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Electronic Payment Methods: A Primer for Business Operations

electronic payment

Electronic payments go far beyond payroll direct deposits. Electronic payment options are critical to the success of any modern business.

These days you can pay for just about anything with a tap of your credit card or mobile wallet, such as ApplePay. People want to pay online quickly and consumers appreciate it when companies make the electronic payment process as smooth as possible. In this digital age, increasingly demanding customers want super-fast services across the supply chain, and electronic payment portals are no exception.

Electronic payment systems, such as credit, debit, e-wallets, and mobile payments are growing in popularity and making payment processes more secure, transparent, and hassle-free for both customers and businesses.

In the eCommerce space, Automated Clearing House (ACH) payments are on the rise too. From 2019 to 2020, the number of payments processed through the ACH Network climbed 8.2% to 26.8 billion payments valued at $61.9 trillion, according to the National Automated Clearing House Association (NACHA), the body that oversees the ACH network.

Whether you are selling partial inventory on eBay, taking online payments through PayPal, or setting up an informational digital product store on Shopify— it’s essential to get set up with a method of accepting electronic payments.

In this blog post, you will learn the how and whys for ensuring your business is set up to be successful with your electronic payment options.

Electronic Payment Solution Options

Choosing an electronic payment solution is an essential decision for any business and there is no one-size-fits-all solution. You must evaluate the needs of your business and source an electronic payment provider that offers solutions to fit your unique situation.

Figuring out the best ways to accept electronic payments and a payment processing platform can be daunting when there are so many options and providers to choose from.

Beyond fees, fraud, and conversion—your company’s ability to expand internationally can also impact your electronic payment processing choice. There’s much to consider, from the transaction fees to fine-print contracts.

1. Credit and Debit Cards

It’s also important to give some careful thought to the ratio of credit card transactions the business will process in person, online, and over the phone. As well as which type of credit or debit cards you will accept

Visa, Mastercard, Discover, and American Express are the most popular. Before choosing an electronic payment solution, take time to compare because processing fees vary between transaction types and card types. You also need to consider the volume of transactions you anticipate you’ll be processing each month because some companies offer better rates for larger volumes.

If you running an online-only business, make sure your payment processing provider integrates easily with your website. Bear in mind that some, but not all payment gateways offer consumer financing options, which can help boost conversions.

For brick-and-mortar-type businesses, you need to take into consideration new integrations—like payment terminals—and ensure they are compatible with your current system. Processing fees range from around 1.3% to 3.5%, in addition to the card processor's cut. Other fees, which go to the card's issuing bank and the credit card network, are non-negotiable.

Debit cards use a different pricing model, and generally cost less for merchants. Also called check cards or bank cards, a debit card is a payment option that deducts money directly from a consumer’s checking account when it is used. The money that can be spent with a debit card is tied to the account balance—you can only spend money you literally have.

2. ACH Electronic Payment Transactions

The Automated Clearing House (ACH) is the umbrella term for a network that moves money between bank accounts across the USA. It’s run by the National Automated Clearing House Association (NACHA). Payments via ACH are made through the ACH network, rather than credit or debit card networks such as Visa or Mastercard.

ACH transfers tend to be less costly than card transactions because they don’t need to be routed through expensive card networks. The median internal cost for processing ACH payments is $0.29 per transaction. In addition, ACH payments are not required to follow the same PCI-compliance guidelines as credit card transactions. However, NACHA requires all parties involved in ACH transactions to implement processes, procedures, and controls to protect sensitive information and to encrypt banking information such as a customer’s bank account and routing numbers.

Moving money between bank accounts usually takes 3-5 days with ACH, with some ACH transactions now processed in a day.

Direct Deposits

These cover all deposit payments from businesses or the government to consumers. It includes payroll payments, reimbursements for employee expenses, and payments from government agencies for social security, other benefit programs, and tax refunds, as well as annuities and interest payments.

Direct Deposit Plus is an ACH distribution solution offered by NatPay, the market leader in third-party processing of Direct Deposits is unmatched here.

