7 Types of Payment Methods All Merchants Should Offer

7 Types of Payment Methods That Every Merchant Should Offer

The variety of payment methods available to merchants and customers continues to grow, prompting both brick-and-mortar and e-commerce businesses to expand their range of offerings to avoid missing a sale. If you’re considering adding a payment method or want to start a new business, understanding the different types of payment methods available—together with their pros and cons—will help you to take full advantage of each one.

Cash Payments

Cash is the oldest and simplest payment method and accounts for 14-92% of transactions worldwide, especially in small towns, traditional communities and rural areas. In a typical cash transaction, the customer pays with coins and notes, the cashier may perform a check to see that the notes are real and then gives the customer change.

Depending on the formality of the business, the transaction may be recorded in a paper journal or entered into an electronic point-of-sale (POS) system for the merchant’s records. Depending on the entry method used, the cashier may give the customer a handwritten or electronic receipt.


  • Payment is instant
  • No risk of insufficient funds
  • No risk of chargebacks
  • Doesn’t require an internet connection


  • Not suitable for online payments
  • No automatic record of payments
  • Risk of theft from the cash register
  • Balancing the cash register at the end of each day is time-consuming

Best For…

Cash payments are generally best for small merchants who sell low-ticket items in person, particularly in rural areas. Local e-commerce merchants can accept cash payments from customers who reserve products online for local pick-up (buy-online-pick-up-in-store).


If you accept payments in cash:

  • Learn how to identify false notes and coins.
  • Keep the cash register locked and store excess cash in another part of the store (preferably in a safe).
  • Deposit cash into your bank account frequently to prevent theft.
  • Train employees on how to respond in the case of armed robbery.
  • Record your cash sales in a centralised database for reporting and analysis.

Prepaid Cards, Credit and Debit Cards

Card payments accounted for 49% of the total number of non-cash payments in the Euro area in 2021 and the number of payment cards issued increased by 4.6% to 637.7 million. Prepaid, debit and credit cards allow customers to pay in person with a point-of-sale (POS) terminal and to pay online through a payment gateway.

To pay with a credit or debit card, the customer simply swipes, inserts or taps their card on the POS terminal (in a brick-and-mortar store) or enters their card details (to pay online). The card details are then forwarded through the card payment networks to the card-issuing bank, which either approves or denies the transaction.


  • Card transactions are overseen and monitored by credit card company networks.
  • Card payments generate transaction records automatically.
  • Card details can be used for recurring payments and buy-now-pay-later schemes.
  • Customers tend to spend more with cards because they have direct access to the funds in their bank accounts.
  • Card transactions allow you to take your business global.


  • A POS system or payment gateway is required to accept payments online.
  • You will need to wait up to 48 hours for card transactions to clear.
  • Percentage-based and fixed fees are charged for every card transaction.
  • You may be held responsible for instances of credit card fraud.
  • Customers can issue a credit card chargeback.

Best For…

Credit and debit card payments are among the most popular online payment methods thanks to their high security level and the possibility of completing a purchase from anywhere in the world.


Before you accept card payments, compare several payment service providers and choose one that is reputable and offers merchant services—such as credit card fraud prevention and chargeback protection—and facilitates recurring payments. In addition, you’ll need to implement security features like encryption and use AVS and CVV authentication as part of your checkout process to prevent e-commerce fraud.

Mobile Payments

Mobile payments describe several types of payment methods that can be performed using a mobile phone rather than a POS system. Mobile payments have grown substantially in recent years, with 32% of the UK Millennials surveyed saying that they used a digital or mobile wallet in 2021.

The advantages of mobile payments are similar to those of card payments, although, in the case of mobile wallets, transactions are generally more secure. The main challenges for mobile payments include the need for a strong internet connection and the requirement for customers to have internet-connected smartphones.

Mobile Wallets

To use mobile wallets, customers download an application to which they link their bank accounts and/or credit or debit cards. Popular mobile wallets include Apple Pay, Google Pay, Amazon Pay, WeChat Pay and AliPay.

