Last editedJun 20236 min read
There are two main methods to accept business payments online: credit (or debit) card payments and bank payments, such as Direct Debit and Instant Bank Pay. Online payments can be taken as bank payments - direct, automated transfers between two bank accounts - or via credit and debit cards through an all-in-one payment processor such as PayPal or Worldpay Online Payments. These methods provide your customers with a quick, simple and safe way to pay online.
We've compiled a guide to your main online payment options to help you decide the best way for your business to accept payments online.
Accept Bank Payments Online
Due to the many business benefits, bank payments such as Direct Debit have become an increasingly popular way for small businesses to accept payments online.
As an online payment method, bank payments have multiple use cases. Direct Debit, for example, is an especially great fit for companies currently using invoicing to collect payments or for businesses that run a subscription business.
Direct Debit is a flexible and highly cost-effective online payment option, equally suitable for one-off and recurring payments, both regular and irregular. As an automated ‘pull’ payment, the business benefits of Direct Debit include eliminating late payments, which reduces manual admin and improves cash flow.
There are several different options for accepting online payments with Direct Debit. Which is right for you will depend on your business and the volume of payments you collect. Enterprise-level businesses collecting payments at volume have different requirements than SMEs, but Direct Debit benefits all businesses regardless of size.
How to collect payments with GoCardless
Create your free GoCardless account, access your user-friendly payments dashboard & connect your accounting software (if you use one).
Easily set up & schedule one-off or recurring payments via payment pages on your website checkout or secure payment links.
From now on you'll get paid on time, every time, as GoCardless automatically collects payment on the scheduled date. Simple.
How to take payments online via Direct Debit
If you choose to collect online Direct Debit payments in-house, then you’ll need to be able to call on significant resources to meet the extensive set-up requirements. Not only will you need your own SUN and to invest in Bacs-approved Bacstel-IP software, but you’ll also need to satisfy underwriting, revenue, and Know Your Client requirements.
If you want to accept online Direct Debit payments directly, then start by speaking to your bank, however, this option won’t be realistic for most SMEs. Instead, small businesses can access the benefits of Direct Debit without the prohibitive set-up requirements by using GoCardless.
Historically Direct Debit has only been viable for large-scale enterprise businesses due to the burdensome financial and regulatory requirements mentioned above. However, specialist online payment services, such as GoCardless, have removed these barriers and made Direct Debit and its multiple benefits available to even the smallest UK businesses.
GoCardless Direct Debit
GoCardless is a secure, online account-to-account payments specialist enabling you to accept online bank payments via our API, our online merchant dashboard, or through a partner app such as Xero or QuickBooks. GoCardless handles the technology and all the legal and regulatory requirements of Direct Debit on your behalf. GoCardless merchants get paid faster, spend less time on financial admin and enjoy improved cash flow with Direct Debit.
Want all the benefits of Direct Debit but without all the hassle & expense of dealing with banks?
GoCardless does all the heavy lifting for you so you can collect payments on time every time with just a few clicks!
Instant Bank Pay
These bank-to-bank payments are instantly confirmed, providing better payment visibility for you and your customers. Instant Bank Pay enables you to save time chasing one-off payments and create a smoother customer experience.
As with Direct Debit, instant payments can be quickly and easily set up in the merchant dashboard or via our API. Instant payments can also be combined with Direct Debit to allow you to take an initial instant payment whilst recurring payments are initiated. Trampoline business Gravity did exactly this and reduced the number of cancelled payments by 33% and save time and money according to Shane Williams, Customer Experience Director.
With GoCardless international payments, you can collect payments wherever your customers are. By offering the local bank payment option in more than 30 countries, including the UK, Eurozone, the USA, Canada, Australia and New Zealand, GoCardless allows merchants to expand their business and increase sales.
GoCardless has built a global bank payment network making it easy for you to collect from international customers without expensive foreign exchange fees and opening foreign bank accounts.
Credit and debit cards are the other main ways organisations accept online payments. If you are in the e-com space or run hospitality or retail businesses, then cards are probably your best option.
You can accept card payments online in several ways, from DIY to newer, full-service providers like Stripe, which do a lot of the hard work for you and save you from onerous PCI compliance requirements.
However, be aware of the relatively high transaction fees of accepting card payments. Card payments are routed through a network of intermediaries, each adding their fee, making them more expensive than bank payments, which are low-cost direct account-to-account transfers. Furthermore, the high payment failure rate due to lost, cancelled and expired cards results in lost customers, lost revenue and more time-consuming manual admin.
How to take Credit Card Payments Online
Unless you use an all-in-one payment processor like Stripe or PayPal, you’ll need to set up a merchant account and payment gateway to accept credit and debit card payments online.
