Types Of Online Payments

Doing business today is not easy. From juggling multiple operations to staying ahead of competitors, challenges never stop coming. But there are two things you can’t compromise on: competitive edge and customer satisfaction.

That’s exactly what online payment platforms offer. With their speed, wider reach, and ease of use, they keep customers happy and loyal, while pushing your business forward. And with digital transaction values projected to grow at a 13.63% CAGR by 2030, online payments are becoming the new norm. 

To make the most of this shift, you need to understand your choices in online payment methods. In this article, we’ll break down the different types of online payments and how they can power your business growth. 

• Online payment methods give businesses and individuals a way to transfer money using digital and electronic modes. These payment methods are especially known for their speed, accessibility, and security.

• For businesses, online payments mean better cash flow, high ROI, increased customer loyalty, a global market reach, and secure payment transfers. 



• Some of the common online payment methods are UPI transfers, card payments, net banking, mobile wallets, crypto transactions, payment gateways, NFC payments, ACH transfers, BNPL transactions, and QR code payments.

Online payment methods simply refer to the way transactions are processed through electronic or digital channels as opposed to the traditional methods like cash or checks. This can be done through digital wallets, credit cards, debit cards, mobile payments, or even electronic bank transfers. All you need is a functional bank account, a secure internet connection, and a digital payment platform. 

The reason they are so widely used all over the world is because of their speed, convenience, accessibility, and security. And for businesses, these benefits can directly mean more loyal customers, higher sales, and ultimately, an increased ROI. 

With online payments, your consumers get multiple payment options they can choose from according to their preferences. They can pay for goods and services anytime, anywhere, using their smartphones or computers, and their transaction gets processed immediately. 

For businesses, reduced costs, competitiveness, and efficiency matter a lot. Here’s how online payments help them achieve just that:

1. Speed and convenience

Unlike traditional methods, online payment methods aren’t tied to geographical locations or office hours. You can use them to send or receive transactions from anywhere in the world at any point of time. What makes them even more useful is their speed - transactions that once took days through checks or bank drafts can now be completed in just a few hours.

2. Better cash flow

One major plus point of online payment methods is that they can be tracked in real time. With instant notification and detailed transaction histories, you can monitor and manage your cash flow, which, in turn, improves forecasting and decision-making.

3. Expanded global reach

Digital payments allow businesses to transfer funds in multiple currencies across the world. This gives you the opportunity to penetrate into newer global markets and expand your business beyond your local area of operation.

4. Increased revenue 

With a wider audience reach, online payment methods open the door to more sales opportunities. The easier it is for your customers to pay, the more likely they are to complete a transaction, directly boosting your revenue.

5. Enhanced security 

Modern online payment solutions come with added security perks like tokenization, encryption, multi-factor authentication, and advanced fraud detection tools to add a security layer to each transaction. Beyond securing transactions from fraud and security risks, these methods also make your business compatible with regulatory standards like PCI DSS. 

6. Cost efficiency

A major flaw that traditional payment methods like checks and wire transfers have is their high fees and long processing times. Online transactions, in contrast, are more cost-effective because of their lower processing fees and less reliance on manual work.

Now that we’ve covered all the major advantages of online payment methods, it’s time to explore the many types of online payment methods businesses and customers can choose from.  

Here are the different types of online payment methods available in today’s market:

1. UPI (Unified Payments Interface)

The first on our list is the UPI, a real-time payment system developed by the National Payments Corporation of India (NPCI) in 2016. Handling over 640 million transactions daily, UPI has made India a global leader in fast payments. 

How does UPI work?

UPI uses the Immediate Payment Service (IMPS) and Aadhaar Enabled Payment System (AEPS) to support both P2P and B2B transactions. It lets users transfer money directly from their bank accounts with their smartphones, using apps like PhonePe, Google Pay, and Paytm. 

Users don’t need to go through the hassle of entering bank details and can simply pay using QR codes, UPI-registered mobile numbers, or virtual payment addresses (VPAs). Each transaction is secured with a UPI pin, a secure six-digit code created during registration. 

With features like two-factor authentication (2FA) and biometric verification, transactions are safe from unauthorized access. Plus, businesses can easily integrate UPI into apps and online stores using ready-made APIs from payment gateways.

The good news for Indian businesses is that UPI is going global. It’s already in use in 7 countries, including the UAE, Sri Lanka, France, Singapore, Bhutan, Nepal, and Mauritius. In time, it will cover more regions of the world and simplify global transactions. 

