The advantages of online payments for your invoices

There are a number of ways that your business can accept payments from your customers. Bank transfer, cheque, direct debit, cash on delivery, and card reader payments are only a few of the available options. 

In this day and age, online payments are becoming increasingly popular, especially during the pandemic. Offering secure online payment options to your customers provides several advantages to bank transfers or in-person payments. 

This article explores the advantages and disadvantages of offering online payment options, how secure these payments are, and how to start accepting online payments for your invoices. 

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What are online payments?

Online payments, also known as electronic payments, are any payments made on the internet. This may include bank transfers made via a bank’s mobile app, direct debit, an integrated credit card form on an online store, a payment link on an invoice, or any other payment made using the internet. 

This article discusses invoice payment links and payments made on a website rather than bank transfers made via a bank’s app. These payments include the customer typing out their credit card information and the payment being accepted or declined immediately. 

How do online payments actually work?

When the customer enters their credit card information online, the online payment gateway encrypts the data into code. A payment authorisation is then sent to the acquirer (E.g. VISA or Mastercard) who confirms with the cardholder’s bank that the payment can go through. 

Once the cardholder’s bank confirms that there are enough funds in the account and that the card is valid, then the bank releases the money to the acquirer who confirms the sale. At this point, the cardholder will see that the payment was successful and will notice the money has been taken from their account. 

During this process, the cardholder may need to confirm the payment via their bank’s mobile app or with a security code. The payment process is usually completed in a matter of seconds. 

The business will then receive their money, minus a transaction fee set by their online payment system, either instantly, or within a few days. 

How secure are online payments?

Naturally, the biggest concern surrounding online payments is security. Any online payment method must ensure data security for both the customer and business.

A new procedure called 3D-Secure (3DS) was implemented in 2021 to add an additional security measure to online payments. 3DS involves the customer verifying the payment with their bank via the mobile app or with a code sent to their mobile phone or email address. 

3DS significantly reduces the possibility of fraud and chargebacks due to the customer having to manually verify the payment at the time of purchase.

The customer who is purchasing online should always check that the business is legitimate. They should look up reviews and check their company registration number to ensure that the company is safe to purchase from. 

Online payments are very secure, however, there is always a very small risk of fraudulent behaviour online. As long as your business is using an authorised payment gateway, and the customer can verify the business, then the payment should be as safe, if not safer, than alternative payment methods. 

The advantages of online payments

Offering your customers an online payment option can benefit your business in a variety of ways. The following outlines the main benefits of using online payments for your invoices. 

Faster payments

When you offer an online payment option, your customers can pay instantly online, meaning that you could receive your money faster. This process can be much more convenient to both you and your customer than alternative payment methods. They can also pay at any time, even outside of business hours. 

Increased sales

Offering an online payment option means that you could provide your goods or services to a wider, even global audience. Your customers can pay from anywhere in the world meaning that you will see an increase in sales and profit. If you do offer these options to foreign customers, you should always make sure that your terms and conditions and shipping information are clearly stated on your invoice and/or website. 

Lower fees

Bank transfers can be tricky and incur large fees, especially for cross-border payments. Online payments can process foreign payments instantly and usually incur a much smaller transaction fee. Since online payments are automated and happen instantly, this also reduces the cost of manual labour, for instance, employing a cashier or employee to chase up late invoice payments. 

Automatic reconciliation

If your online payment solution is integrated into your invoicing software, you can benefit from automatic reconciliation. This is the process of matching a payment with its relevant invoice document. This can save you time and money in manual reconciliation and paying an accountant to check your records. 

Payment security

As previously mentioned, online payments are very secure and highly regulated. Online payments are instantly verified by the acquirer and the customer’s bank. Alternatively, if you accepted a cash payment, this would need to be verified by an employee, and if you accepted a cheque, you would need to deal with any fees if it were to bounce. 

Disadvantages of online payments

While the benefits far outweigh the disadvantages, there are some things to consider. Here are some possible downsides to online payments:

  • Downtime & technical issues: With any type of technology, there is bound to be some flaws. Rarely, you may experience technical issues or downtimes for online sales. While this is very infrequent, it could impact your sales depending on the severity of the issue. Make sure you have a customer support number available for your online payment gateway to help you resolve these issues quickly. 

  • Fraud: Although online payments are extremely secure, there is still a small possibility of fraudulent transactions and chargebacks. However, with the implementation of 3D-Secure, these possibilities are greatly reduced because the customer needs to manually accept the payment with their bank. You should check with your online payment provider that your charges are compliant with 3DS. 

Accept online payments with SumUp Invoices

SumUp Invoices is free invoicing software that helps you create professional, compliant invoices quickly. You can set up online payments to automatically include a secure payment link directly on your invoice so your customers can pay instantly with a credit card, online. 

Once the payment has been received, it will automatically match with your invoice, saving you time in manual reconciliation. There is no contract, limits, or monthly fees. Only a small transaction fee is charged if the customer pays via the invoice payment link. 

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