What Online Payment Systems Are Available in the UK?

What Online Payment Systems Are Available in the UK?

All businesses need to work out how they are going to accept payments from their customers as without a payment system you’re little more than a showroom.

Bricks and mortar businesses have the easiest job. They can deal directly with their customers on their own premises, which means they can accept cash and cards and physically process.

For online businesses, however, it’s a little more difficult.

Your customers are probably far away from your premises, which means you have to process their payment remotely.

Thankfully, the eCommerce industry has been around for decades and business owners now have a load of options to consider when implementing a payment system.

In this article, I’ll look at three common payment systems that power the vast majority of online payments. I’ll also look at the most common payment methods customers use to actually make their payment.

Let’s get started.

 

Most Common Payment Systems

Common Payment Systems

When it comes to accepting payments, eCommerce businesses typically use one of three main options:

  • Payment Gateways — to take payments on a website
  • Virtual Terminals — to take payments by phone
  • Pay by Link — to email a link for the customer to make payment

Each of these payment systems has its advantages and disadvantages so there is, unfortunately, not as simple as saying one is the best of the three.

In the sections below, I’ll look at each of the three in more detail and discuss what sort of business might find them useful.

 

Payment Gateways Systems

If you want to accept payments online, you need an eCommerce system to orchestrate the sale, a payment gateway to process the card payments and a merchant account to accept the money.

The simplest option for merchants is to find a payment gateway that works with their website and a merchant account that charges the lowest fees.

Then you plug them together and off you go!

Combination systems are by far and away the cheapest option with payment gateway fees as low as 5p and merchant account fees as low as 0.3%.

There’s also integrated options like Stripe, which package a payment gateway with a merchant account and sell it for a higher rate.

Payment gateways are brilliant for traditional eCommerce businesses, the type that sells products, subscriptions and so on. They allow you to automate the sales process and scale your business as far as your eCommerce system will allow.

 

Virtual Terminal

Have you ever paid for something over the phone and wondered how the customer service rep had actually processed the payment?

Well, that would be a virtual terminal.

A virtual terminal is a desktop application

 

basically a digital card terminal, which allows a merchant to manually process a card payment without the card being present.

Virtual terminals are super convenient for businesses with longer sales cycles or where there’s direct contact between a sales rep and customer.

While they necessary for traditional eCommerce businesses, they’re a nice addition and can help boost your conversion rate as they allow you to process transactions manually.

 

Pay by Link

For larger online businesses, it might be worth your while exploring pay by link services.

If you’re unfamiliar with pay by link, it works like this.

You create customised emails with a Pay Now button and send them to your customers’ inbox. When your customer clicks the link, they are sent to a secure checkout page with the transaction details pre-filled. They then enter their payment details and the service provider processes the payment.

Pay by link systems definitely don’t work in every industry but they’re still used extensively by businesses with large average transaction values and complex transaction contents.

Pay by link services are sometimes included with other packages (e.g. payment gateway, card terminal, etc) and typically copy their pricing structure.

 

Most Common Payment Methods

Common Payment Methods

Online transactions could conceivably be paid for using dozens of different payment methods. However, most are inefficient or incredibly niche.

When it comes to online payments, three methods dominate the sector: Credit cards, debit cards and PayPal.

In the next few sections, I’ll summarise each payment method and briefly discuss the market share of each.

 

Credit Cards

Credit cards are the most common form of payment online, used in 39 percent of all transactions. Credit cards are also the most preferred payment method with 47 percent of online consumers saying they prefer credit cards to other payment methods.

Merchant accounts will typically charge around 0.3 to 0.6 percent of the transaction value to accept a credit card payment.

 

Debit Cards

Just over a third of all online payments — 36 percent if you want the precise figure — are made using a debit card, making it the second most popular payment method. It’s also the second most popular payment method with one-quarter of consumers saying they prefer using debit cards online.

The good news for businesses is that debit cards are the cheapest of the three payment methods to process with merchant accounts charging between 0.3 and one percent.

 

PayPal

PayPal enables any individual or business with an email address to securely, easily and quickly make payments online. It’s a hugely trusted name, boasts fantastic brand awareness and is used to make 19 percent of all online transactions.

Since it launched in 1998, PayPal has crushed its competition to establish itself as the online-first payment system.

However, putting all PayPal’s successes to one side, it isn’t the preferred payment option for online consumers. When asked about their preferred payment method for buying online, just 12 percent of people said PayPal was their preferred option.

The main drawback to PayPal payments is the cost. Accepting PayPal rather than a credit or debit card will cost you significantly more.

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