Electronic payments are the norm for consumer transactions. If you are like most people in the modern world, you make electronic payments daily--gas pump, Amazon, online bill pay, even tapping your credit card. So you may be asking, then why am I reading a blog post about it? Well, because for many businesses, electronic payments are not quite so common. In fact, recent research shows that 25% of businesses in the U.S. still pay vendors with paper checks.
Whether you’re looking to reduce the use of paper checks at your business or just curious about options for electronic payments, in this post we are going to run through the basics.
The common options for electronic payments for business include Credit Cards, ACH, Wire Transfer and Digital Wallets.
We don’t have to tell you what credit card payments are, but you may not know about virtual credit cards. These are essentially disposable credit card numbers for one-time or temporary use to help prevent fraud or theft. Now let’s look at some pros and cons of credit cards and virtual credit cards.
Automated Clearing House (ACH) payments are how most direct deposit transactions work for payroll. It is a type of bank transfer secured by a third-party clearing house as the mediator and is a great choice for paying vendors.
Wire transfers are similar to ACH in that they are both bank transfers. Wire transfers are typically used for large, one-time payments or overseas payments, and they use banks as intermediaries as opposed to a clearing house.
Learn More: Wire Transfer vs ACH Transfer
Digital wallets or ewallets are software systems like PayPal, Venmo or Apple Pay. These apps allow simple digital money transfers and can use a variety of payment methods, including crypto currency.
A 2019 study showed that most B2B accounts payable pros prefer to use ACH. However, because there is so much diversity in the market between vendors and customers, there is no single best method for electronic payments.