How can my business accept online payments?

October 18, 2023 | 5 minute read

Jonathan Sepulveda

Answered by
Jonathan Sepulveda
Small Business Merchant Services - Product Executive
Bank of America


With a growing number of consumers and businesses shopping online, more small businesses are accepting online payments or increasing the types of transactions they process. Bank of America’s 2023 Small Business Owner Report found that 80% of small business owners adopted new digital tools and strategies over the last 12 months and 60% were accepting some form of cashless payment.


Accepting online payment is not only more convenient for your customers, but as a business owner, you stand to benefit, too. Making it easier and more convenient for customers to pay you motivates them to patronize your business again. Plus, payment processors make it possible to set up automatic recurring payments for members or subscribers, eliminating the time-consuming work of invoicing and collecting payments yourself. In addition, accepting online payments often speeds up the process of being paid, allowing you to frequently receive payments instantaneously, which can help your cash flow.


How to start accepting online payments

There are some crucial steps you should take before you start accepting online payments. First, select an online payment processor, which functions as an intermediary company that transmits customers’ credit card data to payment networks and banks. Next, create a payment gateway. This is an area on your website where customers can securely input their credit card information. Most small businesses find it too complicated to build a payment gateway on their own site, so they use an existing one, such as Braintree, Stripe, or Square.


Types of vendors for online payments

If you use a payment processor, you can choose from two options that allow you to accept online payments: opening a merchant account or selecting a payment service provider.


1. Open a merchant account

This can be done with a merchant services provider, like a bank. These are dedicated bank accounts used for credit and debit card, ACH, mobile, and other types of online payment processing. The merchant account holds the money customers pay you from the moment they swipe their credit cards to the time it is deposited in your business bank account —after the payment processor clears the transaction.


Opting for a merchant account tends to provide more stability and less risk than selecting a payment service provider, thanks to its multi-step underwriting process. Further, merchant service providers typically offer a variety of services, such as helping with chargeback questions.


2. Select a payment service provider

This option tends to be a good bet if you want a system that lets you start accepting payments quickly. Accepting payments through payment service providers tends to be easier because they aggregate all their business customers into one overall merchant account — and you effectively become a sub-merchant. The net result is that you don’t have to go through a lengthy official vetting process. They also typically offer a variety of features, from invoicing to reporting. One downside is that you’re pooled with multiple other merchants — and your sub-account can be impacted by them. For example, if other merchants have a lot of chargebacks or refunds, being pooled with them can lead to higher fees.


Understanding payment gateways

All businesses accepting online payments need a payment processor, but only e-commerce companies require what is known as a gateway. As the name suggests, payment gateways serve as gates that must be opened for money to move online, while keeping encrypted customer data secure. These are typically available through your payment processor.


There are two types of gateways. With a separate payment gateway, when customers pay, their credit card data is sent to a third-party outside your website. Customers are redirected back to your site after they’ve completed the transaction. Built-in payment gateways, also known as white label payment gateways, are integrated into your platform, allowing customers to complete their payments entirely on your website. Some small business owners prefer this option because it gives them more control over customers’ purchasing experiences. However, it is important to look at all the features of your payment gateway and the costs of each option before deciding which is best for you.


Costs business owners can expect to pay

While payment gateways don’t always charge a fee, there is always a fee for payment processing. They also may use one of a variety of pricing models:


Interchange-plus pricing

Sometimes known as cost-plus pricing, this approach can be the most affordable choice for businesses with a high volume of transactions. You pay fees based on the card network’s interchange rate (a fee charged by card companies such as Visa, Mastercard, Discover and American Express), along with the payment processor’s markup. Fees generally depend on the risk of a transaction, which is determined by factors such as the card brand, type and how the transaction occurs (online versus in person). You may receive a discount if you have a high volume of transactions.


Flat-rate or blended pricing

This model allows for one flat rate for all transactions of the same type, such as online transactions. While the provider markup varies, the approach tends to provide a more consistent and predictable pricing model than interchange-plus pricing.


Subscription or membership pricing

You pay interchange rates, plus a monthly fee and a per-transaction charge. This is often the least expensive option, and some providers don’t offer it.

You might also find additional charges, such as early-termination, setup, annual and equipment-lease fees. For that reason, make sure you understand all the potential costs ahead of time so you don’t encounter unexpected ones.


The bottom line

Although there are costs involved in accepting online payments, this service can be a major perk for your business. Not only is it more convenient for your customers, but it also can speed up your cash flow and ultimately help you build a healthier business.

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