Payment methods guide: Navigating options for US businesses

Americans have fully embraced digital payments, with non-cash transaction volumes expected to increase by 6.4% this year, reaching 252.6 billion transactions. As digital payments surge and cash usage declines, it’s clear this shift in behavior is here to stay. To keep up with changing consumer preferences and avoid missing out on sales, businesses need to offer a variety of payment methods.

In this guide, we explore the most popular payment methods, practical advice on choosing the best options, and the key questions you need to ask payment processors to help your business adapt and continue to grow.

What is a payment method?

A payment method is a process or tool that facilitates the transfer of funds from a customer to a business. In recent years, the way funds are transferred in the US has transformed dramatically. Last year, credit cards accounted for 32% of all payments, while debit cards made up 30%, totaling over 60% of transactions. Additionally, mobile devices are increasingly used for eCommerce, with projections indicating that mobile commerce will amount to ~856 billion dollars by 2027.

Global transactions are also on the rise, with estimates suggesting the global cross-border eCommerce market will reach $7.9 trillion by 2030. Understanding the different payment methods is an essential first step to ensuring your business meets consumers where they’re at and provides the best possible payment experience.

Popular payment methods in the US

Payment methods have become so critical to the customer experience that they’ve been shown to directly impact revenue. In fact, 77% of consumers claim they will likely abandon their cart if their preferred payment method is unavailable. So, while no one payment type is best, offering the most popular payment methods can have a positive impact on the bottom line. 

Here are some of the most popular payment methods in the US: 

Debit and credit cards

Debit and debit cards continue to be the preferred payment method for both in-person and online payments, driven by the strong growth in online shopping and the desire for convenience. The major card providers include Visa, Mastercard, and American Express.

Benefits: Most businesses accept debit and credit cards, making them convenient payment options for businesses and consumers. Card payments facilitate quick and easy transactions and come with useful features such as tap-and-go. 

Considerations: Every card transaction comes with a cost. Card payments incur fees from the card-issuing bank, the card network, and the payment processor. While you can’t avoid these fees altogether, you can minimize them by choosing the right payment processing partner and, in some cases, passing a portion of the fee to customers as a surcharge.

Digital wallets 

Digital wallet payments are a form of contactless payment made on mobile devices like smartphones and smartwatches, using apps such as Apple Pay, Google Wallet, PayPal, and Venmo. As of July 2024, 65% of US adults reported using a digital wallet at least once in the past month, highlighting a strong shift towards cashless and digital payments among American consumers.

Benefits: Digital wallets offer ease, speed, and convenience. For consumers, setting up a digital wallet is as easy as adding credit card details to a digital wallet app, allowing them to make purchases by simply tapping their device. Digital wallets offer additional security features, such as fingerprint or PIN verification. 

Considerations: To accept digital wallet payments in the US, your business needs a compatible point-of-sale (POS) system for in-person transactions and an online payment gateway that supports digital wallets for eCommerce. This may involve upgrading to an NFC-enabled POS terminal for contactless payments or integrating a payment gateway that works with digital wallets into your online platform. Ensuring your systems are compatible with popular digital wallets like Apple Pay, Google Wallet, PayPal, and Venmo is essential to meet customer expectations and stay competitive.

Bank transfers

Bank transfers, including ACH transfers, direct deposits, and wire transfers, are commonly used for personal and business transactions in the US. They are especially popular for recurring payments and larger transactions.

Benefits: Bank transfers are known for their high levels of security, making them a safe and reliable payment option. They’re well-suited for larger transactions, as they generally have higher limits than other payment methods.

Considerations: Transfer times vary; ACH transfers can take 1-3 business days, while wire transfers may process within the same day but often come with higher fees. Transfers are subject to the operational hours of banks and typically do not provide instant confirmation, which can make them less convenient than other payment options.

Buy Now, Pay Later (BNPL)

BNPL services, such as Affirm, Afterpay, and Klarna, have gained significant traction in the US. These services allow customers to purchase items immediately and pay in installments over time instead of paying the full amount upfront. According to the Federal Reserve, 14% of Americans used BNPL services in 2023, up from 12% in 2022.

Benefits: Offering flexible payment options can appeal to customers who prefer to spread out payments over time, which can be particularly useful for larger purchases. This can help attract more customers, increase sales, and improve the overall customer experience. 

Considerations: BNPL fees are often higher than traditional payment methods and typically include a percentage of the transaction value. BNPL can also contribute to customer debt issues and may present a reputation risk for ethical brands. 

How do I choose the right payment methods for my business?

Offering the right payment methods helps facilitate smooth transactions, keeps your customers happy, and drives business growth. Here are some key things to keep in mind when choosing the right patent methods for your business:

Understand your customers’ preferences

Knowing how your customers prefer to pay is the first step in choosing the right payment options. To gain a better understanding, you can:

• Ask your customers directly - Run surveys, polls, or incorporate questions into your customer service interactions to ask your customers about their preferences. 

• Analyze purchase history - Mine your past transaction data to identify popular payment options. Consider other data points such as abandoned cart and value per transaction data to gain a deeper understanding of potential missed opportunities. 

• Consider market demographics - Review reputable research that shares payment preferences across demographics, purchase type, adoption rates.

Compare fees and costs 

Managing and minimizing payment processing fees is critical for businesses looking to protect their operating margin. When evaluating your payment methods options and providers, you’ll need to consider the financial implications of transaction fees, currency conversion fees, rates, termination fees, settlement times, set-up costs, maintenance, and more.