Why? Well, while other ACH distribution solutions usually require accounts to be held with banks or providers or that you purchase additional software, with DDPlus ACH distribution, no matter what type of software your organization currently uses, NatPay ensures compatibility and accuracy. Funds are electronically deposited into specific bank accounts: checking, savings, or any other type of account at any financial institution.

Direct Payments

ACH payments are a type of electronic bank-to-bank payment method in the US and are different from card payments. Since ACH payments are not routed through the more expensive card networks, it tends to be a cheaper option for electronically transferring funds.

Using the US bank-to-bank infrastructure to process an electronic payment brings additional benefits for entities in that anyone with a US bank account (businesses or consumers) is able to pay via the ACH system. It can also help with client retention.

Credit and debit cards expire, which can lead to potential customer churn. With an ACH transaction, however, a bank account is the source of funds and the risk of involuntary churn is significantly reduced.

There are two main types of ACH transfers—ACH credits and ACH debits. They largely differ in how the funds are transferred between accounts. With ACH credits the funds are pushed into an account, while with ACH debits the funds are pulled out of an account.

For businesses taking recurring payments, NatPay offers an ACH Direct Payments option.

How do ACH payments work exactly?

Let’s take your automated monthly phone bill payments as an example. When you sign up for autopay with your telecoms company, you provide your checking account information (routing and account number) and sign a recurring payment authorization.

Then, when you hit your billing cycle, your phone company’s bank (Originating Depository Financial Institution, ODRI) sends a request to your bank (Receiving Depository Financial Institution, RDFI) to transfer the money owed. The two banks then communicate to process the transaction. If you have sufficient funds, the transaction is processed and the money is routed to your phone company’s bank account.

electronic payment

3. Mobile Payments

The transformative potential of the payments industry has been the focus of attention for years. In 2019, the electronic payment sector witnessed an unprecedented influx of investment, attracting $15 billion, 20% more than the preceding year. Impressively, the numbers show, that this funding injection made up a quarter of the investments into the whole fintech industry, and that was before COVID-19 struck.

Last year, 2021 set the stage for a further breakout, but this time in the mobile payments space. When the pandemic hit, people quickly shifted to new behavior regarding how they paid and received funds electronically. Mobile payments ticked many boxes amid this seismic shift in everyday life and it’s become increasingly easier for companies to integrate new electronic payment services thanks to third-party services, such as NatPay.

A hallmark of innovation is the ability to reinvent norms so customers have flexible, convenient options. Traditional customer experiences typically require citizens to wait agonizingly in line at a store or office to pay for monthly utility bills. But thanks to technology, businesses can now offer an easier solution: mobile payments. With mobile payments expected to hit $161.41 billion this year, this payment method is rapidly emerging as a big player in the digital payment ecosystem and is predicted to grow to $930.44 billion by 2026.

Mobile payments are clearly booming and simplifying the transaction process for both the merchant and the customer.

Types of Mobile Payment Options

  • Near Field Communication (NFC) These are contactless payments between a mobile and an NFC-enabled card reader. A common example of an NFC payment is when a customer stores their bank details in their mobile wallet (a virtual wallet that stores card information on a mobile device), opens that wallet (ApplePay or SamsungPay, for example) on their phone, and ‘taps’ the card reader as they would with a physical credit card.
  • Quick Response (QR) codes – QR codes are two-dimensional square codes that are decoded once scanned with a customer’s phone camera, or with a QR code scanner. Generally, once the code has been scanned, a link in the phone’s browser may open asking for payment confirmation.
  • Magnetic Secure Transmission (MST) MST payments use magnetic signals to generate a connection between a mobile device and a POS terminal. When customers hold their phones against a POS terminal, the phone emits a signal that mimics the magnetic strip on a credit card.

4. Wire Transfers

Typically, you can get the money transferred much faster with wire transfers, but they're pretty expensive—costing the payer an average of $25 per transaction, and even more for international wire transfers.

On top of that, some financial institutions may also charge the recipient a fee to receive the funds. Wire transfers are processed in real-time, as opposed to ACH payments, which are processed in batches three times a day.

