What is Online payment? An expert thoroughly explains the types, benefits, and how to choose

With the spread of e-commerce sites and online services, the importance of "online payment" has never been greater. As consumer lifestyles diversify, the demands for payment method such as Credit card payment and smartphone-based payment (QR code payment) and buy now pay later also broaden. However, many e-commerce businesses and accounting and payment staff may have questions or challenges such as, "Which payment method can maximize sales for our company?" "Will it increase the burden of accounting work?" "Is it safe from a security perspective?" This article thoroughly explains everything from the basic concepts of online payment, to the main types of payment method, the advantages and disadvantages of implementation, and how to choose the best payment method for your company. Please use this as the first step in your payment strategy to stand out from competitors.

1. What is an online payment?

An online payment is a system that allows you to pay for goods or services via the internet. It is used not only for shopping on e-commerce sites, but also for monthly subscription services, purchasing digital content, and selling on credit in B2B (business-to-business) transactions, among a wide range of business scenarios.

While Bank transfer and cash on delivery were previously mainstream, payment are now completed in real time, offering diverse online payment that offer great convenience for both consumers and businesses.

Additionally, the recent spread of AIO (generative AI search) and the digital shift in purchasing behavior have led consumers to increasingly seek smoother and safer purchasing experiences. As a result, online payment has evolved beyond being just a "means of payment money" into a "key marketing tool that enhances customer experience (CX) and drives business growth." Preparing payment method that meets customer needs directly connects to the company's competitiveness.

2. Representative Types and Features of Online payment

There are various types of online payment, each with its own strengths and a target audience that is easy to use. To build the optimal payment environment for your business, let's first take a closer look at the key features of the payment method.

Credit card payment

It is the most widely used payment method among online payment and essential for any e-commerce site. Because payment is completed instantly, the biggest feature is the ability to ship products and provide services quickly. Moreover, it supports not only lump-sum payments but also installment and revolving payments, making it very suitable for selling high-priced products.

smartphone-based payment (QR code payment ・Pay-affiliated payment)

payment method that utilize smartphone apps such as PayPay, d Payment, and Rakuten Pay. It has received overwhelming support from young people who do not own credit cards and users who prioritize point rewards for various services. Additionally, by using existing account information including ID payment from Amazon Pay, Apple Pay, or Google Pay, you can save yourself the hassle of entering shipping addresses and credit card numbers. This eliminates the hassle of purchasing and dramatically prevents cart abandonment (abandonment on the payment screen).

CVS Payment

This method involves paying in cash at the registers of convenience stores nationwide. It is a payment method that tends to be chosen by students who do not have credit cards or users who feel reluctant or anxious about entering card information online. From the business side, the basic method is the "prepayment method," where products are shipped after payment confirmation, which eliminates the risk of uncollected items.

Bank transfer ・Virtual Account

Bank transfer has a strong demand for B2B transactions and high-value BtoC deals such as automobiles and real estate. In particular, the "virtual account," which issues a customer-specific account number for each order, has the powerful advantage of significantly reducing the burden on accounting staff by reconciling and reconciliation work, as the system can automatically identify who is receiving the deposit.

Carrier payment

The system combines your monthly mobile phone usage fee to pay the bill. Since you can easily complete payment by entering a 4-digit PIN, it's an excellent payment method for small payment, digital content sales, and subscription (subscription) services.

buy now pay later payment（BNPL：Buy Now, Pay Later）

After receiving the product, you payment method to pay at convenience stores or banks using a invoice that will be shipped together or sent later. It lowers the psychological barriers for consumers such as "I want to see the actual product before payment" or "I don't have money on hand right now but want to buy," greatly contributing to acquiring new customers. Since the risk of uncollected assets is mainly guaranteed by payment processing company companies, businesses can introduce it with peace of mind without bearing the risk of bad debt.

3. Benefits of Implementing Online payment

Implementing online payment offers businesses a wide range of business benefits, from expanding sales to improving back-office operations.

Prevent lost sales opportunities (cart abandonment) and maximize sales

Consumers tend to stop purchasing and leave competitors' sites if the payment method they usually use or want is not available on their e-commerce site. By implementing diverse online payment tailored to your target audience, you can reliably meet customer needs, improve conversion rates (CVR), and drive direct sales growth.

Reducing the risk of uncollected payments and stabilizing cash flow

By using Credit card payment, smartphone-based payment, or guaranteed buy now pay later payment, you can minimize the risk of unpaid payments. Businesses can be freed from the hassle of collecting payments and mental stress, allowing them to focus their resources on their core business of product planning and marketing initiatives.

