The ultimate guide to the different types of payment methods

May 11, 2021

Shoppers nowadays have a plethora of choice when it comes to making a payment.

They can use their watch, smartphone, card, face, fingerprint, and even car keys (we’re not joking!).

With so many options and touchpoints, there also appears to be an increased opportunity for merchants to cater to more customer needs, helping decrease cart abandonment and increase customer retention.

At Pomelo Pay, our 25+ payment methods allow businesses to accept the most important payment methods and open up to new markets.

Talking about payment methods, here’s what we’ll be covering in this comprehensive guide:

  1. What is a payment method?
  2. List of top payment methods
  3. What is the most common method of payment?
  4. What are the different online payment methods?
  5. What is the safest method of payment?
  6. Why accept more payment methods?
  7. How to choose the best payment method
  8. How to accept several payment methods

What is a payment method?

Payment methods refer to the ways your customers can buy your product or service. When you purchase something at a shop, you can usually decide to pay by cash, card or mobile phone.

When you buy something online, you’ll also probably see a dropdown list of all the payment options allowing you to pay by card, direct bank transfer, e-wallets or even crypto! In 2021, you may be surprised to hear that there are over 200 types of payment methods!

Since we offer 25+ payment methods, it’s worth understanding the different ones available.

Let’s look at a list of the top ones.

List of payment methods


Cash is the original and oldest payment method: the physical coins and notes you’ll find in your wallet, an ATM or at the bank.

But over the past couple of decades, cash payments have decreased by 15%. Although they are the cheapest way to accept a payment, many businesses tend to prefer the security and convenience of online payments.

types of payment methods cash

Debit cards

In the UK, 98% of the population owns a debit card, and it’s the most popular payment method for both online and offline purchases.

The biggest benefit of using debit cards is the extra layer of security when completing a payment.

Not only do customers have to input a personalised PIN code, but each payment must go through a card network such as Visa and Mastercard. This ensures purchases are not fraudulent and come from a verified bank account.  

Accepting debit card payments usually requires using a card machine, also known as a POS machine.

Credit Cards

Credit cards are funded by banks and building societies, with the customer paying with borrowed money rather than a bank account. Credit cards have a pre-approved limit and are later paid back by the customer (with interest) over time.

Credit cards allow customers to spread payments across time, as well as earn rewards and points for their spending.

As for the merchant, credit cards operate similarly to debit cards. They require inputting a PIN, payments go through a card network and there is the additional layer of protection provided by the credit card company.

Credit cards are the second most popular payment method after debit cards, with UK residents completing 340 million transactions in 2019.

Bank transfers

Bank transfers are popular amongst B2B transactions and larger payments such as wholesale orders.

In the UK, you need an account number and sort code to send a bank transfer, and an IBAN and SWIFT code for international transfers.

Although bank transfers are popular, they are often less secure than other payment methods; that’s because there is no card network in place to monitor the transaction, and therefore cannot be recalled if there is an error. Bank transfers are also a lot more manual and time-consuming to process.

types of payment methods atm machine

Direct debit

Direct debit payments are scheduled and automated payments, typically used for household bills and in subscription payment models such as TV subscriptions. The customer sets up a direct debit mandate with their bank to ensure monthly payments are on time, every month or week.

Over 4 and a half billion payments were made through direct debit in 2019, with the Direct Debit scheme offering a full refund guarantee for any mistaken payments.

Direct debits are another popular payment method for businesses, since they guarantee a monthly income. Although it increases customer retention, direct debits are not applicable to every business and similarly to bank transfers, don’t have the added security of a card network.

Mobile payments

Mobile payments refer to payment methods that use your phone. These could be remote, in-person, or contactless payments. Examples of mobile payments include mobile wallets, qr codes and payment links.

Launching under a decade ago, mobile payments are one of the newest payment methods available, but are quickly rising in popularity, with Google and Apple Pay boasting over 300 million users combined.  

That’s because they are an incredibly convenient payment method and due to biometrics, are often considered more secure than other payment methods.  

types of payment methods google pay

Two of our most popular mobile payment solutions at Pomelo Pay are QR codes and payment links, which are both channels that enable credit/debit card payments as well as Apple and Google Pay.

Mobile payments: e-wallets

Mobile wallets are virtual wallets (also called e-wallets) that store your customers’ payment information and allow them to pay online and in-person.

Examples of mobile wallets are Apple Pay, Google Pay, Alipay and WeChatPay: they essentially allow customers to store money on their phone and then use it to complete a payment using biometrics.

Mobile wallets are a popular payment method since they are convenient, secure and often a lot cheaper since wallet to wallet transactions are usually free.

Read more: 

Mobile payments: payment Links

Payment links are an easy and convenient way to accept payments remotely. Businesses essentially send their customer a link via text or email, and the customer just needs to fill in their card details to complete the payment securely.  

Not only is this an incredibly versatile payment method, but sending a link directly to your customers’ mobile phone means they pay a lot more quickly.

Thanks to payment links, David, EPC contractor, now gets paid as soon as he finishes his job. He sends the payment link the day before, completes his job and then asks his client to pay.

types of payment methods payment links

According to David: “We find that the time scales are better, customers get what they need on time, and we get paid on time.”