Benefits of UPI

• Faster settlements
• High-end security
• Better customer experience
• Easy integration with workflows
• Wider reach and lower costs

2. Credit & debit card payments

On a global scale, approximately 56% of consumers use cards for transactions, which includes both credit and debit cards. This makes cards one of the most widely accepted and trusted forms of online payment methods worldwide. Credit and debit cards are also a quick and easy online payment method, where the payment is made using online channels or Point of Sale (POS) devices.

How does card payment work?

The processing of card payments involves multiple entities. Let’s have a look at the process.

Step 1: Customers use their card details to make a payment at a POS.

Step 2: You send those details to your payment gateway.

Step 3: In the next step, the payment gateway transfers the transaction information to the payment processor.

Step 4: The payment processor, in turn, transfers the information to the card network.

Step 5: The card network transmits that information to your customer’s issuing bank. This bank verifies that there are enough funds in your customer’s account and completes the transaction. 

Step 6: The bank then relays this transaction approval to the card network, and that information is again transmitted backward till it reaches the customer and merchant. 

Step 7: At the end of the day, the merchant submits a batch of all approved transactions to the processor for settlement. The actual settlement may take somewhere between 1-3 business days. 

Just like UPI, card payments also come with advanced security features like tokenization, transaction alerts, and fraud detection. 

Benefits of card payments

• Improved cash flow management and budget control
• Reduced administrative workload
• Better security and fraud prevention
• Integration with ERPs and accounting systems

3. Net banking

Net banking is just like using banks to transfer money, but in an online mode. All banking services that you used to get through banks are now provided through websites and portals of banks via the internet. No need to visit your bank branch and wait hours standing in queues to get your work done. 

How does net banking work?

To avail the benefits of net banking, you just need to register for internet banking with your bank. Following this, you’ll receive a unique customer ID and password, which you’ll have to use to log in to the net-banking portal.  

Once registered, you can use net banking for:

1. National Electronic Fund Transfer (NEFT) for one-on-one transfers at any time and from anywhere.

2. Real-Time Gross Settlement (RTGS) to transfer funds of at least Rs.2 lakh with immediate settlement.

3. Immediate Payment System (IMPS) for real-time transfer of funds by mobile, internet, or ATM. 

Benefits of net banking 

• 24/7 availability
• Faster transactions
• Clear transaction history
• Secure and encrypted transactions

4. Mobile wallets

Just like a physical wallet is used to hold your cash, debit cards, and credit cards, a mobile wallet is used for something very similar. Mobile wallet is an online application like Paytm, PhonePe, and Google Pay on your smartphone. In a mobile wallet, you can store payment information about credit cards, debit cards, cryptocurrencies, insurance cards, membership cards, and other such details. 

How does a mobile wallet work?

Mobile wallets generally use near-field communication (NFC) or magnetic secure transmission (MST) technology to make payments. To accept mobile wallet payments, you simply need to integrate with wallet providers and enable NFC/QR code-based acceptance at checkout. 

The wallet also uses encryption and tokenization to store payment details safely, so the actual card or account number of your customers isn’t shared during transactions.

Benefits of digital wallets

• Simple checkouts
• Lower cart abandonment and better conversion rates
• Use of tokenization and encryption
• Theft protection due to reduced need to carry physical cards and cash

5. QR code payments

QR code payments offer another cashless transaction method where users scan a QR code with their smartphone to pay directly from their bank account, digital wallet, or payment app. With QR code payments, you also won’t have to invest in expensive card-swiping machines.

How does QR code payment work?

QR codes are just a square-shaped barcode that contains a grid of horizontal and vertical patterns that can be scanned in seconds. In this scannable barcode, there’s a link hidden that can take you to any specific information. 

When these QR codes are used for payments, this information is related to transaction details. It could be the amount of payment, account details, or any other payment-related information. A scanner is used to decode this information and redirect to a specified action, which can be opening a website or initiating a transaction.  

Benefits of QR code payments

• Low setup and operational costs
• Improved customer loyalty
• Use of multi-factor authentication, encryption, and tokenization
• Quick integration with business workflows
• Easy traceability

6. Payment gateways

A payment gateway is a digital technology platform that works by transferring payment information for transaction authentication and approval. Some of the common payment gateways you may have heard of include Stripe and Razorpay. 

