Online Payment Methods: The Complete Guide to Digital Transactions

In 2025, online sales surpassed 4.3 trillion U.S. dollars worldwide.¹ E-commerce is responsible for a large percentage of many businesses' sales these days. Consumers expect a certain level of online service for their purchases, such as different payment methods when buying online.

In this blog post, you’ll learn more about digital payment solutions, the types of payment methods available, and what to look for when choosing online payment methods.

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What are Online Payment Methods?

Online payment methods allow shoppers to pay for goods or services electronically. They are as ubiquitous today as checks once were, and have replaced cash for many shoppers as one of the most popular ways to pay for products.

They’re a preferred option for many, as they are fast, secure, and convenient.

The first online payment methods by credit card were made in the 1990s, and in the 35+ years since then, new methods emerged, with customers today able to pay by mobile wallet, cryptocurrency, and other methods.

How Do Online Payment Systems Work?

In short: online payment systems act as an intermediary between the customer and the selling institution.

Here’s a basic overview of how they work:

1. Collect the customer’s payment details
2. Authenticate and encrypt the transaction to keep it secure
3. Route the request through banks, networks, or third-party providers
4. Approve or decline the payment
5. Transfer the funds to the merchant’s account

This entire process takes seconds from start to finish.

What Types of Online Payment Methods Are There?

Credit and Debit Cards

Most shoppers will be familiar with this first online payment method type. With credit card processing, you can enter your card details on the checkout page of the store or website you’re buying from, and pay for your goods.

Once funds have been verified, they will be transferred to the merchant account.

Popular card networks include Visa, Mastercard, and American Express. These networks are accepted in most places, and offer robust fraud protection.

Digital Wallets (e-wallets)

A digital wallet allows you to store your card and bank details securely, so you can pay for goods with one click. Digital wallets often come with advanced security features to protect your confidential information, including biometric authentication.

Bank Transfers

There are various types of internet banking transfers you can use to make one-off or recurring payments.

• ACH (Automated Clearing House): ACH payments are common in the U.S. for direct deposits and bill payments
• Wire transfers: Wire transfers are a fast type of online payment, useful mostly for large sums, but can be expensive with fees
• Direct bank transfers & real-time payments: Some payment gateways give you the option of making an instant transfer so the recipient can receive the money into their bank straight away

Cryptocurrency

Cryptocurrency, which is a form of digital currency, allows you to make peer-to-peer payments without needing to go through traditional banks.

Customers generally enjoy lower fees with cryptocurrency and increased privacy, and can send money without considering borders. However, cryptocurrency payments can be volatile and there’s regulatory uncertainty and limited adoption.

Examples of cryptocurrency include Bitcoin and Ethereum.

Prepaid Cards

Prepaid cards are cards that you can preload with funds, and work similarly to debit cards except they aren’t linked to a bank account.

You can use prepaid cards for sticking to a budget, giving a gift, or if you don’t have access to a bank account.

What is the Most Common Online Payment Method?

For many years, debit and credit cards have been the most common online payment methods around the world.

They’re a familiar payment method for many consumers, widely accepted, and supported by nearly every e-commerce platform. Cards have stood strong for decades in the online shopping space, and for many customers, they’re the go-to choice for checking out.

There’s competition for this title, though. Virtual wallets are fast becoming one of the most common online payment methods, and are also widely accepted by e-commerce stores. If you sell online, it’s important to offer a range of payment methods to accommodate a wide range of customer preferences.

🔍 Read more:
Is Online Payment Safe? What Features to Look For When Choosing Online Payment Methods What Are the Benefits of Using Online Payment Systems for Businesses? What is the Future of Online Payments? Wise Business: The Smart Way to Manage International Payments

Is Online Payment Safe?

In many cases, online payments are reliably safe. Over time, they’ve become more and more secure due to layers of encryption, fraud detection, and regulatory standards including PCI DSS (Payment Card Industry Data Security Standard).

It’s common practice for payment systems to rely on tokenization these days, which means your sensitive card data is swapped out for encrypted “tokens” that are inaccessible to hackers.

To stay safe while making online payments, here are some best practises to follow:

• Always use secure Wi-Fi
• Don’t use “autofill” for your card details if you share your computer
• Monitor your accounts regularly for suspicious activity

What is the Safest Way to Pay Online?

The safest way to pay online is using a digital wallet, since they don’t share your card details directly with the merchant.

By requiring encrypted, single-use tokens and biometric authentication in many cases to make a purchase, they’re a reliable form of online payment. However, you should always be aware of online scams and fraudsters.

