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Online payments have displaced cash and forward-looking businesses must adapt. Learn about the different online payment methods you can adopt.
As innovations in online payments continue across the globe, the usage of cash has continued to drop.
Global cash usage declined by 4% in 2022 while the usage of electronic or online payments rose by 17% over the past five years, according to McKinsey and Co, the global consulting firm.
In this new environment, businesses, irrespective of their size, must learn how to adopt online payments and provide their customers with the payment method they desire. “Paying bills online has become the preferred way to pay because it's fast, easy, and safe,” said Field Routes, a field service management software.
Inability to meet the needs of customers will lead to diminishing revenue while providing them with what they need will increase customer retention and even lead to an expansion of the customer base.
In this article, we will consider six different online payment services and evaluate them based on different factors, of which security is preeminent.
If you have not yet adopted online payments, you will learn how best to go about it and if you are already using any of these methods, you will learn if there are better alternatives you should consider.
We’ll cover:
- Debit and
- Bank transfers
- Direct debits
- Instant payments
- Digital wallets
- QR code payments
[Are you looking for an efficient way to get instant payments from your customers? Download the Kem app to unleash the power of QR code payments for both your online and offline businesses.]
1. Debit and credit cards
The online payments revolution can be said to have begun with debit and credit cards.
Cards are still the most popular online payment method in Kuwait with more than 5 million cards issued across the country. The card payments market in Kuwait is worth $123.5 billion, according to Global Data, and they expect it to grow by 12% CAGR in the next four years.
If you have ecommerce stores or operate online marketplaces, you will need a payment gateway where you can collect customers’ card information and a payment processor that will route the transaction details to the card network. The card network will ultimately process the transaction between your bank and the customer’s bank.
Perhaps you are a small business that cannot set up a payment infrastructure from scratch? Not to worry, you can tap into the network of third-party providers by installing their API for a monthly or annual fee.
And if you operate offline, you will need a POS (point-of-sale) terminal that can receive physical debit or credit cards. A payment processor will also be responsible for transferring the transaction details to the card network.
Visa and MasterCard still remain the most popular card networks across the globe.
Evaluation of debit and credit cards
Credit and debit cards still remain the most popular in Kuwait. Therefore, providing this payment method might be a matter of necessity for businesses who want to serve their customers.
Similarly, they are very popular for global payment since Visa and MasterCard cards in local currencies can still be used to pay for goods and services in other popular currencies (dollar, Euro, pound).
However, it is important to state that there are problems with debit and credit cards. First, card transactions are often beset with network issues, resulting in failed transactions, reversal of transfers, double debits for a single transaction, a debit without a corresponding credit, among others.
All of these can make life difficult for you and your customers. “Every transaction that fails to post or requires manual intervention to resolve can cost a company between $50 and $60,” admitted MasterCard. No one wants to be wasting that amount of resources.
Secondly, scammers are still in the business of stealing debit or credit card information and defrauding card owners.
Finally, due to the many intermediaries involved, card payments can be expensive for customers. It even gets worse with credit card payments. At your end, setting up the payment infrastructure for accepting card payment can also be expensive.
2. Bank transfers
A bank transfer (whether ACH, SWIFT, or wire transfers) is simply a movement of funds from one bank account to another.
Many businesses accept payments from their customers by providing their account information. This is more common with businesses who operate physical stores though some online businesses also provide bank transfer as a payment option.
Furthermore, bank transfer still remains a very popular B2B payment method.
While intrabank transfers can be seamless, complications do arise with inter-bank transfers since those require clearinghouses who serve as intermediaries.
Evaluation
The main problem with bank transfers is that they often take time to complete, depending on the country and whether the transfers are intra- or inter-bank. It’s not unheard of for some bank transfers to take more than a day.
This is one of the reasons why many don’t find it attractive. Imagine having to wait for hours in a physical store because the firm has not yet received the funds in their account. Or imagine not being able to complete an online checkout because the transfer is taking time.
However, on the other hand, bank transfers are safer, cheaper (lower transaction fees), and simpler than card payments.