A merchant account is a bank account that allows you to accept payments using credit or debit cards. It is an online bank account that temporarily holds your money until it is moved to your actual business account.
Options: Most banks, including HSBC, Barclays and RBS.
Note: Your merchant account doesn’t need to be with the same bank as your business account.
A payment gateway connects your website to one or more of the processor networks (similar to a credit card machine in a shop or restaurant). It lets your customer submit their credit card details and then tells you whether the cardholder’s bank approves the charge and submits your charges for settlement.
Payment Service Provider
Outsource to a full-service payment provider
If you don’t want to do it yourself, you can use a payment service provider or a payment processor to help you accept online payments.
These act as a middleman between you and the banks – it ensures that all the money ends up in the right place by taking it from the cardholder’s account and delivering it to your account. Full-service payment service providers typically act as the merchant account and the payment gateway, allowing you to accept online payments without a merchant account.
Using a payment service provider or a payment processor typically reduces the burden of PCI compliance, as you will never actually touch sensitive financial information. Online Payments Providers can also offer a full stack of services such as subscription billing, fraud management, payouts and transfers, etc., making the payment process even easier.
Subscription management service
A subscription management service (or subscription wrapper) lets you easily handle recurring payments. Services typically have a credit card vault (where customers can store their credit card details for future use); automate billing, customer sign up and billing-related emails; and make sure the right people get charged the right amount every month. You’ll typically still need to use a merchant account, payment gateway, or payment processor.
Online payment methods - key takeaways
In this guide, we have focused on the two main ways to accept business payments online - bank payments and card payments. While there are several other payment methods, they are either declining in popularity and use or are new and emerging.
Cash and cheques are now almost historical forms of collecting payments, no longer relevant for most modern businesses. Digital wallets, like cards, are great for e-com, retail and hospitality - in essence, a digital wallet is a non-physical extension of your plastic card. Cryptocurrency is the newest, least understood, and most unsuitable payment method for most businesses.
Cards still make the most sense for e-com, retail and hospitality businesses, whilst bank payments, such as Direct Debit, are better suited to UK businesses that need to collect payments in such a way as to:
reduce failed payments
reduce late payments
reduce manual admin
GoCardless offers a cost-effective, easy-to-use, automated bank payment collection service that reduces costs, manual admin and stress for business owners and finance managers.
Bank payment via GoCardless is more affordable, more secure and more reliable than accepting credit and debit cards.
"Customers don't need to worry about fraud like they do with credit cards and bank accounts don't expire, so they’ll never need to update their details." - Scott Westbrook, Director of Business Systems, Deputy
How to use GoCardless
GoCardless merchants use the online merchant dashboard to set up payments in just a few clicks. Authorisation forms are automatically sent to customers. Once authorisation has been given, you will automatically receive payments on the dates you specified.
There is also the option of setting up payments by using the GoCardless API to build an integration with your current payment stack.
Furthermore, GoCardless integrates with over 350 software packages, including all the major accounting software such as Xero and Quickbooks.
To learn about the basics of Direct Debit from a business perspective, try our overview of Direct Debit for small business.
Case Study: Bank payment switch
Health and fitness chain Lifestyle Fitness was able to digitise recurring payments collection with GoCardless to reduce monthly reporting from three weeks to five days.
“We needed better data to be able to plan more accurately, to streamline joining the gym online and in person, and to offer more transparency to customers around payment schedules,” explained Commercial Manager Chris McQuillan.
“GoCardless is perfect for membership organisations. It provides a full payment history, forward projections and the functionality to easily make amendments. Throw in one of the best APIs I've ever seen, and it's an immensely powerful tool for driving more unified experiences and communications.”
In summary, Chris noted,
“Customers are happier, so staff are happier and since launching GoCardless we haven’t had one negative piece of customer feedback about payments.”
Cost-effective, secure and reliable recurring payment collection for small businesses.
"For ongoing monthly payments it’s perfect. You can easily adjust the subscription amounts and don’t suffer from the problem of expired cards." - Charles Cridland, Technical Director, YourParkingSpace
We can help
“Setting up payment collection with GoCardless is fast and efficient. By automating the payment collection process, GoCardless drastically cuts down the administrative responsibilities of managing and tracking invoices for your team.
GoCardless makes it quick and easy to get started, and with no contracts or long-term commitment required, there’s no risk. You can set up instant, one-off, or recurring payments in the merchant dashboard in just a few clicks, and GoCardless automatically creates and sends all the necessary forms, doing all the heavy lifting for you. You can also connect to GoCardless via over 350 partner apps, such as Xero and Quickbooks.
Discover how GoCardless can automate payment collection, making it easier for you to concentrate on what matters most - your business growth.