Types of payment methods in the UK

What is a payment method?

A payment method is how you pay for goods or services, from the cash you hand over at the counter to tapping your card on a reader, from writing a cheque, using debit or credit cards, to going digital with bank transfers, mobile payments, online platforms and cryptocurrencies. 

Each option has its benefits, whether it's convenience, security or ease of use. As tech advances and finance evolves, we're seeing more and more ways to pay, making it easier to get what you want, whether you're shopping in person or online.

Benefits of payment methods

Offering a variety of payment methods isn't just about keeping up with the times – it benefits your business in several ways.

Enhance convenience and customer experience

Offering a variety of payment options means your customers can easily buy what they need, no matter where they are or how they like to pay. It's all about making shopping smooth and hassle-free for everyone. This level of convenience creates a positive shopping environment, encouraging repeat visits and building a loyal customer base.

Bolder security

Modern payment methods offer advanced security features to counter various types of fraud including credit card fraud, offering peace of mind for businesses and customers. This strong security foundation is important for building lasting trust and confidence.

Reduce costs

Embracing the right payment methods doesn't just benefit your customers – it also makes good financial sense for merchants. Some payment options have lower fees or better terms, which can help businesses cut down on their operational costs. Over time, these savings can add up, allowing you to invest more in what matters most – improving your service and offerings.

Improve cash flow

Diverse payment methods can help you get quicker access to funds, which is a game-changer for improving your cash flow. You’ll have more flexibility to invest in new products, enhance services, and grow your business in ways that directly benefit you.

Different types of payment methods

By card 

• Debit cards: The cornerstone of card payments, debiting funds directly from a bank account.
• Credit: Offering customers the ability to pay later, credit cards are a staple in consumer finance.
• Prepaid: Preloaded cards are a secure alternative for online and in-person purchases.
• Contactless: Powered by NFC technology, contactless payments are at the forefront of convenience in transactions.

By phone

• Digital wallets: Revolutionising payments, digital wallets offer secure and quick transactions.
• Over-the-phone payments: Still key for many businesses, particularly for services that are managed remotely.

Online

• Online banking: Direct bank transfers rank as one of the most dependable ways to pay.
• Pay by link: Simplify the payment process by sending a payment link directly to customers.
• QR code: A quick scan of a QR code can complete a payment, for extra convenience.
• BNPL: Buy now, pay later schemes are becoming increasingly popular, offering flexibility to consumers.

Cash

For some, cash remains the easiest payment method around. Even with the rise of digital alternatives, many people continue to rely on cash for everyday purchases. It's particularly useful in shops that do not accept digital payments – especially for older customers who are less tech-savvy.

Cheque

Cheques are still around as a traditional way to pay without going digital, especially in the professional services industry. These give you a solid paper trail for your payments and let you control when your money moves between accounts, making them a smart and safe pick for customers and businesses alike.

Choosing the right payment methods for your business

Next, we're going to look at how the size of your business, whether a small to medium-sized enterprise (SME) or a larger enterprise, along with the industry you operate in, can shape the ideal payment methods for your operations.

Business size

SMEs 

SMEs make their mark by rolling out a variety of payment methods, from online transactions and card payments (including the tap-and-go contactless option) to traditional cash. This adaptability is key to avoiding lost sales and appealing to international customers who prefer specific payment methods.

Balancing ease for customers while keeping things running smoothly is the sweet spot. However, SMEs need to keep these options streamlined to sidestep any potential complexity or high costs.

Enterprise

Enterprises face unique challenges due to their volume of transactions. They require payment systems that are not only fast and secure, but also capable of managing vast amounts of data. This often leads to investments in advanced Electronic Point Of Sale (EPOS) systems or services. 

For big businesses, it's crucial to have solid online payment gateways, direct bank transfers, and digital wallet options, including those that support contactless payments. These methods make sure transactions are not just efficient and secure but can also grow with the company.

Business type

Hospitality 

In the hospitality industry, the pace is fast and the expectation for service is high. Customers are looking for a seamless experience from the moment they walk in.

This means payment processes need to be as smooth as the service itself. Quick and secure payment methods like contactless cards, mobile payments and online booking systems not only meet the need for speed but also ensure customer and business transactions are safe. 

For hospitality businesses, streamlining the payment process improves the overall customer experience, encouraging repeat visits and positive reviews.

Professional services

For businesses providing professional services, invoicing and collecting regular payments are part of the daily workflow. Electronic payments, including bank transfers, online payment gateway and direct debit services, offer both the business and the client convenience and reliability. 

These methods speed up the payment process, reduce paperwork and offer a clear record of transactions for both parties. They're especially useful for setting up recurring payments, making it easier to manage ongoing client relationships and ensuring timely payments without too much back-and-forth.

Retail 

Retail customers come with their own set of expectations and preferences, influenced by the wide range of shopping experiences available, from in-store to online. Offering various secure payment methods caters to this diversity, ensuring every customer finds a payment option that suits them. 

This covers all bases, from classic cash and card payments to the latest in digital wallets and Buy Now, Pay Later services for those bigger buys. For retailers, having these choices available doesn't just make shopping smoother, it also boosts the chance for more sales by making it easier for customers to go through with their purchases.