Because of their high cost and speed, wire transfers are suited for large or time-sensitive transfers, either within the US or abroad. But if time sensitivity isn’t an issue, the lower cost of an ACH payment offers a significant advantage over a wire transfer. It’s important to note however that ACH transfers are only available in the USA.

5. Electronic Payment Online Gateways

Payment gateways relay transactional information to issuing banks, which in turn authorize or decline such transactions. Simply put, payment gateways facilitate communication between banks and sellers.

The software performs a number of tasks from the moment a customer places an order online. It first encrypts bank account information that would be sent to the vendor. This transaction data is then sent to the payment processor that the acquiring bank uses. Upon receipt of the encrypted data, the payment processor sends it to a card association for authorization. Ultimately, the bank is responsible for authorizing or declining such a request. Once approved, the processor sends the authorization to the payment gateway, which transmits it to the interface for processing, after which the merchant fills the order.

Types of Electronic Payment Gateways


PayPal has evolved from a simple way to send money to friends and family into a company that offers both online and in-person credit card processing and is a great example of a redirect. When the gateway takes the customer to PayPal to process and make the payment, a redirect occurs.

Redirects provide a convenient and secure payment platform and a flexible platform for merchants, too. Paypal’s Payflow gateway offers a couple of options: a $0/month checkout payment gateway hosted by PayPal, or a $25/month option which offers greater customization capabilities. Both options come with PayPal's fraud protection security at no extra charge.

PayPal currently charges processing fees of 2.9%, plus an additional 30 cents per transaction.

Checkout On-site, Payment Off-Site

Stripe is an example of a payment gateway that uses this approach. The front-end checkout happens on the merchant’s site, but the back-end processing is handled by Stripe. As with redirects, this method offers simplicity for merchants. It’s convenient for customers too, because they don’t need to leave your site and hop onto another to complete their transactions.

Popular with SMBs as well as larger companies like Lyft, Stripe handles mobile e-commerce as well as SaaS and platform-based payments. Processing fees for Stripe are currently 2.9% and 30 cents per transaction.

On-Site Payments

As the name implies, on-site implies that the entire payment process takes place on the merchant’s secured website, reinforced by using SSL encryption and the latest software. Customers enter their payment details on your site at the checkout screen, creating a seamless transaction.

This approach is typically favored by large online merchants with the expertise and resources to manage it effectively. From a customer’s perspective, onsite payment processing is a smooth process and will most likely result in more completed transactions, and having fewer abandoned carts could significantly improve revenues. Whether that balances out the added costs of setup and ongoing payment gateway/SSL costs is a decision each business needs to weigh for itself.

NatPay—Your Third-Party Processing Solution

The payments revolution is in full swing with electronic payment methods transforming how we bank, pay, and do business with innovations in the payment industry giving rise to a simpler and more efficient way of managing payments. Gone are the days of relying on traditional methods, such as cash and checks. Moreover, the ever-evolving technological landscape has led to an eCommerce explosion that has spurred the demand for efficient and secure payment systems.

Cash payments are still with us especially for low-value transactions because it's universally accepted, along with speed, anonymity, and lack of fees. And while credit cards and debit cards are capturing the lion's share of payments at both the POS and online, the rise of the smartphone has given customers unprecedented access to an ever-expanding range of services. Mobile apps or applications have enabled payments for everything from ordering food to booking vacations, as well as offering the option of quick, secure payments through banking apps.

In the dash to ditch cash, more and more businesses are turning to ACH transactions for both payments and receivables collection, not only because it's more secure than cash or checks, but it offers convenience and security for customers too. And NatPay can help with all your third-party processing needs because our distribution solutions go well beyond just payroll direct deposits for employees. From direct deposit of salaries and wages, tax payments, and reimbursements to B2B payments, vendor payments, and benefit payments, we can help you manage it all through our rigorous and robust online systems.

Partner with a strong electronic payment provider, like NatPay to assure all your payments are processed through an industry-leading security standard, so you can focus on running the rest of your business operations.