One additional measure is to use a digital card. For example, the Wise virtual card lets you spend using the mid-market rate online, in-store and while you travel - but exists only in your Wise account, either on your phone or laptop.

There’s no need to carry your wallet, and less risk of your card being compromised. Your virtual card has different details to your physical card, and can be frozen after each purchase. That means it’s a safe, smart and simple way to spend no matter where in the world you are.

What Features to Look For When Choosing Online Payment Methods

Security Features

It’s important to consider security features when choosing online payment methods to protect your funds.

Look out for methods that include encryption and fraud protection features, specifically end-to-end encryption, since this adds several extra layers of protection to your funds.

Two-factor authentication (2FA) is important, too, as it means payments won’t go through until the customer provides a code they’ve received to their mobile number or email address.

Transaction Fees

Payment methods incur transaction fees, so you need to be mindful of the fees you’re paying.

In some cases, the payment provider will take a flat percentage fee from every transaction, while in other cases, there are additional costs as a result of currency conversion or cross-border payments.

Convenience and User Experience

The modern consumer expects a seamless checkout experience, so if your payment method requires too many steps, you might risk losing the sale.

Look for solutions that offer user experience benefits, such as:

• One-click or tap-to-pay transactions
• Seamless integration with your website or e-commerce platform
• Mobile payments optimization for smartphone or tablet shoppers

Global Accessibility

To accommodate customers around the world, your payment method should accept cross-border transactions.

If you cater to international customers, then you need to consider the currency conversion fees, as this could impact your ability to scale.

What Are the Benefits of Using Online Payment Systems for Businesses?

Increased Sales and Customer Reach

When you use online payment systems for your business, and open up various e-payment options, you remove barriers during the checkout process. As a result, customers are more likely to complete their purchase as they can use their preferred payment method.

This approach can lead to an increase in sales and expand your customer base on an international scale.

Streamlined Operations

With online payment systems, you can integrate everything from your accounting software to your inventory management tool. That way, everything is processed in a uniform manner, and you can more easily interpret the data from your business.

Enhanced Security and Fraud Prevention

Many modern payment providers use advanced encryption and sophisticated fraud detection systems so you (and your customers) can feel confident that each payment is secure.

Detailed Reporting and Analytics

Payment systems often come with dashboards that can show you a host of relevant information from payment trends and revenue breakdowns to customer behavior.

You can use this information to forecast future cashflow, and strategize sales and marketing campaigns.

What is the Future of Online Payments?

Emerging Technologies

Online payments have come a long way, but there is still a lot of innovation in the space. Blockchain, which cryptocurrency relies on, is always advancing and being explored as a solution for instant and secure online transactions.

AI is also being used more and more to detect fraud in real-time by detecting unusual behavior patterns, and has a lot of potential applications to streamline the entire payment process.

Regulatory landscape

Governments and regulators are constantly tightening rules to make sure funds are protected and businesses stay compliant.

Trends and Predictions

It’s plausible that in the coming years, digital wallets could surpass credit and debit cards as the most popular online payment method.

Real-time payments will likely become more commonplace, too, leaving behind slow transactions that can take days.

Wise Business: The Smart Way to Manage International Payments

Wise Business offers users a simple way to manage online payments in multiple currencies. You can avoid cross-border fees by receiving currencies to local account numbers. What's more, you can manage all your currencies in one account, and convert to USD at the mid-market rate (the same one you'll see on Google). These features make Wise Business an easy way to receive online payments from customers around the World.

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Wise is not a bank, but a Money Services Business (MSB) provider and a smart alternative to banks. The Wise Business account is designed with international business in mind, and makes it easy to send, hold, and manage business funds in currencies. You can get major currency account details for a one-off fee to receive overseas payments like a local. You can also send money to 140+ countries.

Some key benefits of Wise Business include:

Major local account details to receive international payments with ease No monthly account fees just a simple one-off fee for account details Receive payments from e-commerce platforms such as Amazon or via Stripe. Free invoicing tool to generate and send invoices. Create invoices using the Wise invoice generator or invoice templates. Accounting integrations, including a QuickBooks Bill Pay connection. Bill payments will be synced, matched, and categorized in QuickBooks for simple reconciliation. Wise Multi-Currency card for business and team expense cards, to make global spending easy Access to BatchTransfer. Fast payment of up to 1,000 people.

Read the guide on how to open a Wise Business account

Sources:

1. online sales surpassed 4.3 trillion U.S. dollars