7 Top Retail Payment Options and How to Accept Them (2022)

Retail payment options

You need to give yourself as many opportunities to succeed in your business as possible. One way is to stay up to date on the preferred methods of payments for your customer base. 

It’s common to accept cash and credit card payments from customers. But if those are the only payment options you accept, you could be turning away new customers and missing out on opportunities to deepen relationships with existing ones.

By understanding the benefits of the many payment options available, you can decide which makes sense for your store and your customers. Then, with the help of a flexible retail point-of-sale (POS) system, you can begin accepting most payment options with ease, creating better customer experiences and nurturing repeat business.

Types of payment options

According to CustomerThink, nearly 50% of customers who can’t use their preferred method of payment will abandon a purchase. And the other 50% who end up buying from you? They aren’t seeing the best customer experience you can offer.

That’s a lot of avoidable revenue left unrealized simply because you don’t accept as many payment methods as you could.

In other words, the best option for retailers is to accept as many payment methods as possible. Let’s look at all types of payment options:

Cash 

Cash is, of course, the most basic payment method you can accept. Cash also doesn’t require you to research payment processors or worry about fees.

The pandemic shifted payment behavior slightly. McKinsey reported that cash transactions declined 16% globally in 2020, with the US seeing a 24% fall in cash payments. McKinsey suggests that cash payments will rebound, depending on how the economy recovers from COVID-19. 

While there are some intricacies to handling and accounting for cash transactions, there are very few downsides to letting your customers pay with cash. On the flip side, there are quite a few benefits for both you and your customers:

  • Cash is easy and convenient: This is especially true for those customers who prefer and carry it regularly (particularly important if you offer cash on delivery options).
  • Speed: When customers pay with cash, their payment is in your hands (albeit not your bank account) immediately.
  • No transaction fees: When you accept cash payments, you keep more of the actual money because you don’t have to carve out payment processing and other fees that credit cards and other payment types usually incur.

In short, accepting cash payments is still expected as table stakes in retail, and there are almost no drawbacks to it.

Checks and echecks

Next to cash, paper checks would be the most direct form of payment. Like cash, this form also doesn’t require you to research payment processors or merchant fees. 

While the number of checks being written is dropping by 1.8 billion a year, the Federal Reserve of Atlanta reported that 25% of consumers 65 and older still have a preference for writing paper checks. So even though accepting paper checks for your business may seem outdated, there are still a few benefits to keeping it as an option:

  • No transaction fees: When you accept a paper check, you don’t have to worry about most merchant or processing fees, so you’re able to keep most, if not all, of the payment.
  • People tend to use checks for larger purchases: On average, check payments tend to have a higher value amount (around $300 versus other forms of payment at $87). 

An echeck is a digital version of a paper check. Echecks use the Automated Clearing House (ACH) to take money out of a customer’s checking account and deposit it directly into the merchant bank’s business account. Echecks act more like direct bank funds transfers, so there will be a fee when using echecks, but they are amongst the lowest fees of any payment options.

According to the Federal Reserve Payment Study, ACH was the only one out of three core payment systems that grew in number in 2020. This is most likely due to the marked increase in e-commerce sales. People are moving from paper checks to echecks, so even though there is a slight fee involved with using echecks as a payment system, there are benefits to providing it as an option for your customers:

  • Fewer limits on transaction amounts: Bank-to-bank transfers of funds have little to no limits in terms of amounts. So you don’t have to worry about your customers’ credit limits or about them reaching their debit card limit. 
  • Lower fees: Compared to credit cards and debit cards, the fees for accepting echecks are usually significantly lower than other electronic payment services. 

Paper checks and echecks are payment solutions that require little to no fees to accept in your business. Accepting them as a payment option will only increase your business without costing you very much at all.

Credit cards and debit cards

Credit and debit (bank-issued) cards have been around for a while, but their use is far from plateauing. In fact, research from BAI Research and Hitachi Consulting shows that 41% of consumers are going cashless often, and 97% of survey respondents are turning to credit and debit payments instead.

In part because of numbers like that, accepting credit/debit cards has become the norm. It’s the bare minimum retailers need to do to keep pace with consumers and competitors.

