Online payments: everything you need to know to grow your SME
Online payments are continually evolving, with new technology changing the way we do business.
In past decades, payment options were limited, and industries typically stuck to a few preferred methods. But today, things are different.
John Rampton, a fintech entrepreneur and investor, said, “Instead of paying with paper, like cash and cheques, businesses are expected to accept a variety of payment methods ranging from credit cards to digital payments.”
What’s more, innovative online payment solutions provide crucial competitive advantages for SMEs – such as inexpensive transaction fees, quick international transfers, and mobile payment options. However, these advantages also mean that if you don’t streamline your online payments, your business could get left behind.
In this article, we’ll explore how online payments work and how they can help you grow your business.
But before we get to it, let’s set the scene.
Life before online payment solutions
Before we explore the power of online payments, it’s important to understand the traditional alternatives.
Many businesses still use payment options, such as:
- Bank transfers: Moving funds directly from the buyer’s bank account to the seller’s bank account.
- Credit and debit cards: Complete payments by calling the seller and providing card details to a company representative over the phone.
- Direct debits: Buyers authorise sellers to collect funds from their bank accounts, without the buyer needing to initiate the payment.
- Cheques: Actual paper cheques that must be written and mailed to sellers, who then need to deposit them into bank accounts.
- Cash on delivery (COD): Buyers must manually obtain the necessary cash from a bank, then manually give it to the seller – who will likely need to deposit it back into a bank account.
Now, if you’ve worked with a conventional B2B company at some point, you know how these payment methods work: endless back and forth communication that can take months before money exchanges hands.
In the meantime, you need to manage the payment work involved, while also devoting significant resources to chasing slow payments. If you’re lucky, this takes place over email. However, there are still companies out there sending paper purchase orders, invoices, and cheques in the mail.
These traditional payment methods can cost your business a lot of money – and not just on paper, ink cartridges, and telephone bills. These types of payments hurt your business’s cash flow, disrupt daily operations, and waste time that could be spent growing your company.
Enter online payments. Online payment solutions can help you mitigate or remove these problems. How? Let’s find out.
What are online payments?
Online payments are financial transactions that take place using the internet. Many online payments are made with a credit or debit card using an online payment gateway. However, they can also be made using peer-to-peer platforms or other online payment services.
Types of online payments
In essence, there are three main types of online payments:
- Digital wallets
- Payment gateways
- Open banking payments
Let’s explore how each of these online payment types works.
1. Digital Wallets
A digital wallet – also known as an e-wallet – is a service that allows users to store money and payment information to make online payments quickly and easily.
This means that digital wallet users can make online payments with money from their bank accounts or credit cards, or with the funds stored in their digital wallet.
Popular consumer digital wallet services include Google Pay and Apple Pay.
Digital wallets can be used to make payments online in two main ways: direct peer-to-peer payments (for example, Samsung Pay to Samsung Pay) or through a payment gateway (such as an ecommerce website).
Plus, digital wallets can also be stored on smart devices such as phones, tablets, and watches. Users can then use their smart device to make a “contactless” payment in-person using near-field communications technology.
Digital wallets have grown tremendously in recent years. In fact, around 91% of Hong Kong residents use digital wallets for payments.
And it’s easy to understand why they’re so popular. According to one 2019 study, UK consumers chose digital wallets as their preferred payment method because they’re convenient, save time, and make it easier to see how money is spent.
2. Online payment gateways
A payment gateway is a service that authorises and processes online payments for merchants. Payment gateways typically accept online payments from most providers of digital wallets, credit cards, and debit cards.
To accept business payments online via a website, you need both a payment gateway and a merchant account. For example, you could create a merchant account with Neat and then connect it to a payment gateway, like Stripe.
In this instance, Stripe’s tools will allow you to accept online payments through your website. Plus, you could include a link to your payment gateway in your invoices to make it easier for customers to pay. Then you can use your Neat account to manage online payments and company accounts.
3. Open banking payments
Open banking is a new wave of technological developments in the banking industry. These developments are a direct result of new regulations requiring banks to allow consumers to share their financial information with third-parties, such as budgeting apps.
There are two main types of open banking services:
- Account Information Service Providers (AISPs): These organisations can only read banking information and typically provide budgeting or lending services.
- Payment Initiation Service Providers (PISPs): As the name implies, these organisations are able to initiate payments from bank accounts in a new way.
“Open Banking is beneficial to small and medium-sized enterprises (SMEs),” writes Sulabh Agarwal, the managing director of Global Payments. “This is because it enables account aggregation, better financial management, easier credit checking of customers and the integration of lending and accounting applications. Thanks to Open Banking, SMEs are able to receive and make payments using different platforms with better visibility and speed.”