You can easily integrate these payment gateways using APIs into your platforms, websites, or apps, and they’ll work on simplifying your payment processing. Think of them as a communication bridge between you and your bank, and your customer and their bank. Getting confused? Let’s simplify this. 

How does a payment gateway work?

Step 1: At checkout, your customer selects a payment method and inputs their data. It could be card details, wallet info, or UPI ID.

Step 2: The payment gateway will encrypt that data and send it to the acquiring bank (in this case, your bank) or payment processor.

Step 3: The payment processor will then forward the transaction details to the issuing bank (your customer’s bank) for authentication and to check whether funds are available in their account.

Step 4: If the funds are available, the issuing bank will approve the transaction and send the response back through the payment gateway to your bank.

Step 5: Once the payment is approved, your bank will initiate the settlement process. The payment gateway will receive the funds from your customer’s issuing bank and transfer the payment to your bank account. This whole cycle of events will typically take a few business days.

Benefits of a payment gateway 

• SSL/TLS encryption and fraud detection
• Multiple payment options
• Instant authorization and confirmation
• Enhanced global market reach
• Built-in compliance 
• Easy integration and automation

7. BNPL (Buy Now Pay Later)

BNPL is more like a loan facility for a short period, which gives your customers the choice to purchase something in the present and pay for it later. This could be either in instalments or at any fixed point of time in the future. 

Their popularity stems from the fact that they are mostly interest-free and do not even come with any additional service charge, helping your customers who might be on a tight budget. 

How does BNPL work?

At the time of purchase, your customers can choose BNPL as their payment method. After a soft credit check by BNPL providers like Klarna, Simpl, or LazyPay, the method will be approved and the provider will pay on behalf of the customer. 

This money is usually repaid to the BNPL provider in fixed instalments. Most of the time, the repayment is automated to prevent any defaults from the customer's end.

Benefits of BNPL 

• Increased sales
• High average order value due to immediate purchase
• Improved conversion rates
• Better customer experience 
• Increased customer reach 

8. ACH transfers

Next on our list is the ACH or automated clearing house payment method. Mostly used in the USA, ACH is used for the electronic transfer of funds between banks. Want to pay all your employees? Have a vendor payment pending? Need to renew your project management platform subscription? ACH has got you covered if you live in the USA. 

How does ACH transfers work?

There are multiple intermediaries involved to carry out an ACH transaction. Let’s say you have to pay a vendor. Here’s how it will work:

Step 1: You, the originator, will obtain the vendor's bank account details and payment amount. You will authorize your bank (Originating Depository Financial Institution or ODFI) to initiate an ACH credit transfer to the vendor.

Step 2: The ODFI will batch this payment request with other ACH transactions and send the batch to an ACH operator - Federal Reserve, or a clearinghouse - at scheduled intervals throughout the business day.

Step 3: The ACH operator will process the batch and route the payment instructions to your vendor’s bank (Receiving Depository Financial Institution or RDFI).

Step 4: The RDFI will debit your account and credit your vendor’s account with the funds on the scheduled date. 

Step 5: The actual settlement will happen through Federal Reserve accounts, typically within 1 to 3 business days. And if you want faster processing, you can even use same-day ACH, usually at a higher fee. 

Benefits of ACH transfers 

• Lower transaction fees compared to wire transfers or checks
• Automated scheduling of recurring payments
• Security ensured by Nacha
• Faster processing than checks 
• Same-day ACH for urgent transactions

9. NFC mobile payments 

NFC, or near-field communication, is actually a wireless communication technology. It is used to let two devices communicate that are in close range. Platforms like Apple Pay and Google Pay use this technology for mobile payments. 

Usually, for a card payment, the card has to be swiped or inserted, but NFC changes that. Now, with NFC-enabled devices, you need to tap a payment terminal and that’s it - the transaction is done.

How does NFC payment systems work?

NFC technology uses RFID, in which radio waves are used to transfer data. For NFC mobile payments, you’ll have to choose a payment processor that supports NFC payments and install an NFC-enabled payment terminal. The process looks like this:

1. Your customer will use their NFC-enabled device on your NFC-enabled terminal. 

2. There is an NFC chip in the device that will communicate wirelessly with the terminal using encrypted radio waves to exchange encrypted tokenized payment credentials of your customer. 

3. The terminal will send the encrypted transaction data to the payment processor for authorization.

4. The payment processor will contact your customer’s bank or card issuer to verify there are enough funds in their account and approve or decline the transaction.