That’s actually good news for consumers and retailers alike, because there are a lot of pros to credit and debit card payments. Data shows that consumers spend more when paying with a credit card versus cash. That’s something the Girls Scouts of America learned when it quadrupled annual cookie sales over the prior year simply by implementing mobile credit card swipers.

In addition, credit and bank cards:

  • Lend stores some authenticity. Accepting credit cards (specifically Visa, Mastercard, Discover, and American Express) is so common that stores without the ability to accept card payments may be seen as being “behind the times.”
  • Increase sales overall. With more and more consumers forgoing cash entirely, allowing credit card payments means you can avoid losing out on sales when customers just don’t carry cash.
  • Have cash flow benefits. Credit card payments, unlike cash, are often deposited into your bank account automatically. While the exact timing can vary from one payment processor to another, you can typically expect the money to hit your account soon after a sale is completed.

The one caveat to all of those benefits? Fees. Processing credit cards means you’ll have to accept the associated transaction fees that payment processors charge. While these fees can vary, they average between 1.5% and 3% of the total sale.


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Mobile payments

There’s another payment method experiencing rapid growth over the last few years: mobile and smartphone payments, also known as contactless payments. These include common smartphone payment options like Apple Pay, Google Pay, and Samsung Pay.

In 2021, more than four out of 10 US smartphone users used contactless payment at least once. And the use of mobile payment apps like Apple Pay and Google Pay is expected to double between 2020 and 2025. There are a lot of reasons for this growing interest in mobile payments, chief among them: mobile payments are faster and easier for consumers who typically have their phones out anyway.

In addition, there are some choice benefits for retailers who accept mobile and smartphone payments, too:

  • Customer convenience. As mentioned, it’s easier and faster for customers to pay you this way.
  • Cash flow. Mobile payments, similar to credit and debit cards, typically hit your bank account less than three days after the sale.
  • Data availability. When customers pay with their smartphones, you can potentially receive and track customer data, including how frequently they shop with you and how much they spend, and you can engage with customers throughout the in-store journey (by sending location-based updates on sales, discounts, and more).

Integrate alternative payment methods such as digital wallets, mobile transfers, and bank transfers. Having these options increases customer loyalty and purchase rates because people are more inclined to shop where it is most convenient for them.

Gift cards and store credit

Gift cards and store credit are one payment method you may not hear about very often, but they’re one of a retailer’s most powerful tools in building long-term loyal customer relationships. In a nutshell, store credit enables retailers to deepen and continue existing customer relationships, while gift cards help introduce new people to your store in a low-risk way.

Gift cards, store credit, and discounts are all levers you can pull to create better customer retention and loyalty. Plus, there are several other key benefits for retailers:

  • For one, gift cards and store credit encourage customers to spend more because they’re likely to spend more than the gift card or credit is worth. Plus, customers feel more comfortable spending more money with your store when they know you offer a great return policy—it’s like a safety net.
  • When it comes to returns and exchanges, issuing gift cards or store credit in lieu of refunds enables you to be more flexible and creative. For example, marketer Kaleigh Moore shared an interesting experience she had with a retail return: a company offered to credit her 120% of the original purchase price if she opted for store credit over a cash refund.

Overarching all of the benefits, store credit and gift cards enable you to keep money in your ecosystem. Even if the gift card never gets spent or an item gets returned/exchanged, that sale stays with your business.

FURTHER READING: How to reduce returns and sell more with store credit

Custom payments

As we mentioned before, a good POS system offers you the flexibility to accept as many payment methods as you and your customers need. That includes custom payments such as:

  • Split payments. The classic example here is when a group wants to split their restaurant bill among multiple credit cards. In a retail environment, this may look like two shoppers jointly purchasing a gift with two credit/debit cards.
  • Split tender. For flexibility, shoppers may prefer to pay for part of their order in cash and put the rest on a credit card.
  • Partial payments. For some retailers, it makes sense to accept a partial payment upfront and offer credit or payment plans (like layaway) to collect the rest. Alternatively, retailers can accept an initial payment in-store and have the customer pay the rest of the bill online, which can increase the average order size.
  • Zero payments or IOU. Similarly, some retailers may offer layaway or other payment plans without any upfront payment. Your POS needs to be able to account for these transactions.