To pay for goods or services, the customer signs into the app using biometric authentication (such as their fingerprint or facial recognition) or enters a passcode. Then, he or she taps the mobile device to the merchant’s near-field-communication-enabled POS device.

For online payments, the customer clicks or taps the mobile payment button offered at the virtual checkout, signs in and authorises the transaction. This payment method is quick and secure and the merchant usually receives the funds the next business day.

Payment Links

Payment links are becoming popular with merchants who want to accept payments on a mobile phone. This payment method also uses a payment gateway but doesn’t require the customer to have a specific application.

To create a payment link, the merchant or self-employed individual enters the transaction details into a payment-link-generating desktop or mobile application and clicks on the payment link generation button. The merchant then sends the payment link to the customer, who enters their card details into the form on the merchant’s device or their own internet-connected device and clicks on the “pay now” button to confirm the transaction.

QR Codes

QR codes (quick-response codes) are similar to payment links but require the customer to have an internet-connected smartphone on hand. To pay via QR code, the customer scans the QR code provided by the merchant, enters their card details into the form and clicks on the “pay” button to authorise the transaction.

Best For…

Mobile payments offer a convenient solution for merchants who sell online, in a brick-and-mortar store, move around with fairs, conventions and trade shows or sell door-to-door.


As with credit and debit card payments, it’s important to have a secure payment gateway with fraud and chargeback protection when you accept mobile payments. You’ll also need a payment service provider that accepts mobile payments in addition to credit and debit cards.

Alternative Payment Methods


Cheques used to be very popular with business people but are rapidly on the decline as even B2B customers switch to payment methods like credit and debit cards, EFT or ACH payments and wire transfers.

While cheques in themselves are secure and don’t come with transaction fees, there is a possibility that a merchant will be given a fake cheque or a cheque that bounces, resulting in the merchant not getting paid. The other disadvantage of cheques is that they can take up to four days to clear.

Direct Deposit/Direct Payment

In some countries, merchants ask customers to deposit payments directly into the business owner’s bank account. Each customer can then decide whether to make the deposit in person or online via electronic funds transfer (EFT). After depositing the funds, the customer takes a photo of the physical receipt and sends the photo to the merchant or forwards the payment confirmation as a PDF.

The advantages of direct deposits/direct payments and bank transfers include:

  • A high level of security
  • No fees for the merchant
  • Generally quick processing times (from minutes to a few hours)

For the customer, making a direct payment or direct deposit can be time-consuming and less convenient than credit card or mobile payments, especially if depositing funds in person. However, if online EFT transactions are used for payment, the process is fairly quick.

Other Kinds of Electronic Payments

While electronic payment methods like EFT can be less than appealing for retail customers, they are still popular with B2B customers, especially for large amounts. Some electronic payment methods come with bank fees, especially when transferring across banks or across countries. On the upside, electronic payments are secure and generally clear on the next business day. Popular electronic payment methods include:

  • Standing orders. The customer asks their bank to transfer a pre-specified amount to a recipient (such as a landlord or utility company) on a set schedule.
  • Direct debit. The customer authorises a merchant to withdraw a pre-specified amount of money from their bank account on a set schedule.
  • Automatic Clearing House (ACH) Payments (in the United States and Puerto Rico). The payer sets up in-country direct deposit or direct payment orders which are cleared as a batch.
  • Wire transfers. The payer sends money to a bank account in another country using the recipient’s SWIFT code and international bank account number (IBAN).

Digital Currencies

While they aren’t used by as many people as digital wallets, cryptocurrencies such as Bitcoin are used by customers and merchants in certain industries—especially in the gaming industry. If you have a traditional merchant account and don’t yet trade in cryptocurrencies, adding this payment option at the checkout could expand your customer base.

The More Payment Options, the Better

As a merchant, you want a payment method that’s secure and convenient for both you and your customers, is cost-effective to accept and clears quickly. However, as there are so many payment options available, it’s important for you to be prepared to cater to your customers’ needs.

The best way to take advantage of all of the payment methods on offer is to work with a payment processor who can integrate them all, offering customers a wide selection and including sales from all types of payment methods into a single report. Then, you will have all the information you need to intercept fraudulent payments, make sound business decisions and take your business global.