Across the world, the demand for digital payment methods has skyrocketed. As the world becomes more digitized, customers are looking for ways to make their lives more convenient. This means that businesses need to find ways to accept digital payments in order to stay ahead of the curve.
The digital payments market was valued at $68.61 billion and will grow at a CAGR of 20.5% from 2022 through 2028. This growth is driven by the increasing demand for digital payment methods, the growing focus on mobile commerce, and the rise of ecommerce.
But digital payments don’t just benefit customers—they can also help businesses save time and money.
What Are Digital Payments?
These are electronic transactions that don’t require the use of cash or checks. They can be made through various channels, including credit cards, debit cards, mobile wallets, and apps. Virtual cards, wire transfers, and ACH payments are also considered digital payments.
Some applications of digital payments include:
- Paying for goods and services online
- Sending money to friends and family
- Transferring money between accounts
- Making charitable donations
They provide a traceable, secure, and speedy way to make transactions. In the business world, they can help streamline invoicing, accounting, and other financial processes. They can also visualize company spending and help prevent fraud, sometimes in real-time.
Different Types of Digital Payments
By accepting digital payments, businesses can tap into various payment types. The most popular include:
Credit cards are one of the most commonly used types of digital transactions. They allow customers to make purchases without carrying cash and can be used for both online and in-person transactions.
Credit cards work by borrowing money from a lending institution, such as a bank, and repaying that debt with interest over time. There are two main types of credit cards: personal and business.
Debit cards are linked to customers’ bank accounts and enable them to make transactions directly from their accounts. This makes them a convenient alternative to cash or checks. 85% of Americans carry a debit card with them.
Mobile wallets are digital versions of customers’ physical wallets. They can be used to store credit and debit card information, as well as loyalty cards and coupons.
Smartphone users can open up their mobile wallets with a few taps to make in-store purchases. They can also use the information in their mobile wallet to speed up the online checkout process.
There are many different types of apps, each with its own unique features. Some popular examples include Venmo, PayPal, and Square Cash. These apps are useful for processing business transactions such as invoices, payments, and tips.
Virtual cards are an emerging type of digital payment. They are single-use, randomly generated credit card numbers that can be used for online transactions.
Virtual cards provide an extra layer of security for businesses because they can’t be reused if they’re compromised. This makes them a safer alternative to traditional credit and debit cards.
Wire transfers allow businesses to send and receive money electronically. They can be used to pay suppliers, employees, and contractors.
Wire transfers are typically processed quickly, which makes them a convenient way to make time-sensitive payments.
House network. Banks and financial institutions use this network to move money between accounts.
They are often used for recurring payments, such as utility bills and loan repayments. They can also be used for one-time transactions, such as payroll direct deposits.
Benefits of Digital Payments for Businesses
There are many benefits of digital payments for businesses. Some of the most notable include:
Improved Cash Flow
Digital payments can help businesses improve their cash flow by reducing the time it takes to receive payments. This is because traditional methods, such as checks and money orders, can take days or even weeks to process.
Digital payments are typically processed much faster, which can help businesses keep their cash flow moving.
Another benefit of digital payments is that they can help businesses reduce their costs. This is because traditional methods, such as checks and money orders, often come with fees for postage and processing.
In some cases, digital payment processing has no fees, such as with ACH payments or wire transfers (to and from certain banks). In other cases, businesses may be charged a small percentage of the transaction total in order to use an online processor.
When users can easily pay for products or services on your website, they’re more likely to complete a purchase. People who abandon their shopping carts due to complex or time-consuming checkout processes are less likely to return to your site.
Digital payments can help businesses increase their sales by making it easy for users to complete transactions on their websites.
Improved Customer Satisfaction
Customers who have a positive experience with your business are more likely to come back and make repeat purchases. Digital payments can help improve customer satisfaction by providing a fast and convenient way to pay for your products or services.
There are some digital payment gateways (like Afterpay, Klarna, and Sezzle) that offer customers the option to pay for their purchases over time. This can help businesses increase customer satisfaction by giving users more flexibility in how they pay for their purchases.
Better Business Analytics
Unlike traditional methods, digital payments are traceable, easily tracked, and monitored in real-time. With digital payments, businesses have access to data that can be used to improve their operations.
This data can be used to track customer spending habits, monitor employee expenses, and identify areas where your business is losing money. This means that business owners and executives can have complete visibility of their business’s finances.
What this means is that they can make data-driven decisions about how to grow and improve their business.
Less Manual Work
From easier financial reporting to automated customer billing, digital payments can help businesses reduce the amount of manual work that needs to be done. This can free employees to focus on other tasks that contribute to your business’s bottom line.
Automating workflows also leaves less room for human error in bookkeeping, taxes, compliance, and other financial and administrative tasks.
Ways Digital Payments Can Increase Profits
If you use an online payment solution for your business, you are significantly improving your company’s user experience, streamlining your financial reporting and payments, and reducing your costs. Each of these things results in increased profits for your business.
Let’s take a look at a few ways digital payments can increase profits:
Accurate financial reporting means businesses can pay taxes easily
Especially for businesses that have a lot of sales, it can be difficult to keep track of all the income and expenses. When these are tracked manually by financial and accounting professionals, there is a large margin for error in calculations and record-keeping.
If a business fails to pay the appropriate taxes, it can end up owing a large sum of money to the government. This can lead to interest and penalties, which further reduces profits.
And for businesses that make larger mistakes, it can even lead to an audit, legal penalties, and—in rare cases—jail time or loss of personal assets for the business owner.
Using an online payment processing solution can help businesses avoid these problems by providing accurate financial reporting. Since the data is tracked and stored electronically, it is much less likely to be lost or tampered with. And since it integrates with banking and bookkeeping software, businesses can be confident that their taxes will be paid accurately and on time.