The chief benefit of customer payments like those above is that they enable retailers to be more flexible, often to the benefit of both the store and the customer.

For some brick-and-mortar retailers, custom payments like split payments and split tender are a necessity in order to cater to customer preferences and keep up with competitors. However, split payments between multiple credit cards may mean that your store incurs higher credit card processing fees, so it’s important that you take the costs of offering these custom payment options into consideration.

We offer the option to pay in full or to pay in monthly installments. The monthly payment option is an excellent way to make our mattresses more accessible and affordable for our customers.

Cryptocurrency

Cryptocurrency is a digital currency protected by cryptography, which is a secure communication technique that transmits information with encrypted contents. It’s nearly impossible to counterfeit because it exists on a decentralized network called a blockchain. It cannot be manipulated by any government or organization. 

Cryptocurrencies are being adopted more and more. Between 2018 and 2020, the global user base of all cryptocurrencies increased by nearly 190%. Now, even retail businesses like Whole Foods and Home Depot are accepting cryptocurrencies for payment. 

Though crypto is a newer type of payment option, there are benefits to adopting it:

  • More secure than credit cards. In 2020, the FTC reported 4.7 million credit card and identity theft reports were filed. Thirty-four percent of those who filed reports incurred losses. With cryptocurrencies, there’s no need to worry about data breaches or identity theft because your customer’s information isn’t stored in any centralized place. It’s all stored only on their crypto wallet.
  • Lower fees and no international fees. Cryptocurrency exchanges offer fees that are lower than most other merchant fees. For example, PayPal charges close to 4% per transaction, while some bitcoin exchanges offer fees of less than 1%. Also, cryptocurrencies don’t have international currency payment fees since they aren’t tied to any one country.
  • Refunds are entirely in the business’ hands. Cryptocurrency transactions can only be refunded by the party receiving the funds. Customers cannot cancel the payment on their end or change their credit card number, so it’s easier for a business to keep track of its cash flow. 

2020 saw a 13% increase in people between the ages of 18 and 34 interested in buying Bitcoin. These are the people who are going to be your customers going forward. Part of creating a successful and lasting business is staying ahead of the curve. Offering a payment solution, like cryptocurrency, that will cater to future customer needs is part of that equation. 

Pros and cons of different payment methods

Cash

PROS

CONS

  • Cash is easy and convenient.
  • Customers can only carry around so much cash.
  • Money goes directly into your hands. There is also little to no wait time for cash deposits to become accessible in your bank account.
  • You need a safe on-site, or you need to take frequent trips to the bank. 
  • There are no transaction fees with cash. All you have to do is go to the bank and deposit it. 
  • Lots of cash on-site can make you a target for theft from both employees and outsiders.

Checks and echecks

PROS

CONS

  • There are no transaction fees for check payments. 
  • You have to go to the bank to deposit a check and it may take a few days for those funds to be accessible in your account. 
  • People tend to write checks for larger purchases.
  • People can write bogus checks, their checks can bounce, and they can stop payment, leaving you unpaid for your product and service.
  • Echecks have fewer transaction limits.
  • If they are mailing in checks for online orders, it may take a while for the check to get to you.

Credit cards and debit cards

PROS

CONS

  • Makes your store appear more legitimate. 
  • Credit and debit cards come with a lot of fees, including merchant fees for all different kinds of cards and processing fees.
  • You can cater to the growing number of consumers who are opting to carry less cash and pay with credit and debit cards, especially online. 
  • Credit card fraud could leave you holding the bag for purchases that were made with fraudulent credit card information.
  • You don’t have to go to the bank to deposit the money. Credit card and debit card payments go directly into your business’ bank account.
  • Data breaches can cause cardholders to stop shopping at your store because they feel their information is not secure with you.