5. If approved, the transaction completes. The terminal and the device will show a confirmation, and the funds will get transferred.

Benefits of NFC payments 

• Quick transactions with just a tap
• Faster checkout
• Support for multiple payment options
• Use of biometric, two-way encryption, and randomly generated one-time codes
• Compatibility with most modern smartphones 

10. Cryptocurrency payments

For businesses looking for an alternative to bank transfers and card networks, crypto transactions are just what you need. Run on decentralized blockchain technology, these transactions give you a faster, borderless, and transparent way to exchange funds in digital currencies.

How do cryptocurrency transactions work?

Before you begin accepting cryptocurrency payments, you’ll need to set up a cryptocurrency wallet and partner with a payment gateway that supports such transactions. 

When a customer pays with cryptocurrency like Bitcoin or Ethereum, the transaction is recorded on a blockchain - a public digital ledger. Usually, the transaction would go through the banks or a payment processor, but that's not the case here. 

With crypto transactions, the funds move directly from the customer’s digital wallet to your wallet. The customer’s wallet digitally signs the transaction with their private key, proving ownership of the funds without revealing the key itself.

Not just that, every transaction is validated by a network of computers, which means it’s almost impossible to change or forge. Verified transactions go into a pool, from where miners will add them to the blockchain ledger and confirm the transaction after solving complex cryptographic puzzles. 

Once the transaction is confirmed, the transfer is complete and this whole process is concluded, that too in mere minutes, no matter where you are located.

Benefits of cryptocurrency payments 

• Decentralization and global reach
• Lower processing fees than cards or wire transfers
• Settlement within minutes
• Expanded customer base
• Blockchain encryption and tamper-proof records
• Innovative and tech-savvy business positioning
• Reduced chargebacks

After looking at all these payment methods, it’s natural to get confused about which one you should be choosing for your business. Worry not, we have created this list of questions you can ask yourself before you decide which payment method works best for you. 

1. Is the payment method widely accepted and accessible?

Choose a method that your customers are already familiar with and can use easily. The more accessible it is, the fewer sales you’ll lose at checkout.

2. Does the method support multi-currency transactions?

If you are an exporter or have plans to sell internationally, make sure the payment option can handle different currencies without causing friction for you or your customers.

3. What are the transaction fees and hidden costs involved?

Look beyond the surface. Some methods charge higher processing fees or may even add hidden costs that can slowly drain away your profit.

4. How fast are settlements and fund availability?

Compare settlement times of different payment methods and opt for a method that releases your funds quickly so you can reinvest in your business or make other necessary payments without waiting for days.

5. Does it integrate easily with your existing systems?

How easily the system can integrate with your ERPS, CRMS, or POS should also be a factor. Pick a solution that connects smoothly with your POS, website, or accounting software.

6. How secure is it?

No matter how fast, cheap, or convenient a payment method is, if it isn’t secure, it’s a risk to both your business and your customers. Ensure the method uses strong protections like encryption, tokenization, or two-factor authentication and is fully compliant with regulatory standards.

7. Is customer support and dispute resolution reliable?

When something goes wrong, and it will, you need a payment provider that responds quickly and resolves issues fairly. Check out reviews from existing customers to assess how good their customer support is. 

8. Does it align with your business growth plans?

Lastly, what’s working for others might not work for you. Consider that also and choose payment methods that suit your business needs and can scale with you, whether that means handling higher volumes, expanding globally, or supporting new technologies.

Xflow is a forward-thinking payment platform that’s designed to simplify receiving and managing international business payments for businesses of all sizes. 

It provides virtual account numbers in multiple countries, allowing your international clients to pay through local bank transfers. With Xflow, you can even lock the FX rate for 45 days to have control over currency conversion costs. Here’s what Xflow delivers:

• Funds withdrawal at live FX rates
• 50% savings on FX costs
• Settlement within 1 business day
• Transaction in over 25 currencies from 140+ countries
• Easy integration with your existing platforms and software
• Full transparency with no hidden charges or FX markups
• A flat fee of 1% or a minimum of 8$ over every transaction
• Automated digital FIRA generation
• Creation of shareable payment links and professional invoicing
• Real-time tracking of payment status
• Dedicated customer support

Still not convinced? Reach out to us, and we’ll be happy to walk you through how Xflow can simplify your cross-border payments and give you more control over your global transactions.