How to accept credit card and debit card payments from customers online and in person

Businesses in every industry and stage of growth must figure out how to accept payments from customers, but there isn’t a one-size-fits-all solution. This is especially true for an increasingly digital era, when businesses need to accept payments online, in person and on mobile devices.

In 2021, top payment methods in the US included credit cards at 40% of all transactions, debit cards at 30%, cash at 11% and digital wallets also at 11%, followed by alternative payment methods such as prepaid cards, gift cards and buy now, pay later payment methods.

So how do you know which payment processing options are the best fit for your business?

What's in this article?

• Benefits of accepting online payments
  
• Should I sell through my website or a marketplace?
  
• How to accept online payments
  
• How to accept credit and debit card payments
  
• Accepting payments in person
  
• How much does it cost to accept payments?
  
• Which payment processor is best for my business?
  

Benefits of accepting online payments

Whether your business accepts in-person payments or exists entirely online, accepting online payments is a powerful way to expand your digital presence, drive growth and convert customers effectively. These days, most businesses need to accept online payments and even wholly in-person businesses would probably benefit from integrating online payment processing.

Businesses that need to accept online payments include:

• E-commerce stores
  
• Subscription services
  
• SaaS platforms
  
• Creators
  
• Platforms
  
• Marketplaces
  

Should I sell through my website or a marketplace?

Merchants must choose between selling their products and services on their own branded website or making their goods available on a third-party marketplace, such as Shopify, Amazon or Etsy. Because most of the payment processing options that we’ll discuss influence this choice, let’s walk through an overview of the decision.

Accepting payments on your own website puts the burden of processing payments on you, but it comes with a few notable advantages:

• Control over everything
  You have total control over how your website looks, how it is organised and what gets featured. You can curate and optimise every detail of a visitor’s experience depending on your goals and target audiences. You know your business better than anyone; accepting payments on your own website allows you to use that deep knowledge to increase conversion, grow revenue and strategically orchestrate your marketing and sales efforts.
• Stronger branding and referrals
  When you primarily process sales through your own website, you get immeasurable brand equity in return. If a potential customer discovers your product on a large marketplace like Amazon, they could easily decide to purchase another brand’s product instead.

If you’re trying to cultivate a strong brand with scalable solutions that will grow with you, selling on your own website may be the best option.

But there are upsides to selling through marketplaces: They give your business exposure to new customers, increase credibility and provide you with a payment gateway and payment processor. Consider the best fit for your business and your goals.

How to accept online payments

To start accepting online payments, you need two things: a payment processor and a payment gateway. Some providers offer both, but let’s take a minute to define how they’re different:

• Payment processor
  Payment processors manage the entire scope of a transaction. They communicate between the customer’s bank and the merchant’s bank, getting the money where it needs to go. They’re the third-party tool that gives you the technical ability to accept payments and process transactions.
• Payment gateway
  A payment gateway is, as the name implies, a sort of "gate" that either approves or denies a payment method after a customer submits it for payment. Gateways send payment information to the payment processor, which handles the rest of the transaction. Stripe, like most payment processors, has gateway functionality built in to its payment processing solutions, so you don’t need to worry about setting up a separate gateway. That said, standalone payment gateway products do exist.

How to accept credit and debit card payments

Merchants must have a payment processor and payment gateway set up in order to accept credit card or debit card payments on their website. If you’re selling through an online marketplace or platform with built-in payment processing for merchants, you’ll likely only need to link your business bank account.

Accepting payments in person

If your business also conducts transactions in person, choose a payment processor that offers hardware to accept in-person transactions, like a point-of-sale (POS) terminal and a card reader that’s able to accept credit and debit card information. Your payment processor should also offer cloud-based payment software that aggregates both in-person and online transactions.

Make sure that your card reader is able to accept these types of credit and debit card payment methods:

• Contactless payments
  Most credit and debit cards can transmit payment information when you hold the card close to the card reader or tap it. These card transactions use near-field communication (NFC) and are highly secure. Most modern card readers accept these types of transactions, including digital wallet payments – an increasingly preferred method of payment for consumers (for the convenience) and merchants (for the security).
• EMV chip payments
  If you’ve ever inserted a credit or debit card into a card reader (instead of tapping or swiping it), that payment action was facilitated by an EMV chip. EMV chips are small square computer chips that are embedded in some cards. They conduct payments by transmitting unique codes to card readers instead of card numbers, making them less vulnerable to fraud than swiped-card transactions.
• Magnetic stripe payments
  Magnetic stripe (magstripe) payments use the magnetic stripe that stretches across the back of credit cards, debit cards, prepaid cards and some gift cards. This classic card payment mechanism is less secure than other methods of credit card transactions. But many credit and debit cards still exclusively use them, so it’s a good idea for your business to be equipped to process them, even if you prefer newer, more secure methods.

