business should still maintain the financial records of these sales separately from your day-to-day transactions.
Virtual wallets are electronic payment methods that allow customers to spend money online. E-wallets allow users to link their credit cards to the app and can be used anywhere credit cards are accepted. Then you just need to click on the app and your payment is processed.
The advantage of using these virtual wallets is that they allow the customer to easily pay for their purchases without having to buy the electronic wallet itself separately. The downside is that you have to trust the merchant not to take your card information and buy things on your behalf!
Mobile payments have become a bit of a buzzword in the business world lately, and for good reason. Mobile payments are a popular way to make purchases because they are convenient, fast and secure. They also allow you to pay without disclosing your contact details or sensitive financial information. When paying for purchases with a smartphone or tablet, all you have to do is enter your credit card information directly into the mobile application and confirm the transaction with your PIN code.
Criteria for choosing an appropriate payment method
The best way to pay for you and your customers will depend on how important the following criteria are to you.
If security is your primary concern, it doesn’t matter which payment option you choose. Each of the above payment methods has security measures in place to protect your information. For example, one way to ensure security is to use additional features from most credit card companies.
Ease of use
For merchants, accepting a new payment method can be costly and time-consuming, depending on the type of business. If you’re taking cash, there’s no point in switching to other methods if most transactions are processed in-house. If you have the resources to add more payment options, consider their ease of use before making a decision. For example, would it be easier to have an app on your phone than to pull out a physical card?
For customers, ease of use is also key when deciding which type of payment method to use. For example, using your debit card at the supermarket shouldn’t be more work than writing a check or swiping your credit card, but those things still happen. If it becomes too inconvenient for the consumer to use your service, they may find a way to go elsewhere.
Transparency is a good thing, but when it comes to payment methods, it can lead to difficult situations. For example, if you use an e-wallet and choose not to disclose your transaction information, which would be under your phone or card fingerprint, this could become an issue later on. For example, what happens if you don’t use your personal information when making a payment? Also, what if you lose your device?
The solution is simple. Be transparent with what information you collect and how it will be used. Unless you plan to sell the data, which you need to make very clear to consumers, this shouldn’t be a problem.
Make your choice
I hope this article helped you decide for yourself or at least gave you a better understanding of how each payment method works. The best advice we can give you is to choose the option that best suits your business needs. Don’t choose what other companies are doing or what you think they are doing. The last thing you want to do is try to become an overnight success and fail miserably just because you tried to follow a trend!