Digital Payment Methods: Is Your Business Ready for Them?

What are digital payment methods?

Digital payment methods are ways to transfer money electronically from one account to another without physical cash. If you’ve ever used a credit card, mobile wallet or app to pay for a product or service, you’ve made a digital payment. 

Digital payment transactions can take place at both brick-and-mortar and e-commerce stores. They are a fast, secure and convenient payment option, making them increasingly popular among consumers and businesses.

Types of digital payment methods

Business owners aim to accommodate their customers by providing the offerings they want amid a great customer experience (CX). Part of a great CX is being able to pay with a preferred payment method — an accommodation customers appreciate and one that can help business owners earn repeat business. However, your customer base will inform the payment methods your business should accept. Beyond accepting credit cards, it’s essential to understand your customers’ demographics and preferences and ensure you can accommodate their digital payments of choice. 

Here are some popular digital payment methods to consider accepting at your business. Check with your payment processor and point-of-sale (POS) provider to ensure you can support them if your customers would use them:

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• Credit and debit cards: Credit and debit cards are technically digital payment methods because they don’t involve the exchange of cash. Newer credit cards are also equipped with near-field communication (NFC) or radio frequency identification technology, allowing for contactless payments (more on this below). Customers can simply hold their contactless credit card close to the card reader to send payment. They don’t have to swipe, insert or tap the card to pay. Note that rates and fees apply when consumers use a credit card to pay for goods or services in your store. 
• Mobile wallets: A mobile wallet is a digital version of a traditional wallet. It holds various digital payment methods on a smartphone or other mobile device. Mobile wallets securely store a customer’s payment details and are popular options for in-store, online and even peer-to-peer payments. Mobile wallet examples include Apple Pay, Google Pay and Samsung Pay; they are also considered contactless payment methods. Note that to accept mobile wallet payments in-store, merchants must have card terminals enabled with NFC technology. 
• Contactless payments: There’s some overlap with the technologies that underpin digital payment methods. While mobile wallets, as described above, are contactless payment methods, contactless payments can also be considered their own digital payment category. Customers using contactless cards and NFC mobile devices can pay quickly and securely at checkout with just a tap or scan. 

• Peer-to-peer (P2P) payment apps: Many people are familiar with P2P payment apps like Venmo. However, using Venmo for business is increasingly popular as retailers accept this form of payment in-store and online. PayPal and Cash App are other payment apps consumers are using to pay merchants. 
• Smart speakers: Consumers can use voice commands to make instant payments or purchases through smart speakers like Google Home, Apple HomePod and Amazon Echo. In fact, according to Statista, 35 percent of users buy products like groceries and clothing through their smart speakers. To take advantage of this growing trend, retailers should consider optimizing their online stores for voice search to make them easily recognizable through tools like smart speakers. 
• Bank transfers and automated clearing house (ACH) payments: These digital payment methods are likely not options for typical online and in-store retailers. However, they are cost-effective and straightforward options for businesses that handle recurring subscriptions or invoices. 
• Buy now, pay later (BNPL) services: According to Tom South, director of Organic & Web at Epos Now, more customers today expect businesses to offer BNPL functionality through services like Affirm, Klarna and Afterpay. BNPL allows customers to purchase products or services without paying the full price upfront. Instead, they’ll make installment payments and repay the balance over a set period. Merchants receive full payment upfront, minus any fees. Offering this digital payment option can be a great way to increase conversions and boost the average order value.
• Cryptocurrency payments: Mabel Oza, adjunct professor at the University of Illinois at Chicago and founder of FatFIRE Social, says businesses should start accepting cryptocurrency payments, which are significantly more efficient than ACH payments. “Crypto payments can be cleared and confirmed within minutes instead of two days and the fees are significantly cheaper,” Oza explained. “If I were to use Stripe for payments, it would cost me 2.90 percent plus 30 cents per transaction while, in crypto, [with] transactions in chains like Solana, a transaction fee is [around 1/16th of a cent].”
• QR code payments: QR codes are a technology that supports digital wallets, but they can also be a stand-alone digital payment option. They are particularly effective in restaurants. Customers can scan a code, pay for their meal and leave without waiting for a check and a server to handle their payment. 
• Subscription billing services: If your business sells monthly subscriptions, customers can pay digitally via platforms like Stripe and Square, which automate recurring payments. 

