Last editedAug 20222 min read
In the digital age, cash is no longer king. Whether you’re accepting payment from your customers online or on-site, you have a plethora of payment options available. The more different types of payment you offer, the more convenient an experience you can provide for your clientele and the more sales you can potentially generate.
However, each type of payment method has its caveats as well as its benefits.
The modes of payment you choose can have lasting implications on your cash flow, potentially delaying the time it takes for funds to reach your merchant account or eroding your profit margins with charges. Here, we look at each type of payment method available to your customers, and the pros and cons of accepting each.
There was a time when cash was king. But the reign of all kings must come to an end, and cash was dethroned as the UK’s favourite payment method in 2017. While credit and debit cards are the preferred payment method for UK consumers, especially given the potential Covid risks associated with paper notes and coins, cash is still favoured by 17% of consumers, according to UK Finance.
Advantages of cash
Easy to use
No fees or charges
Customers can make purchases without needing their own bank account
Disadvantages of cash
Customers are less likely to use cash to make high-value purchases
Processing cash transactions can take longer at the till
Some consumers may not feel safe using cash, due to the risk of theft and potential Covid transmission
E-wallets like Apple Pay and Google Pay work like a digital version of a physical wallet. It facilitates contactless and online payment via a smartphone. It stores the details for one or more payment methods (e.g. credit or debit card) and makes faster, more secure and more convenient payments.
Advantages of e-wallet
Fast and convenient
Customers may buy more frequently
Customers can make payments of up to £100 instantly via contactless
Disadvantages of e-wallet
Transactions can take 1–3 days to process
Payments are subject to charges
A point of sale (POS) device is needed to accept payment via an e-wallet
Credit and debit cards are the UK’s favourite way to shop, accounting for over 50% of all payments according to UK Finance. Payments can be made up to £100 via contactless payment, or unlimited payments can be made via chip and PIN (although banks may request additional authorisation for larger purchases).
Advantages of credit/debit card
Customers are more likely to make impulse purchases
Customers can make large purchases with confidence
Quick and easy to process at the till, preventing long queues
Disadvantages of credit/debit card
A POS device needs to be bought or rented
Fees of around 1.5–3.5% apply to each transaction
Transactions can take 1–3 days to process
A bank transfer can be made via multiple systems including BACS, CHAPS and Direct Debits. It is commonly used for paying bills and subscription payments but less commonly used for one-off purchases.
Advantages of bank transfer
Businesses can accept larger payments without hefty fees
Beneficial for B2B commerce due to higher costs and volumes
Affordable and convenient for merchants
Disadvantages of bank transfer
Processing can take 1–-3 days
A merchant account is usually required
Getting the best of both worlds with GoCardless
GoCardless allows businesses like yours the perfect combination of affordability, flexibility and security.
We make it easier and more convenient to accept recurring payments via Direct Debit with much lower fees than recurring credit and debit card transactions. What’s more, Instant Bank Pay powered by open banking facilitates bank-to-bank payments quickly, securely and affordably with instant confirmations. So your business benefits from the security and low fees of a bank payment, alongside the flexibility and instant assurance that come with making a credit or debit card payment, even if you don’t have a merchant account.
We can help
GoCardless is a global payments solution that helps you automate payment collection, cutting down on the amount of financial admin your team needs to deal with. Find out how GoCardless can help you with one-off or recurring payments.