Processing digital customer payments gives businesses a clear view of their customers
Businesses that process digital payments have a clear view of their customers’ spending patterns and habits. This information helps businesses understand their customers better and make more informed decisions about pricing, product development, and marketing.
It also helps them know who to retarget with marketing messages and which customers are most likely to be interested in new products or services.
For businesses with large numbers of SKUs or product lines, this data can be used to streamline inventory and reduce the costs of carrying excess stock. It can also inform them on which ones to discontinue or merge with other products.
In addition, businesses that accept digital payments can provide their customers with an enhanced level of service by offering online account management and 24/7 customer support.
Automated customer billing saves businesses time and money
Billing customers can be a time-consuming and expensive process for businesses, especially if they have a large number of customers. And if a business uses paper invoices, the costs associated with printing and mailing can add up quickly.
Online payment solutions automate customer billing by generating and sending electronic invoices. This not only saves businesses time but also reduces printing and mailing costs. In addition, online invoicing often includes features that allow customers to view their account balance and make payments online.
This can save businesses even more time by reducing the number of customer service calls they receive. And it can help them resolve billing disputes more quickly and efficiently.
For subscription-based businesses, automated billing is the only way to go. It ensures that customers are billed on time and that businesses don’t have to worry about late or missed payments.
Automated processing reduces costs
When businesses process payments manually, they have to pay for the supplies needed to do so (e.g., paper, ink, envelopes). They also have to pay employees to process them.
With direct deposit, businesses can eliminate these costs by paying employees electronically. This reduces not only the cost of supplies but also the time needed to process payments.
In addition, online payment solutions often offer discounts on transaction fees for businesses that use them. This can further reduce the costs associated with payment processing.
Digital payments are secure, meaning businesses are less likely to experience fraud
One of the biggest concerns businesses have about digital payments is security. But online solutions are actually much more secure than traditional methods like checks and money orders.
When payments are processed electronically, they are encrypted, which makes it difficult for criminals to steal sensitive information like credit card numbers and bank account information. In addition, online providers often offer fraud protection services that can help businesses recover from fraudulent charges.
From a customer standpoint, card payments do not put their financial information at risk because they are not required to provide it to the business—only the trusted intermediary.
Digital payments make it easy for businesses to accept customers’ preferred methods
The vast majority of consumers today prefer to pay with a credit or debit card. Cash-only businesses are increasingly rare.
Fortunately, card payment processing makes it easy for businesses to accept card payments. All you need is a computer and an Internet connection.
You can also use online payment solutions to accept other types of electronic payments, such as e-checks, ACH payments, and PayPal. This can make it easier for businesses to expand their customer base by catering to customers with different preferences.
Tips for Accepting Digital Payments & Online Payment Processing
Now that you know the benefits of digital payments, here are a few tips to help you get started:
1. Choose the right provider
When setting up digital payments for your business, consider your needs and choose a payment provider that can meet them. Some processors are better for PoS transactions, while others are better for online payments.
If you run an online ecommerce business, you’ll need a processor that can handle online payments. For businesses that sell in-person, you’ll need a PoS system to process card payments.
You should also consider the fees charged by the payment processor. Some processors charge transaction fees, while others charge monthly or annual fees. Choose the option that is most cost-effective for your business.
2. Set up security measures as soon as possible
As mentioned earlier, digital payments are more secure than traditional methods like checks and money orders. But you should still take steps to protect your business from fraud.
There are many different types of fraud:
- Card skimming: This is when criminals attach devices to PoS terminals that capture credit and debit card information.
- Phishing is when criminals send emails or text messages that appear to be from a legitimate source, such as a bank or payment processor. The message includes a link that leads to a fake website where the victim is asked to enter sensitive information.
- Identity theft: This is when criminals use personal information, such as a Social Security number or credit card number, to open new accounts in the victim’s name.
When setting up your account, be sure to choose a strong password and enable two-factor authentication if available. It would be best if you also kept your software and anti-virus programs up to date to protect against new types of fraud.
3. Ensure compliance with PCI DSS
To accept credit and debit card payments, businesses must comply with the Payment Card Industry Data Security Standard (PCI DSS). This standard is a series of guidelines intended to secure cardholder data.
Compliance with PCI DSS can be complex, but many resources are available. For example, you could use a PCI DSS compliance checklist to help you understand what is required. If you are using a payment processor, they may also be able to help you with PCI DSS compliance.
4. Choose a processor that accepts all digital payments
There are many different methods available, and new methods are always being developed. When choosing between digital payment systems, consider which types of payments you want to accept.
For example, if you sell products online, you’ll need a processor that handles credit and debit card payments, including American Express, Mastercard, Visa, and Discover. But you may also want to accept other types of payments, such as e-checks or PayPal.
Some processors only accept certain types of payments, so be sure to choose one that can handle all the different types of digital payments.
Some payment forms (such as American Express) are more expensive to process than others. But if accepting them helps you sell more products, it is worth the extra cost.
Conclusion: How Digital Payments Can Help Your Business
Since digital payments are required for online business ventures, using them is a no-brainer. They enable companies to do business across the world and connect with their customers in new ways. This, in turn, allows them to make more money and grow their businesses.
Digital payments are also more secure than traditional methods, which helps to protect businesses from fraud. And since most digital payment processors offer some form of fraud protection, you can rest assured that your business is in good hands.
When choosing a digital payment system, be sure to consider the fees, security measures, and PCI DSS compliance. You’ll also want to choose a processor that accepts all types of digital payments, including credit and debit cards, e-checks, and PayPal.