Considerations for businesses adopting digital payment methods 

Keep the following in mind when implementing digital payment acceptance.

Security

As digital payment methods grow in popularity, so does the need for security. Here are a few methods and technologies being used to secure digital payments: 

• Biometrics: Biometrics authentication is a form of verification that uses fingerprint scanners, facial recognition, iris recognition, heartbeat analysis and vein mapping to prevent identity theft and fraud. Many phones with digital wallets, like Apple Pay and Google Pay, use fingerprint or facial recognition, but additional options are in the works. For instance, Visa is piloting a biometric payment card that will allow users to authenticate a transaction by touching a sensor. Their fingerprint is used to verify that person’s identity instead of a PIN. 
• Encryption: Your payment processor should employ encryption to protect transactions throughout the entire payment process and ensure the security of sensitive payment information. 
• Tokenization: Choose a payment processor that utilizes tokenization — the process of replacing sensitive payment data with tokens (unique identifiers). Tokenization ensures that even if payment data is intercepted, bad actors can’t retrieve and use it, as tokens are meaningless without the payment processor’s system to decrypt them. 
• Payment Card Industry Data Security Standard (PCI DSS) compliance: All merchants must adhere to the PCI DSS. These security standards include ensuring secure networks, robust access controls and more. 
• Two-factor authentication (2FA): Two-factor authentication adds an extra layer of security by requiring an additional verification step, such as requiring customers to retrieve and input a code sent to their phones. 
• Secure payment gateway: You’ll need to set up a secure payment gateway with your payment processor. This technology facilitates online credit card payments and other online payment app transactions where a credit card is not physically present. It creates a secure connection between your business’s website and the credit card processing company.

Payment processing tools

If you want to accept digital payments in your brick-and-mortar or e-commerce store, you must have the right equipment. Consider the following: 

• The right POS system: Your POS system must be able to accept the payments you want to support. Many go beyond payment acceptance to provide inventory management, customer loyalty programs, employee tracking and more. 
• Payment processing terminals: To accept contactless payments, such as those made with NFC-enabled mobile wallets or contactless credit cards, you’ll need modern card terminals. These devices support tap-to-pay functionality, ensuring a fast and seamless checkout experience for your customers. (Your POS platform should provide the equipment you need.)
• Mobile POS systems (mPOS): Many of the best POS systems include mobile processing functionality — necessary for accepting digital payments on the go. Mobile POS systems are tablets, smartphones or proprietary wireless devices that use an app and a card reader to process payments.
• QR code payment support: If your business caters to quick-service environments like cafes or restaurants, consider tools that enable QR code payments. These systems allow customers to scan, pay and go without waiting for traditional checkout processes. Read our review of Square and our Toast review to learn about POS systems that support QR code payments. 
• Virtual terminals: Virtual terminals are software-based platforms that allow businesses to accept digital payments without physical hardware. They’re particularly useful if you accept credit card payments over the phone. 

Why your business should accept digital payment methods

Accepting digital payments positions your business as professional and modern while showing you’re attuned to your customers’ needs. Consider the following additional benefits: 

• Meeting customer needs: Ben Richmond, managing director at Xero, emphasized the importance of accepting digital payment methods to accommodate customer preferences. “Adopting diverse payment methods positions businesses to stay competitive in a rapidly evolving landscape,” Richmond explained. “Providing customers with the flexibility to pay the way they want helps businesses get paid faster, retain customers and ultimately grow.”
• Providing a better CX: Digital payments are more convenient and improve the CX. Customers can make payments with just the swipe or tap of a card instead of remembering to bring cash or checks. 
• Enhanced security: Digital payments are also more secure, ensuring your customers’ confidential payment information is kept safe.
• Less expense: Digital payment methods are often cheaper for businesses to process. They have low transaction fees and much faster processing times. Plus, digital payments can streamline the checkout process, so you may not need to hire as many employees.