Significant streamlining of accounting and back-office operations

Traditional manual confirmation of bank account deposits, issuing and sending invoice, processing settlements, and reminders for non-depositors required enormous time and effort for accountants. However, by implementing an online payment system and centrally managing payment data and more, these back-office tasks can be automated and streamlined. Not only can it reduce human errors and cut labor costs, but it also serves as an opportunity to drive digital transformation (DX) across the entire organization.

4. Disadvantages and Points to Note About Online payment

While there are many benefits, there are also points to consider from a business perspective when introducing and operating them.

Occurrence of various fees and system operation costs

Implementing and maintaining an online payment involves initial costs, fixed monthly fees, payment fees (a fraction of sales), transaction processing fees, and transfer fees for sales proceeds. Since these costs directly affect the company's profit margin, it is necessary to carefully simulate cost-effectiveness based on the average unit price of your products and the expected number of monthly transactions.

Investment in Security Risks and fraud Measures

Online transactions always carry risks of information leaks and credit card fraud (such as credit masters misusing others' card numbers or mass attacks). If a chargeback (refund claim from the credit card company) occurs due to fraud, the business may suffer financial losses. Therefore, it is essential to invest in robust security measures, such as introducing EMV 3-D Secure (identity authentication services) and applying AI-powered fraud detection systems.

The effort involved in system development and integration

You may need development resources and time to integrate your e-commerce site or core systems with your new payment system. However, nowadays, API integration documentation is well-developed, and if you use major e-commerce platforms (SaaS or ASP Cart), you can easily implement them with plugins that require no development.

5. How to Choose the Best Online payment for Your Company and Comparison Points

We explain key comparison points to help you choose the best one for your company from among the many online payment services.

Compatibility between target audience and products/business models

Identifying the payment method your customer base uses most frequently is the top priority. For example, if your main target is younger people, smartphone-based payment or career payment are suitable; for high-value products, credit card installment payments or Bank transfer are suitable; and for monthly recurring payment (subscriptions), credit cards or Account transfer are suitable. Also, if you are running a B2B business, supporting debit payments (invoice payments) and virtual accounts is a mandatory requirement.

High security standards and robust support system

In addition to full compliance with PCI DSS (the global security standard for the credit card industry), strictly check system stability, processing capacity, and whether you have a rapid support system in case of failures. Whether security solutions capable of countering the latest fraud tactics are also important factors in determining whether they are available.

Operation of the management interface and payment cycle that do not overwhelm accounting tasks

When multiple payment method are introduced, each has a different deposit cycle, making cash flow and accounting clearing tasks complicated. Make sure the management interface is intuitive and easy to use, and that all sales data for payment method can be centrally managed and exported as CSV. Additionally, whether you can flexibly change or choose deposit cycles (such as month-end closing, payment at the end of the following month, or multiple closings) to fit your company's cash flow is a crucial point for stabilizing management.

6. For online payment, using "payment processing services" is recommended

To implement online payment, there are two approaches: "direct contract," where contract are individually connected with each payment institution (such as credit card companies or smartphone-based payment operators), and "payment processing company via," where contract and system connections are made in bulk through payment processing company companies.

For e-commerce businesses, direct contract is not a realistic option due to strict screening procedures for each company, individual system development, and inconsistent payment dates and operational and accounting procedures. Therefore, in business settings, using "payment processing services" has become the standard.

By using payment processing services, you can integrate multiple payment method at once with a single system connection, streamlining sales management and payment cycles. This dramatically reduces the system implementation workload for engineers and the tedious administrative burden of accounting departments.

Solving management challenges with GMO Payment Gateway's "PG Multi-Payment Service"

Our company, GMO Payment Gateway, offers "PG Multi-Payment Service" is a comprehensive online payment system that allows you to integrate over 30 diverse payment method all at once. From B2C to B2B, we meet the requirements of every business model, boasting industry-leading robust security environments and stable system operation.

We don't just offer payment features; we offer a wide range of services that strongly support merchants' business growth, including marketing integration to boost sales, Early Payment Service to improve cash flow, and invoice DX solutions.

If you want to know the specific mechanisms of online payment or more detailed implementation steps, the main article below explains technical terms in detail. Please be sure to read it as well.

7. Summary

Online payment is the key infrastructure for leading modern e-commerce businesses to success. It is important not to view them merely as "payment processing tools," but as "strategic tools to enhance customer experience, prevent cart abandonment, and ultimately increase sales."

By ensuring a well-stocked payment method suitable for your target audience and products, you can prevent lost sales opportunities. At the same time, to reduce system development workload, lessen the daily burden on accounting staff, and build a secure trading environment, selecting a "payment processing company company" with trust and Actual is extremely important.

Refer to the pros and cons of implementation explained in this article, as well as key points for choosing when comparing, to build an online payment environment that best fits your business model and lead to further business growth. payment Leave solving the challenges around you to us payment professionals!