Review security and fraud protection measures

With the rise of high-profile data and security breaches in recent years, it’s no wonder security is top of mind for businesses and consumers alike. To mitigate risks of financial loss, legal consequences, and reputational damage, businesses need to offer payment methods that offer the highest standards of security. The three main pillars of safe payments to consider are:

• Authentication - This verifies the identities of parties in a transaction using methods like the CVV code and multi-factor authentication to prevent card fraud.

• Confidentiality - This ensures customer data and card details are kept private during transmission and storage, primarily through encryption.

• Integrity - This guarantees the accuracy and trustworthiness of transaction data, using methods like digital signatures and secure protocols to prevent tampering.

Consider integration with your existing systems

The payment methods you choose should seamlessly integrate with your current business systems, including your eCommerce, accounting, marketing, sales, and inventory systems. With the right payments processing provider supporting seamless integrations, you can:

• Automatically sync, reconcile, and categorize transactions and make it easier for your customers to pay you worldwide.

• Streamline order data and inventory management.

• Allow global customers to pay in their preferred currencies and payment methods.

• Start automating common processes without coding.

Offer multiple payment methods

Offering multiple payment methods is crucial for reducing cart abandonment rates. A study by PayPal found that 59% of consumers have abandoned a transaction because their preferred payment method was unavailable.

Offering variety helps improve the payment experience by allowing:

• The flexibility for consumers to choose their preferred payment method.

• Alternative options if one method fails or isn’t suitable.

• A convenient, smooth, and hassle-free purchase experience. 

What questions should you ask when choosing a payment methods provider?

To find a payments processing provider that aligns with your business needs, it’s important to ask the right questions and get a clear understanding of what you’re signing up for. Here are some key questions you can ask to help you make an informed decision:

1. What are the fees and costs involved?

Ask about transaction fees, monthly charges, setup costs, currency conversion fees, hidden charges, and early termination fees. Understanding these expenses is vital, as they can significantly impact your bottom line. For instance, Gimme Swag, a company that crafts branded, one-of-a-kind toys, partnered with Airwallex to streamline its international payments. This collaboration allowed them to save on foreign transaction fees and enhance their global operations.

2. How secure are your payment methods?

Since handling credit card payments involves sensitive information, ask about the provider’s security policies, fraud prevention measures, authorization rates, and compliance standards to protect your customers' data.

3. What payment methods do you support?

Check the payment processing provider can offer the variety of options your customers want and cover all your business needs, such as multi-currency transactions and international payments. Also, consider your longer-term business goals and payment methods trends, and whether the payments processing provider can cater to these changes. 

4. How does your system integrate with the software we currently use? 

Seamless integration with your existing software, like eCommerce platforms, accounting tools, or CRM systems, is crucial for efficient operations and smooth payment processing. Find out what is involved in set-up and maintenance, and what skills you will need in your business to manage this. 

5. What is the transaction speed and reliability?

The speed of fund settlement impacts cash flow, so ask how long it typically takes for transaction funds to be deposited into your account. Learn more about their reliability and how they handle any transaction disputes. 

6. What kind of customer support do you offer?

Effective customer support is essential for resolving payment issues quickly. Key aspects to ask about customer support include:

• Availability - is customer support available often?

• Support channels - what channels are available? For example, phone, email, and live chat.

• Response time - What is their average response time for resolving issues?

7. How do you handle refunds and chargebacks?

Efficient refund and chargeback management is vital for maintaining customer trust. Learn about the provider’s process for managing chargebacks and whether they offer support or protection, which can help mitigate future losses.

8. What additional features do you offer?

Your payments processing partner should offer more than basic transaction data. Providers that offer additional features like analytics, reporting tools, or marketing insights can help you add value across your business to improve the customer experience, streamline inventory management, address common financial operations challenges, and more. 

How does Airwallex help businesses with their payment methods?

At Airwallex, we accept payments for your business from customers worldwide via their preferred payment methods, with no coding required. 

Here’s why our customers choose us as their preferred payment processing provider:

• Comprehensive global coverage - We offer multi-currency accounts and facilitate high-speed international transfers, allowing businesses to operate globally with ease. You can open local currency accounts in 60+ countries, accept payments from 180+ countries, and make transfers to 150+ countries. 

• Cost efficiency - By offering competitive interbank rates and minimizing unnecessary foreign exchange fees, we help businesses improve their profit margins and free up funds to grow their business.

• Easy integration - Our platform seamlessly integrates with software such as Xero and Shopify, helping to streamline financial operations.

• Security and reliability - With 60+ security licenses and permits globally, we meet the highest international security measures and local requirements.

• Proven track record - We’re trusted by over 100,000 businesses to help them manage their global payments and finances.  

Curious to see how it all works? Sign up for your Airwallex account to learn how we can help you offer your customers the payment methods they prefer and grow your business internationally. 

FAQs about payment methods

What are the popular payment methods in the US?

Popular payment methods in the US include credit and debit cards, bank transfers, mobile wallets, and Buy Now, Pay Later (BNPL) services like Afterpay and Klarna.

How quickly can I set up a payment method?

The time taken depends on the payment method and payments provider chosen. Digital wallets can often be set up within minutes to a few hours while integrating a new credit card processor or setting up bank transfers might take a few days to a week. Online payment platforms such as Airwallex streamline this process, offering fast and efficient setups for your business. 

Is it expensive to set up a payment method?

The cost of setting up a payment method varies based on the provider and services needed. While digital wallets and online payment platforms have minimal setup costs, integrating credit card processors or comprehensive payment solutions may include initial setup fees and ongoing transaction charges. Airwallex offers competitive pricing and cost-effective solutions for setting up different payment methods for your business.