Taking payments from your customers has never been easier however choosing the right payment solution can be complicated. Over the next few pages we look at the options available, and help you make a choice that balances the payment methods your customers demand with the cost to the business.
Generally small business payments fall into these categories:
- Credit and debit cards
- Electronic payments
- Direct transfer
How to choose the right payment method
Think about the kind of goods or services your business is selling and how your customers would want to make payment. Credit and debit card payments are the most popular as a number of platforms have matured as online retailing has developed. Examples include:
Most small businesses try and offer as many payment methods as possible so their customers have a wide choice to choose from. This makes commercial sense, as your business doesn't want to lose a sale because your company didn't offer the payment method your customer wanted to use.
Answer these questions to help you decide which payment methods are right for your business:
- Does your business trade online and with a physical store? – Credit and debit card payments should be offered to customers.
- Is your store online only? – Payment systems like PayPal will be expected that offer fast and efficient payment and checkout solutions for small businesses.
- Does your business sell to other businesses only? – If so, credit transfer via the BACS system is the usual way for businesses to pay other businesses for good and services.
- Do you sell outside of the UK? – The major banks all offer credit and debit card payment devices that can be used worldwide.
- Does your business have a mobile audience? – Mobile payment methods are maturing fast to offer efficient and safe payments to consumers who are on the move.
Implementing electronic payments
The payment methods you choose for your online business should be as straightforward and intuitive to use as possible. If you confuse your online customer or make your store's online checkout system too complex, they will simply abandon their order and according to comScore the average abandonment rate in 2011 was a staggering 72%.
Follow these steps to professionally implement electronic payment services within your online store:
- Partner with a reputable payment system vendor.
- Include highly visible payment security on your site including MasterCard SecureCode, and Verified by Visa.
- Ensure the checkout and payment system is easy to understand with the fewest possible steps.
- Offer help at each stage of the checkout system.
- Never hide any charges such as postage or credit card transaction fees. Always show the total cost of every purchase.
- Ensure the payment is confirmed via an email to show that the transaction is complete.
Online shoppers are now savvy and understand the payment methods that are available. Those businesses that seamlessly integrate their payment systems into their online store will gain repeat business, as consumers today are time poor and want to buy from online stores, quickly and efficiently.
How to prevent payment fraud
One of the major concerns when taking electronic payments is the risk of fraud. As the customer is not buying in person, the threat of credit and debit card fraud is a constant danger for online retailers. However, you are not powerless to reduce the levels of card fraud, and there are steps you can take to reduce the level of fraud.
- Systems like Verified by Visa and MasterCard SecureCode should be in place.
- Use the address verification service your bank will offer to ensure the card being used is registered to a valid address.
- Look for unusually large transactions from new customers. Check their credentials before processing their order.
- Ask your customers to register on your website before they can order. This allows you to check their card and address details are valid.
- Check or block orders from countries and areas that have a high risk of fraudulent card payments.
- Look for unusual delivery addresses, or if a new customer has asked for delivery to an alternative address to the one their payment card has been registered to.
With some simple preventative measures you can ensure the instances of card fraud against your business are minimised.
Considering mobile commerce
According to analysts IDC, 472 million smart phones were sold in 2011 alone. Increasingly your business' customers will want to use their phones to buy and make payments.
Systems like PayPass from MasterCard and the new PayTag [www.barclaycard.co.uk/personal/paytag] from Barclays offer simple and efficient payment methods to mobile phone users.
Phones will soon also have payment systems built into them with the arrival of NFC (Near Field Communications) that could herald a new era in mobile payments. Berg Insight reports that annual global sales of NFC-equipped handsets has increased ten-fold to 30 million devices in 2011 and is forecasted to reach 700 million units by 2016. In addition, an estimated 20 countries are expected to launch NFC services in the next 18 months, resulting in transactions approaching $50 billion worldwide by 2014, according to Juniper Research.
David Chan, CEO of Barclaycard Consumer Europe, said: "Most of us say that the item we're most lost without is our mobile phone, so we're giving people the option of using them to make easy, convenient, everyday payments without the need to upgrade their current handset."
It's still very early days for these technologies, but as a small business owner you should pay close attention to how these payment platforms are developing. Listen to your customers to ensure your business is ready to offer these mobile payment options when they become popular.