Mobile Payments

PROS

CONS

  • It’s faster and easier for customers. They don’t even need to bring a wallet: they can pay for everything with their phone.
  • Data breaches if customers don’t secure their smartphones with a strong password. 
  • Mobile payments are fairly quick to hit your business account (usually within three days).
  • No cross-platform solutions. Depending on the type of mobile payment (Apple Pay, Android Pay, etc.) you may need to invest in multiple operating systems.
  • When customers pay with their smartphone you can potentially receive customer data that can be helpful in your marketing efforts.
  • If you have a brick-and-mortar shop, you’ll need to invest in hardware that can accept mobile payments.

Gift cards and store credit

PROS

CONS

  • Gift cards encourage customers to spend more in your store.
  • Added expense to integrate some sort of software or hardware to accept gift cards as payment in your operating system.
  • Using gift cards or store credit in lieu of cash for returns allows you to recapture the interest of that customer.
  • The added expense of having effective code created for your website to accept gift cards as payment.
  • Gift cards are usually given as gifts, so it’s an easy way to market your business.
  • Risk of fraud because gift cards are purchased anonymously since they are usually given away as gifts, making them untraceable. 

Custom payments

PROS

CONS

  • Allows businesses to be more flexible to their customers’ needs. 
  • You may need to invest in a more versatile POS system. That usually means it’s also more expensive. 

Cryptocurrency

PROS

CONS

  • Crypto has lower fees and doesn’t have any international fees.
  • Values of cryptocurrency can fluctuate quite dramatically. 
  • Data breaches and fraud are much less likely when accepting cryptocurrency.
  • The IRS requires you to keep track of the value of each cryptocurrency on the day it’s received and the day it was sold, which potentially can lead to a lot of paperwork.
  • All transactions are permanent. You, as the business owner, are the only one who can initiate a refund or payment change.
  • Because all transactions are permanent, a large number of refunds can create a lot of extra work for you.

How to accept various retail payments

Open a bank account

The US Small Business Association recommends that every business open a business bank account upon receiving a federal Employer Identification Number (EIN), a federal tax ID to identify the business entity. 

Business bank accounts will provide you with limited liability protection, help you in your bookkeeping, and make things a little less complicated when tax season rolls around. 

The right business bank accounts will really depend on the needs of your business. There are a lot of different kinds out there, but here are some things to look out for:

  • Do they have any introductory offers? 
  • What account features and services do they offer (i.e., Do they have a good online and mobile banking system? Do they have check writing services?)?
  • What are their interest rates for savings and checking accounts?
  • What are their interest rates for lines of credit?
  • What are their transaction fees? (Do they charge by the week, month, year? Do they charge based on transaction volumes?)
  • Do they have early termination fees?
  • Do they have minimum account balance fees, and if they do, what are they?
  • Are they compatible with whatever software you are using to help run your business (e.g., payroll software, accounting software, etc.)?

For example, if you’re mainly an online business just starting out and you’re based in the US, you might want to consider Axos Bank. It has no monthly service charges, no minimum balance requirements, and no fees.

If you’re based out of Canada, consider one of the many business accounts at the Royal Bank of Canada. The website provides an assessment quiz to help you decide on the best account for you.

💡 PRO TIP: With Shopify Balance, you can skip opening a business bank account and manage your finances in Shopify. Avoid monthly and hidden fees, earn cashback rewards on business purchases, get exclusive offers tailored to your business, and more.

Choose the right point of sale (POS)

There are a lot of different POS systems out there, but choosing the right POS system for your small business is key. Here are some things to consider when choosing a POS system:

  • Is this system designed more for in-store or online usage? If you’re operating in both brick-and-mortar and online, it’s best if you can find a POS that can connect your in-store and online sales so your inventory is always updated in real time.
  • Will it allow you to collect multiple forms of payments? The more payments your POS is able to accept, the more business you can accept.
  • Does it collect sales data and provide analytics? This will help you understand which products are selling and which ones are not. 
  • Does it build customer profiles? This will show you what marketing campaigns work on what customers and what customer experience is bringing them back to your store.
  • Does it integrate with your other tech? Check to see if your POS system has partnerships with other software and apps (i.e., your accounting software, the apps designed for your store).
  • How much does it cost? You can find open-source POS systems that cost you nothing, as well as POS systems that require $1,000 per month subscriptions. So make sure the system you choose has the right features and functionality at the right price point for you.
  • Does this system have good support? Technical issues are inevitable, so choosing a company that has a good record for helpful customer and technical support will alleviate a lot of headaches for you in the future.

