The payment landscape is one of the fastest and hottest growing industries of the moment. In just three short years, mobile payments alone have gone from $37 billion in global processing, to nearly $300 billion in 2012. Online transaction processors are becoming the leaders in accepting payments with a huge wave of new technology that makes both paying and accepting payments through the digital world easier than ever.
This fast changing environment leaves many small businesses pondering the cloud of often misunderstood payment terminology and trying to come to terms with an overwhelming amount of new technology. They key question small business owners are asking is, “ Should my business jump on to the band-wagon and when should it jump?” The answer may change not only your business and the way you accept payments from your customers but also the very nature of your customer relationships.
This post is designed to help you make that decision. We’ll provide basic descriptions and overviews of the following key industry sectors. Use this information to narrow down the methods that are the best fit for your small business, and then watch for future posts that delve into each of these sectors in detail.
- Online Bill Payments
- Recurring Billing
- Electronic Invoicing
- Mobile Payments
- Gateway and Shopping Cart
- Retail and POS
Online Bill Payments
Online bill payment can be merchant directed or customer directed. It encompasses online banking systems that permit bill payment to multiple companies as well as “biller-direct” solutions that enable merchants to create and offer online bill payment and presentment from their own websites. While many businesses have made the move to accept online payments, a large percentage still receive checks in the mail, which can add cost and inconvenience to both the business and its customers.
This payment method consists of billing your customer on a repeated basis or schedule for goods or services. It is both expedient and cost-effective because it collapses invoicing and payment processing into a single automated step that charges a customer account, credits a merchant account, and provides a receipt for the transaction. It is convenient for both the business and customer, allowing for consistent cash flow for the business and peace of mind for the customer by eliminating human error from the process.
As the name itself describes, an electronic invoice is an invoice created in a digital format instead of a printed format. This process allows a business to move away from a paper-cluttered workflow to an automated one that reduces cost and eliminates errors. Large companies use sophisticated systems that use XML code for invoice input and streamline the entire A/R and A/P process. For small businesses converting to electronic invoicing is as simple as emailing invoices to customers and enabling them to pay online or over the phone.
One of the fastest growing sectors in the payments space is mobile. The reasons for this involve the vast explosion in popularity that mobile devices play in our everyday life, and the convenience mobile devices contribute to the payment process. Within the sector you will see a variety of methods of accepting payments, including;
- Swiper – Using a small credit card reader attached to a mobile device to act as a mobile POS system.
- Keyed Entry – A mobile App that enables users to enter (and often times, save) payment information on a mobile device which submits it for payment processing and often emails a receipt.
- Scanned Entry – Enables a customer using a compatible mobile App to scan a QR code in order to direct payment to a merchant, or enables a merchant to scan a QR code displayed on a customer’s mobile device.
- NFC – Near Field Communication (NFC) technology enables transactions, digital content exchange, and electronic device connections to be made by touching devices to each other or to an NFC receiver. Typically used in conjunction with a Digital Wallet (an account to which a payment method is linked) attached to a mobile device, a customer can tap a NFC receiver at a merchant location to complete a purchase.
Gateway and Shopping Cart
A payment gateway handles the exchange of payment information from a website/mobile app to an acquiring bank. A shopping cart, on the other hand, acts as the front end display and allows customers to add and store items to be purchased on an eCommerce site. Often times this includes other features like tax calculation and inventory management.
Retail and POS
One of the most commonly seen forms of accepting payments is that of a POS system. This includes swiping a credit card at a counter of a store or business and authenticating with a signature or scanning a paper check for POS ACH processing. Although this space has evolved over the past decade, traditional cash register and receipt printer configurations are being rapidly replaced with mobile based POS systems that provide comprarble functionality with lower costs and higher satisfaction rates.
The payment space is certainly vast, and the way we accept payments will continue to evolve over time. The mobile landscape has so much technological promise, that it will inevitably redefine the nature of payments. Do you have any experience with payment processing or do you favor one method of accepting payments over the other? Feel free to comment or continue the conversation below or online at Twitter and Facebook.