The only way a bank transfer can go wrong is if the sender does not pay attention to the account details of the recipient. Before the transfer is completed, most banking apps will still implore you to confirm all details before you click “send.” This makes it more difficult to lose money.
3. Direct debits
A direct debit is an automatic withdrawal of money from a customer’s bank account without them needing to initiate the payment.
In essence, it is like a standing order that authorises the business to withdraw a specific amount at a stated interval.
Direct debit is often used by subscription services like Spotify, Netflix, among others. The advantage here is convenience and ease as users don’t have to enter their payment information every 30 days.
Direct debits are also used for utility bill collections, insurance premiums payments, and B2B payments (as an alternative to sending payment links every now and then).
Businesses will typically send a reminder to the customer some days (mostly 7 days) before the money will be deducted from their accounts.
Most direct debits work with card payments as customers give businesses the permission to automate new debits on their cards.
Evaluation
Again, convenience and ease are the two key advantages of direct debits.
Furthermore, there is a direct debit guarantee that guides direct debits transactions. This ensures that any wrongful payouts will be refunded without question.
Fundamentally, direct debits are also exposed to the safety concerns of debit and credit cards.
4. Instant payments
Instant payments, also known as real-time payments (RTPs), aim to tap into the benefits of bank transfers while removing their main disadvantage – slow transaction processing.
With this payment system, transactions can be completed within seconds (or at most within a few minutes). This is because payment processing on these platforms do not require financial intermediaries like clearing houses that are necessary for bank transfers.
Kuwait, UAE, Saudi Arabia, Bahrain are examples of countries in the MENA region that have created national real-time payment platforms that banks can tap into.
The volume of transactions conducted via RTP platforms have been increasing with the MENA region leading the way as the fastest growing RTP market, according to ACI Worldwide.
Nevertheless, adoption is not yet as large as it could be, especially when compared to other online payments methods.
Evaluation
Transactions can be completed quickly on RTP platforms. Consequently, you can quickly receive money from your customers, thus avoiding liquidity (cash flow) challenges.
The complications associated with card payments (reversals, among others) are not present with instant payment. This means a better payment experience for you and your customers.
Since payments are completed almost immediately, RTP has a disadvantage – there is no time to correct transactions made in error. Correcting such errors when the money is already with the recipient may be hard.
Like bank transfers, payments made on RTP platforms still require bank account numbers. Thus, customers' information can still be hacked by nefarious elements.
5. Digital wallets
Digital wallets like Paypal, Venmo, Apple Pay, Samsung Pay, Google Pay, among others, have also helped to make online payments easier.
(Some will separate Paypal and Venmo and call them digital wallets while calling Apple Pay, Samsung Pay, and Google Pay mobile payments. For our purpose, it is a distinction without difference.)
Users can load money into their digital wallets using their debit or credit cards or they can receive a P2P payment from another user.
Once they have funds in their wallets, they can make purchases and transfer money to the seller’s wallet. Since these transfers are P2P, the provider can process payments almost immediately.
Most digital wallets also allow transfers to bank accounts though, like a traditional bank transfer, this will take more time to complete.
To allow digital wallets payment, all you need to do is have an account with a platform that is popular among your customer base and notify them that they can now pay my making transfers on that platform.
Evaluation
P2P payments are as safe as the payment service provider that supports them. If the security architecture of the platform is not strong enough, customers’ information and funds can be at the mercy of scammers.
Encryption, tokenization, 2-factor authentication, and biometric authentication are some of the steps that these platforms take to ensure security.
6. QR code payments
QR code payments are a form of contactless and instant payments.
As a contactless payment method, customers can make in-person purchases at physical stores by scanning the QR code of the store.
In 2021, McKinsey and Co expected QR codes to be the second most popular contactless payment method between 2021 and 2026.
Contactless payments became more important as many governments imposed social distancing measures when COVID-19 broke out. Since then, they have become an important part of the online payments revolution and QR codes have been at the forefront.