As a retail business, your best bet is using a point of sale (POS) system with integrated payment processing like Shopify POS

With Shopify POS, you can: 

  • Process sales and take payments
  • Offer flexible returns, exchanges, and store credits (e.g., buy online, return in-store)
  • Provide flexible payment, purchase, and delivery options
  • Gain full visibility into your inventory across all locations, updated in real-time
  • Access robust analytics and reports
  • See customer profiles, order histories, and loyalty program status
  • Leverage app integrations to extend your POS system’s capabilities
  • Easily integrate with your business tech stack (e.g., marketing, accounting software, etc.)

Purchase the right hardware (credit card readers, tap to pay/contactless, etc.)

Retailers need hardware to process payments like tap to pay. Many times, the POS company you choose will offer hardware as part of a package deal with its POS software, or it will recommend hardware that is compatible with its POS software. 

Shopify hardware

Common hardware you’ll need includes: 

  • POS terminal, which is the device your POS software runs on. You can also install mobile POS software on a tablet, smartphone, desktop, or laptop with an internet connection. 
  • Cash drawer to safely store cash people use to pay for products. 
  • Tablet or smartphone to process transactions and accept payments anywhere in-store. Staff can also count and adjust inventory on the go.
  • Barcode scanner to read an item’s product details and ring up sales. Shopify POS lets you scan a product’s barcode using your tablet or smartphone’s camera, rather than using a barcode scanner.
  • Credit and debit card reader to accept debit and credit card payments. This hardware lets customers swipe, tap, or use an EMV chip to make a purchase.
  • Receipt printer, just in case customers prefer paper receipts over emailed ones.

Finding the right hardware for your business is going to be a balancing act. You’re going to have to figure out which payment methods are popular with your client base and the type of hardware you’ll need to invest in so you can process those payment methods. 

💡 PRO TIP: Shopping for a POS system and hardware can feel tedious. Before you decide what’s right for you, we recommend learning which factors influence how much a POS system costs.

Payment gateway (for ecommerce)

A payment gateway is basically a software application that authorizes an online payment and connects it with a bank. This allows your customers the convenience to pay for their purchases from a computer or mobile device. 

Here are some things to consider when choosing which payment gateway to go with:

  • Does the gateway integrate well with your POS system?
  • What types of payment methods does the gateway accept? Make sure to find the gateway that works with your customer base’s preferred payment methods.
  • What type of pricing options does the payment gateway offer? There are a number of ways a processor can structure its pricing options. Choose the one that works best for your business.
  • Does this gateway provide 24/7 customer support? Technical issues with your gateway are going to stop sales from coming in, so make sure whatever gateway you choose has good customer support.

With e-retail sales surpassing $4.2 trillion worldwide, finding the right payment gateway for your online sales is going to be an important aspect of making your business a success. 

Examples of payment options

Shop Pay

Shop Pay is an online checkout system that small businesses can use to provide a faster and easier checkout experience for their customers. It does this by remembering the contact and payment information of your customer and automatically filling it in for them. 

Shop Pay checkout

Once a buyer uses Shop Pay for the first time, their information is saved for future purchases. So, if a customer buys an outfit from Fashion Nova, Shop Pay will save their information for future purchases anywhere online. 

Then, if that same customer goes to Pixel Surplus to buy some fonts for their website, they can complete their purchase with one simple click or tap because all their information will be automatically filled in at checkout. 

Enabling Shop Pay in our checkout has really made the most painful point of the customer experience delightful.

Benjamin Sehl, co-founder of KOTN

Adding Shop Pay to your business arsenal provides many benefits, according to our research, including:

  • Increases checkout speed by 4 times
  • Average checkout-to-order rate is 1.72 times higher than those going through regular checkout
  • Shop Pay checkouts convert 1.91 times higher than regular checkouts

Google Pay

Google Pay is a digital wallet and online payment system that customers can use for in-app, online, and in-person contactless purchases on Android mobile devices.

