Business owner researches how to choose an electronic payment system for their small businesses.

How to Choose an Electronic Payment System for Your Small Business


Digital payments help small businesses quickly access funds and improve cash flow. Here's how to choose an electronic payment system for small businesses.

Accepting digital payments has long been a smart strategy for small business owners, allowing for quicker access to funds and improved cash flow. As the coronavirus pandemic has made online payment and contactless payment increasingly important, customers also appreciate businesses that offer an electronic payment system.

If you’re looking for an electronic payment system, it’s important to take the time to choose one that will work best for your business needs and your customers. Whether you're new to accepting digital payments or upgrading an existing system, it can be difficult to understand the various options and the pros and cons.

Electronic Payment Systems—More Important Than Ever

The options for online payment services and digital payment systems may seem endless, but don’t get overwhelmed. Learning about the various choices and selecting the one that works for your business is likely to pay off, as demand for e-commerce continues to grow. By the end of 2019, global e-commerce sales reached $3.5 trillion, representing 14 percent of all global retail sales, according to a study. Those figures were predicted to rise to $4.2 trillion, making up 16 percent of global retail sales, by the end of 2020.

And that was before a global pandemic forced much of the world’s population to isolate for months, avoiding public places, and turning even more sharply to online shopping.

As some cities and states reopen after pandemic-induced closures, and some shoppers return to stores, they will continue to prefer contactless payment options in the interest of safety. Whether customers are making purchases in-store or at home for delivery, curbside pickup or other types of shopping, they are expected to continue to prefer digital payment services. Such services offer opportunities to pay without touching cash or buttons that have been handled by many other customers in the course of a day.

To compete effectively in this new environment, small businesses need to provide payment options for customers who want to stay safe and use convenient methods of payment such as credit cards or phone-based payment.

Electronic Payment Options for Small Businesses

There are two basic uses for electronic payment systems. The first is for customers to make online payments for online shopping, buy-online-pick-up-in-store (BOPIS) or curbside pickup. The second is for customers to make touch-free payments at the point of sale.

Some electronic payment systems are tailored for one of these uses, and some can handle both. For instance, PayPal, Square, Stripe and are popular systems for accepting payments online. These and other online payment systems allow customers to securely pay your business online. Their fees vary based on the provider and the size of the transaction. For instance, PayPal and both charge business users 2.9 percent of each transaction, plus $.30 per transaction.

By accepting mobile wallets such as Apple Pay, Google Wallet, Android Pay and Samsung Pay, your business can accept touch-free payments at the point of sale. These systems also charge fees to merchants, often similar to the fees charged by credit card processing companies.

Businesses can also accept contactless payments by upgrading their equipment to accept contactless credit cards. Many credit card companies are now offering contactless versions of their cards, which allow users to simply tap their cards on a card reader, eliminating the need for users to enter a personal identification number.

Both mobile wallets and contactless credit card readers use near-field communications (NFC) to communicate payment information, generating a unique cryptogram for each transaction. To facilitate those transactions, your business will need an NFC-enabled reader. You may be able to simply get a plug-in reader to attach to your current card reader. Many digital payment providers have contactless readers that you can purchase, lease or borrow, or they can help you determine which third-party card readers will work with your current system.

Deciding Which Electronic Payment System to Implement

The most important consideration when choosing a digital payment system is how your customers will use the system. For instance, if your customers prefer to shop online for delivery or place orders from their smartphones and pick up at curbside, you’ll need a solution that is tailored for e-commerce. If your customers prefer to shop in-person but want to make touch-free payments, you’ll need an NFC-enabled solution. Take time to think about your customers’ preferences, and consider asking some regular customers which payment options they would like to have.

Regardless of which type of solution you choose, you’ll need to pay close attention to security. Research the security protocols of any system you’re considering. Merchants and credit card companies are liable for any fraudulent activity that takes place through their systems if they do not have chip technology in place, so it’s important to ensure that the system you select will protect against any potential fraud.

Even in a post-pandemic business environment, it’s safe to assume that safety concerns will keep customers interested in online transactions and contactless transactions. To be prepared to serve your customers wherever they are and help ensure a safe shopping environment, small business owners should consider implementing an electronic payment system that can be used both online and in-person—or a separate system for each scenario.

Taking the time and making the effort to select a secure, easy-to-use electronic payment system can help your business get paid faster, enjoy quicker access to funds, and serve customers better. As business owners seek to move beyond the pandemic and the crisis-level stress it has caused, implementing a digital payment solution can be an easy way to push forward.

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