Read the case study: How this Business Owner Uses Pomelo Pay to Get Paid Instantly

Mobile payments: QR code payments

QR code payments are a great way to speed up in-person transactions. You’ve probably seen them on restaurant tables and outside cafes as more people prefer ordering online.

The process is simple: customers scan the QR code, a notification pops up that takes them to a separate payment page where they fill in their details and then complete the payment. They can also choose to pay with their preferred e-wallet on their phone, such as Google or Apple Pay.

With QR codes, business owners can also turn their smartphones into a card machine. This makes it a lot cheaper to accept payments, and also speeds up order processing.

Tiziania, owner of a mobile food business, offers QR code payments to those who want to skip the queue. With QR codes, she’s effectively doubled the amount of orders she can serve.

types of payment methods heartmelts

Read the case study: How This Mobile Food Business Doubled Their Orders With On the Go Payments

Alternative payments

Alternative payments refer to a number of different methods, including:

  • “Buy now, pay later”
  • Digital currencies (such as crypto currencies)
  • Prepaid cards
  • Cheques

While some of these methods seem outdated or too new, and are commonly referred to as “alternative payments”. In some cases it’s worth adding them as a payment option, although it really depends on your target market.

What is the most common method of payment?

Debit card payments are the most common payment method, currently accounting for 42% of all online and in-person payments.

This is followed by a mixture of cash, direct debit and credit card payments - although, it’s worth noting that mobile payments are growing at the highest rate. Cheques are the least common form of payment.

What are the different online payment methods?

Online payments are used when the customer is not present, for example if the store is based online and does not have a brick-and-mortar location. Online payment methods include:

  • Direct debits
  • Bank transfers
  • Mobile payments 
  • E-wallets
  • Payment links
  • QR codes
  • Digital currencies
  • “Buy now, pay later” programmes

What is the safest method of payment?

Not only are they the most common payment method, but debit and credit cards are the also most secure means of payment.

The major reason for this is because each card payment must go through a card network such as Visa or Mastercard.

Card networks ensure that the payment is from a valid bank account and that the transaction happens securely. If there is an issue with the payment, both the merchant and the customer can contact the card network to resolve the dispute.

Using a licensed payment services provider such as Pomelo Pay adds an extra layer of security.

Read more: What is a Payment Service Provider (PSP) and Why Should You Partner with One?

Why accept more payment methods?

Offering more payment methods means offering a much better checkout experience to your customers.

Would you complete a payment if your favourite method wasn’t available? Most customers will cancel a purchase if their preferred payment method doesn't turn up.

As our cofounder, Simon Verraest, recently explained in an interview:

“For a very long time, businesses were deciding how they wanted to accept payments. But the customer may have specific reasons for choosing a certain payment method and there shouldn’t be any friction by merchants offering a multitude of options.

For example, someone might want to use their British Airways Amex for points or cashback, use their Visa for purchase protection, or even use Alipay or WeChat Pay for a better Forex rate if they use a local wallet.”

Not only that, but with digital payments you get a lot more insights. By using multiple touchpoints and integrated payments, you can get a 360 view of all your payments. With one single system, you get a snapshot of how your business is doing at any time of the day.

Instead of having to connect to another system, both you and your customers see payments as seamless.

types of payment methods pomelo dashboard

With more payment options, your customers are more likely to complete a payment, effectively decreasing cart abandonment rate and growing your business.

How to choose the best payment method

The right payment methods for a new craft business might be totally different to the best payment methods for a restaurant, e-commerce shop or construction company.

That’s why it’s important to think about which payment methods are the best for your business.

Here is a table summarising the best payment methods:

How to accept multiple payment methods

How can you offer multiple payment methods without having to partner with a separate payment facilitator for each one?

Two words: payment gateway.

With a payment gateway, you can accept several multiple payment methods by simply partnering with one company. The payment gateway is a piece of software that integrates into your website, and processes payments from start to finish.

Read more: Why You Should Use a Payment Gateway for Your Website

Pomelo Pay is a payment service provider (PSP), which means you can accept a wide range of payments through these various payemnt channels including:

  • Credit card
  • Debit card
  • QR code
  • Payment link
  • Apple Pay
  • Google Pay
  • Alipay 
  • WeChatPay
  • iDeal
  • Klarna
  • Bitpay
  • & many more!
types of payment method payment gateway

By accepting multiple payment methods with one gateway, your payments are unified: you can accept payments in-person, through your website and remotely, all through one system with Pomelo Pay. We have built our system to consolidate your customers preferred payment method.

These modern tools make it a lot easier to track all your payments, reconcile transactions and make data-driven decisions - while bridging the gap between online and offline. If you have a Wordpress website, you can also integrate Pomelo Pay using WooCommerce.

Not sure which Pomelo Pay feature is best for you? We have a very friendly support team whose job is to help you find the payment method that is best for your business. Simply contact us to learn more about Pomelo Pay’s 25+ payment methods and which one might fit your business best.

We hope this payment methods guide was useful and you now understand the importance of offering multiple payment methods. Although it can be overwhelming at first, using the best payment methods will translate into better security, faster processing times and most importantly of all: increased revenue.

Ready to get started? Create a Pomelo Pay account for free!