Developed by Google to make app purchases in the Google Play store more convenient, it is now becoming a common form of payment for in-store and online purchases all across the globe. In fact, 84% of India’s in-store POS purchases were done with Google Pay in 2021. 

Google Pay checkout

In order to use Google Pay, your customers must connect either a credit card or bank account to their Google Pay account. Then their phone effectively becomes a method of payment for any store accepting contactless payment methods. So if a customer who has Google Pay forgets their wallet in your store, they could just tap their phone onto a contactless payment reader, et voilà

Bitcoin

Bitcoin is a digital currency that relies on peer-to-peer software and cryptography. It operates completely free of central control or oversight of banks or governments, and there is a public ledger that records all Bitcoin transactions that’s stored on servers all around the world. 

If you’re thinking of accepting Bitcoin as a form of payment for your business, you’ll need to include your Bitcoin address on your online stores and program some new code into your POS that allows for the transaction to go through. Xbox, Shopify, and Subway are three businesses that already accept Bitcoin as payment.

Trends in retail payment methods

Growing popularity of cryptocurrency

Cryptocurrency was thought to be a flash in the pan back in the early 2010s, but the number of blockchain wallets that store crypto has increased by almost 20 million in the last year alone. Now, words like “Bitcoin” and “Ethereum” have become part of our everyday language and are even in the dictionary. 

Because of the growing popularity of cryptocurrency with younger generations, more and more retailers and corporations are accepting it as a viable form of payment for their physical and online stores. These stores include Microsoft, Overstock, and Starbucks, and payment companies like PayPal. 

Buy now, pay later

The buy now, pay later trend grew in popularity during the COVID-19 pandemic. In fact, one out of every three UK consumers reports having used one of these BNPL services more than before the pandemic. 

But even as things have opened up around the world, younger consumers are still using BPNL to buy electronics, appliances, and fashion items online. Insider Intelligence estimates that BNPL will bring in up to $680 million worldwide by 2025.

As a business owner, offering BPNL options will encourage your customers to buy more big-ticket items, since they’ll be able to spread their payments out over time. For example, Shopify’s BPNL program allows your customers to split a purchase up into four equal payments with 0% interest, and it’ll have no impact on their credit scores.

Contactless payments

Smartphone use surpassed six billion users worldwide in 2021 and is forecasted to increase by several hundred million in the next few years. And because of the pandemic, a recent report by Insider Intelligence stated that in-store mobile payments increased by 29% in 2020. 

Now that consumers have experienced the ease of carrying all their payment options on their phones and don’t need to touch unsanitary money or machines. Statista reports that contactless technologies are projected to generate over $220 billion in 2023 in the US alone.

For example, the Vitamin Shoppe was forced to adopt contactless payments when the pandemic started. Andrew Laudato, the Vitamin Shoppe’s Chief Operating Officer, told CNBC that the brand’s customers didn’t want to touch anything, so it had to rush to get all contactless payment options in all of its stores. Now, Laudato says Vitamin Shoppe customers prefer the self-checkout experience and continue to enjoy using contactless payment. 

READ MORE: Tap to Buy: Should I Offer Contactless Payments in My Retail Store? 

Choose the right payment options for your business

When you have a POS system that makes it effortless for you to accept varied payment options, there are really no drawbacks to accepting all of the payment types your customers want to use.

Offering customers the payment flexibility they’re looking for means they spend more, enjoy a better customer experience, and open up the opportunity for you to deepen and sustain long-term loyal customer relationships.

This post was originally written by Roxanne Voidonicolas and has been updated by Michael Keenan.

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Retail payment systems FAQ

What are the 4 types of payment methods?

The four types of payment methods are cash, checks, credits, and money orders.

What are the three payment systems?

The three payment systems are checks, credit cards, and debit cards.

What is retail payment system?

The retail payment system refers to the various methods by which retail customers can pay for goods and services. These include cash, cheques, credit and debit cards, and electronic funds transfer.

What is the most popular e payment systems?

The most popular e payment systems are PayPal, Stripe, and 2Checkout.