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Why Small Businesses Need Online Payment Apps
Fewer people are relying on cash and want to use different methods, like online payment apps, to purchase items.
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Small businesses that accept online payment apps like Apple Pay and Google Pay fare better than those that don’t. Offering customers their choice of payment methods can increase sales and put your small business at a competitive advantage. Read on to learn more about the benefits of accepting online payment apps.
What are online payment apps?
Online payment apps are digital wallets that securely store the user’s credit card or debit card information. To use an online payment app, the customer can use the mobile app on their phone or select the app option on the merchant’s website at checkout.
“Digital payments have become far more accepted,” David Axler, chief strategy officer at Wave, told us. “It’s become a part of our daily routine.”
What are the pros and cons of payment apps?
Online payment apps are easy to use and convenient, but they aren’t risk free. Here’s a look at the pros and cons of accepting online payment apps in transactions with your customers.
Pros of online payment apps
- They’re a familiar payment method. When people were stuck at home at the onset of the COVID-19 pandemic, e-commerce and online payments exploded in popularity. Precedence Research puts the overall value of digital payments in the United States at $36.07 billion, a figure which is projected to increase to $184.72 billion by 2034. “It speaks to the comfort level of consumers in paying online,” Axler said. “It used to be not well understood, not routine.”
- They’re convenient for customers: Many customers like the convenience digital wallets offer, allowing them to cycle through various payment methods at will. When a business accepts online payment apps, customers know they can choose to pay however they like, which helps improve customer satisfaction and build loyalty.
- They speed up checkout. Accepting online payment apps streamlines the checkout process in both e-commerce and brick-and-mortar stores. The quicker and easier it is to purchase something, the less likely a customer is to abandon their shopping cart.
- They improve security: Digital wallets tokenize card details, replacing credit card numbers with unique and random codes called “tokens.” Tokenization improves security and reduces the likelihood that data breaches expose customers’ financial information. This creates peace of mind for customers and reduces potential liability on the part of the business by reducing the amount of sensitive data they keep on hand.
Cons of digital payments
- Scammers target digital wallets often. Scammers often target consumers and businesses using online payment apps. For instance, dummy apps that appear in the online app stores collect personal information about the user and use it to commit fraud. Encourage your customers to use well-known payment apps available from legitimate vendors.
- They can get pricey to accept. You’ll be charged a transaction fee when customers use payment apps linked to their credit cards. Card-not-present payments, which is the category online payments often fall under, typically cost more for the merchant. “It tends to be the most expensive way to go,” said Andi Gray, president of Strategy Leaders. “Business owners really need to know what they need the payment app for.”
- They’re harder to manage. Getting all the transactions from disparate payment apps into one accounting system can be cumbersome and time-consuming. “When you start to accept payments electronically, you don’t have them tied to a particular invoice or particular receipt,” Axler said. Business owners can solve this dilemma with cloud-based accounting software that organizes all transactions under one dashboard. [Read related article: The Best Accounting and Invoice-Generating Software]
The best online payment apps
These are the best online payment apps that small businesses should consider accepting:
- Apple Pay: Apple Pay is among the best-known mobile payment apps. Users input their credit or debit card information into the mobile wallet on their iPhone and then they can use Apple Pay in stores and online. Apple Pay uses near-field communication (NFC) technology to enable contactless payments. There is no fee to accept Apple Pay, but you do pay the transaction fees on credit card and debit card sales. [Read related article: How to Accept Payments With an iPhone]
- PayPal: PayPal is a popular online payment app for consumers in America and abroad. It’s free to use and accept, but you’ll pay standard rates on credit and debit transactions. You can also send invoices to clients through PayPal’s online platform. [Find out more about credit card processing with PayPal]
- Venmo: This popular peer-to-peer payment app is owned by PayPal and has nearly 68.3 million users. There are no fees to use or accept Venmo, although it generally charges transaction rates of 1.9 percent plus $0.10 for payments via credit or debit card. You get paid instantly when a customer uses Venmo. [Find out how Venmo Business works and how to get it for your company]
- Zelle: This online payment app lets you accept payments directly from customers’ bank accounts, including Bank of America, JPMorgan Chase, Wells Fargo, Capital One and U.S. Bank. Generally, there is no fee to send or receive money with Zelle as either a business or consumer. However users’ banks may set transaction limits and fees. Your business account needs to be registered with Zelle before you can accept payments.
- Google Pay: Google Pay has about 150 million users worldwide with 25.2 million in the United States. This Android credit card payment app was initially only for Android devices, but there’s now an app you can download if you have an iPhone. You won’t be charged any fee for taking payment by Google but expect to be charged as usual by your payment processor. [Related article: SMB Payment Processing: What to Know]
Mark Fairlie and Jennifer Dublino contributed to this article. Source interviews were conducted for a previous version of this article.