How much does it cost to accept payments?

Multiple factors affect the cost of accepting payments, including your industry, the payment processor that you use and which payment methods you most commonly accept. There are three main pricing models that payment processors use:

• Interchange plus
  The interchange rate refers to the fee that merchants have to pay on every credit and debit card transaction. You’ll pay the interchange rate set by the credit card network plus a margin added by your payment processor.
• Subscription
  You’ll pay a flat monthly subscription fee that covers most of your processing costs.
• Flat rate per transaction
  In this model, you will be charged the same rate for every transaction of the same type. This model accounts for variations in interchange rates, but you are charged a predictable fee, which makes budgeting and planning easier.

Aside from the processing costs, there are a few other fees that you might run into with your payment processor or merchant account:

• Setup fee
  This is a one-off fee associated with the initial setup of your merchant account.
• Monthly minimum fee
  Some providers set a minimum amount that you’re required to pay each month, and if you don’t hit that amount in payment processing fees, you’re charged the difference.
• Payment card industry (PCI) fee
  If your business accepts credit and debit card payments, you’re required to comply with the data security standards set by the PCI Security Standards Council. These are called the Payment Card Industry Data Security Standards (PCI DSS). Sometimes, you’ll have to pay a fee that goes towards continued compliance with these standards.
• Annual fee
  Some providers charge a fee for every year of service on the merchant account.
• Batch fee
  Your transactions from any given day are often bundled together in a "batch" and sent for payment processing. A batch fee covers this service.
• Chargeback fee
  If a customer disputes a charge from your business on their card and the charge is reversed, you could receive a chargeback fee.
• Early termination fee
  This fee usually applies if you terminate your account before a certain period of time, as defined in your service agreement.

Which payment processor is best for my business?

Also consider which payment processor will provide the best customer experience. Processing payments isn’t simply a matter of moving money between customer and merchant. If the transaction is effortless, you’re not only more likely to convert the sale, but you’re also investing in a better brand experience for that customer, which can generate brand loyalty and increase their Lifetime Value (LTV).

Here are a few things to consider when you’re choosing the right payment solution:

• Customisation
  Opt for a payment solution that lets you tailor your checkout user interface and integrate with your existing digital ecosystem, while also giving you the tools and support to customise and deploy your payment setup easily.
• Security
  Be overly diligent when it comes to protecting your customers’ payment information. You’ll want a payment processor that’s serious about fraud prevention and ideally one that offers security measures for payments like an address verification service (AVS), 3D Secure, and other fraud-mitigation efforts for both card-present (CP) and card-not-present (CNP) transactions.
• Full-scope payment and growth solutions
  Think about other tools or services that are adjacent to payment processing and would be meaningful for your business, for example, invoicing and billing, website development, marketing funnel creation and detailed sales reporting and analysis. Payment processing intersects with all of those facets of your business. Even if your payment processor doesn’t offer those services, keep them in mind as part of a broader, integrated strategy.
• Scalability
  Think about what payment processing will look like as your business grows. If a payment processor, like Stripe, has a range of merchants from small, emerging businesses to larger startups and enterprise companies, that’s a strong indication that it knows how to support your payment needs across the different stages of business growth and expansion. Choosing a scalable payment processing solution will save you the time and effort of repeating the selection process in a few years and possibly going through a tedious migration.
• Range of payment methods accepted
  While consumers continue to rely primarily on credit and debit cards to make payments across most industries, they’re not the only payment method that consumers prefer. Look for a payment provider that allows you to accept a wide range of payment methods. Other popular options that you are likely to want to accept include contactless payments, digital wallets, buy now, pay later and electronic bank transfers.
• Responsive merchant support
  You’re entrusting a major aspect of your business to an outside party. If something goes wrong on their end, it could easily disrupt your business. Make sure that you opt for a payment processing provider that’s responsive, communicative and available to support you and your team.
• An intuitive user interface
  You should optimise your checkout flow, including your payment setup, to create an effortless customer experience and increase conversion. An intuitive, easy-to-use checkout flow counts for a lot with your customers. You don’t want to make them do unnecessary work to complete a transaction.

The content in this article is for general information and education purposes only and should not be construed as legal or tax advice. Stripe does not warrant or guarantee the accuracy, completeness, adequacy, or currency of the information in the article. You should seek the advice of a competent lawyer or accountant licensed to practise in your jurisdiction for advice on your particular situation.