10 advantages of online payments
The rise of online payments is part of a growing need for transactions to be convenient, fast, and inexpensive.
A survey by Google found that 16% of Hong Kong adults (an estimated 990,000 people) say they have a virtual-only bank account – and this number is set to grow.
What’s more, according to the UK Finance Payments Market Summary, more than two-thirds of UK adults (72%) used online banking in 2018, and nearly half (48%) used mobile banking – and these numbers are expected to increase.
These numbers are encouraging but improving and diversifying your payments strategy can feel like a big, complicated step. So, why should you send and accept online payments in more ways?
Let’s explore ten benefits of online payments.
1. Streamlined finances
Using a digital wallet can help you streamline your payments and finances.
Online payment solutions make it easy to connect and monitor the different financial aspects of your business. For example, you can:
- Send online payments
- Accept online payments
- Track spending and monitor revenue
- Easily manage bookkeeping and accounting
- Take online payments through your website
- Manage employee cards
- And more!
2. Global payments
Sending and accepting international payments used to be expensive and slow. Plus, incorporating in another country was challenging to say the least. As a result, only the largest corporations could expand internationally successfully.
These days, things have changed. New online payment solutions make international incorporation and trading easier than ever.
3. Multiple currency wallets
Having many bank accounts in different currencies can turn managing your finances and accounting into a confusing nightmare.
Online payment solutions like Neat allow you to send, and accept multiple currencies within one wallet.
Online payment solutions can help SMEs to bypass many of the costly fees charged by traditional banks. Typically, exchange rates and international transfers are particularly cost-effective when using an online payment service instead of a bank.
5. Fast payments
Wire transfers can take days to arrive, and cheques can take weeks to appear in your bank account. On the other hand, many online payment methods are instant.
The speed of online payments can help improve your cash flow and reduce the resources needed to manage payments.
6. Increased payment options
It’s fair to say that you’re more likely to get paid on time if you allow buyers to make payments using their preferred method.
So, the more payment options you can offer, the better.
Plus, according to research from Forrester, 74% of B2B buyers research at least half of their work purchases online – so, it makes sense to provide online payment options to these buyers.
What’s more, in another Forrester report, 73% of millennials are now involved in the B2B buying process. As the first generation to grow up with internet technology, millennials don’t think twice about using online payment gateways and digital wallets to send and accept online payments.
7. Mobile payments
Many buyers like to use their smartphones to make online payments. Payment gateways like Stripe allow your customers to pay their bills wherever they are.
Plus, it’s useful to be able to manage your business’s finances on-the-go. Many online payment services provide intuitive mobile apps to make this easy.
Many traditional payment methods aren’t particularly secure: Cheques can bounce or be stopped, credit card payments can be reversed, and cash can get stolen or lost.
Although some people still feel uncomfortable with online payment security issues, there are many security advantages of online payments.
First, financial technology companies use multiple layers of security. For example, with Neat, your funds are held in segregated accounts at licensed banks in accordance with robust safeguarding policies.
And secondly, online payment services provide additional features that aid security. For example, notifications allow you to track payments in real-time, which make it easier to catch issues before they go too far.
9. Easy to set up and manage
Another benefit of online payment services is how easy they are to set up and manage. For example, opening a new business bank account can require a lot of paperwork and time, but signing up for a Neat account takes minutes.
To make things even easier for you, many online payment solutions provide additional services that can help you grow your business.
10. Great support
Calling a bank’s helpline to listen to an automated message that says, “we value your call” doesn’t feel good – neither does the 45-minute wait.
Thankfully, many online payment solutions seek to do better.
For example, Neat support representatives are ready to help 24/7 via email, WhatsApp, phone, or through the Neat App.
How to accept online payments with Neat
Now that you understand the advantages of online payments for your business, how can you get started?
Here’s how to take online payments – including international online payments – with Neat in four easy steps:
- Open a Neat account in just 15 minutes
- Set up a Stripe account and add an online payment gateway to your website
- Select “Integrations” from the sidebar menu in Neat and connect Stripe
- Start accepting online payments in multiple currencies through your Stripe payment gateway or directly into your Neat wallet
Executive summary: online payments
Online payment systems continue to revolutionise the way we do business.
However, many businesses are falling behind when it comes to payment technology. To compete effectively, SMEs must take advantage of online payment methods like digital wallets and payment gateways.
In summary, online payment services can help you to:
- Streamline your business’s finances
- Manage global payments and multiple currencies
- Save money on transaction fees and exchange rates
- Improve cash flow with speedy fast payments
- Manage money on the go with mobile apps
- Increase security and monitoring
- Get better support
If you’re looking for a way to accept online payments from around the world quickly and easily, sign up for a Neat account today!