Also, since QR code payments are completed in a few seconds or minutes, they are also a form of instant payment. “As organizations prepare for instant payments, there are many tools at their disposal, including one that may be buried at the bottom of their toolbox: Quick Response (QR) codes,” said the Federal Reserve.
In Kuwait, Kem is one company that has been leading the charge in making QR code payment available to businesses, especially SMEs, as a form of both instant and contactless payment.
Kem is a digital wallet that allows users to send money requests to other users in the form of QR codes. The user receiving the request can scan the code and make payment. Businesses online and offline can use this to instantly receive payments from their customers.
In addition, physical stores can print out their QR codes so that customers can scan them on the Kem app and then complete the payment.
Evaluation
Unlike traditional RTP platforms, QR code payments do not require the banking information of the payer. Everything that is needed has been encoded and there is no naked data that scammers can steal.
QR code payments are convenient and fast. In addition, the infrastructure needed to set them up in physical stores is far cheaper than a traditional POS terminal.
“Minimal infrastructure and equipment are typically needed to set up QR code payment acceptance,” according to Patrick Mutabazi, a technology consultant with iZip Advisory Consulting. “By not purchasing or maintaining conventional point-of-sale terminals, retailers can save money.”
Setting up online payments for your business with Kem
Kem is a digital wallet or P2P payment platform that uses QR codes to also offer the benefits of instant and contactless payments to people in Kuwait.
Online stores can accept fast and secure payments through the Kem app and they can also use the QR code feature to enjoy more security. In addition to all these, physical stores can also print their QR codes for contactless payments.
While QR code payments provide a level of security that other methods don’t, Kem does not stop there.
Any information you submit on the platform will be encrypted and sent to the Kem server irrespective of whether you are using a public WiFi, private WiFi, or data service (3G, 4G, 5G).
Furthermore, “Kem uses the same fraud detection infrastructure and safety standards that are used by thousands of the leading banks worldwide,” according to its CEO, Seth Sadeq.
Kem is also PCI Data Security Standard (PCI-DSS) Level 1 compliant. In essence, both your data and money are safe and secure on the platform.
If you have a business in Kuwait, Kem is a good way to improve your liquidity with timely receipt of revenue, reduce transaction costs by removing costly unsuccessful transactions, retain customers by giving them what they want (convenience and ease), and secure the data and funds of your customers.
[Do you want to improve your revenue collection while providing convenience and ease to your customers? Download the Kem app to receive QR code payments and enjoy the benefits of both instant and contactless payment.]
Frequently Asked Questions
What is an example of an online payment?
QR code payment is a popular example of online payment. Card payment, bank transfers, direct debits, instant payments, digital wallets are others.
Which site is best for online payments?
For Kuwaiti businesses, the QR code payment technology of Kem is a good way to combine the benefits of multiple online payments methods.
Which method is best for online payments?
QR codes still remain one of the best ways to combine speed, safety, convenience, and cost effectiveness.
What can I do to keep my Kem account safe?
Below are some steps you can take to keep your account with us safe:
- Ignore any emails that do not come from @kemapp.io or @kemkuwait.com.
- Ignore any email that contains links to websites different from kemapp.io or kemkuwait.com.
- Kem Support will never ask you to provide your sign-in code, PIN, Civil Identification Number (CIN), and will never require you to send a payment, make a purchase, download any application for “remote access,” or complete a "test" transaction of any kind.
- We may prompt you to verify your identity with your Civil Identification Number (CIN) within the app but Kem Support will not ask for your CIN to receive help. Also, do not offer your CIN to anyone outside of Kem.
- To keep your identity safe, never share your CIN or offer your CIN to anyone outside of Kem. As a reminder, Kem Support will never ask for your CIN to receive help.
- If you sign in to your Kem app on a device other than your personal device, make sure to sign out.
- If you received an unsolicited sign-in code via email, we recommend securing the email account associated with your Kem account by updating your password and enabling two-factor authentication.
- You can also secure your email account by enabling 2-factor authentication.
- Enable notification via push message or email so that you are notified after every Kem payment. You can adjust these settings in the profile section of your Kem account.
- Secure your device with a passcode
