What You Need to Know About the 3 Biggest Global Payment Methods

Recent new technologies will join the roughly 200 different types of electronic-payment methods that currently permeate our world. With so many options and use cases, it can be daunting for any global business to select the right payment methods.

learn more about Tien Tzuo

By Tien Tzuo

Opinions expressed by Entrepreneur contributors are their own.

There have never been more ways to pay someone. MasterCard is working on a new system that confirms transactions with selfies using facial-scanning technology. Apply Pay recently launched in the U.K. in July, joining a crowded European global payments ecosystem. BitCoin is getting more attention as a result of the Greek crisis.

These new technologies will join the roughly 200 different types of electronic-payment methods that currently permeate our world. With so many options and use cases, it can be daunting for any global business to select the right payment methods. It's more complicated for software-as-a-service and other subscription businesses that have to manage more sophisticated payment processes than traditional, one-time-sale models.

In such a scenario, how can these companies find the right global payments for their businesses? For starters, the most important criteria to assess global payment methods are push vs. pull and one-time vs. recurring payments.

Related: The EMV Card Deadline Is Coming. Here's How to Prepare Your Business.

If you're a merchant, push means that your customer has to actively send you the money. You have to request it, and your customer has to make the effort to put forward a discrete payment.

Cash, wire transfer, checks, coupon payment methods such as Boleto in Brazil or BVR in Switzerland are good examples. Generally speaking, the majority of payment methods are push-payment methods, and these are well suited for one-time payments, as few customers are willing to send payments on a monthly basis.

Pull-payment methods are better suited for subscription businesses since they allow the merchant to actively withdraw the money themselves. Agreements need to be put in place first, but a merchant has all the information and agency needed to withdraw the money from a customer's account.

There are several pull-payment methods that work well for SaaS and other subscription businesses. While many are regional -- they're popular in one country but not another, a few are global in nature. Let's take a look at the leading pull-payment methods for subscription businesses:

1. Credit cards

When you look at the most popular global payment methods today (particularly in ecommerce), credit cards are at the top. A pull-payment method, credit cards are excellent for recurring payments for two reasons. First, payments made against a credit card are guaranteed up front, eliminating settlement issues. Second, once a customer agrees to have you use their credit card numbers, you can keep pulling from that card on a recurring basis.

There are a couple of downsides however, such as fees, fraud and charge-backs, but these are relatively minor given the convenience to customers and the benefits listed earlier.

2. Bank transfers

Bank transfers are another popular recurring pull-payment method where the customer gives you their bank account information, and you're able to pull money directly from their accounts through a secure network connection. Most of these direct-debit methods allow you to pull payments on a recurring basis. The key benefits of bank transfers are lower fees and the popularity of this type of payment method around the globe.

Related: 12 Billing Mistakes That Make It Harder for Your Business to Get Paid

The biggest caveat with bank transfers is that there are many different flavors, and how payments are processed will vary by country. A few that come to mind are ACH (Automated Clearing House) in the U.S., PAD (Pre-Authorized Debits) in Canada, SEPA (Single Euro Payments Area) in Europe and U.K. Direct Debit in the U.K.

The complexity of handling SEPA bank transfers is much greater than processing ACH payments. As a merchant who supports bank transfers, you have to carefully manage which countries and types you'll support. In some cases, you simply must have the ones that are commonly used in your core markets even if they are used only in one country, for example, iDEAL in the Netherlands.

3. Ewallets

The third important global payment method to consider is an electronic wallet, or ewallet, which is a third-party payment method funded by a variety of means. There's always another payment method that sits behind it (such as a credit card or a bank transfer), but the company providing the ewallet handles all the complexity, security and process of the payment transaction.

PayPal is by far the most popular global ewallet today. While its ecommerce reach rarely exceeds 20 percent of any given local market, it's essentially in every country and has a proven track record. Other rising contenders include Google Wallet, Amazon Payments and Apple Pay, which are all expanding their reach and adding recurring payments support as well.

As more and more people embrace subscriptions for services or products that are one-time purchases today, we'll see most spending transpire with regular vendors on a recurring basis. Broadly speaking, this means:

1. Recurring, pull-payment methods will continue to gain market share.

2. Simpler, consistent user experiences will win over fragmented and regional methods. Credit cards will continue to remain very popular and major ewallets will gain ground. Bank transfers will continue to rule in certain regions, but global standards around authentication and guarantees will need to emerge for this payment method to gain more acceptance.

3. In the long term, we'll likely see an ewallet payment method gain significant market share, just like Alipay has in China. The simplicity for merchants, and the flexibility for customers to fund the wallet by a variety of methods seems to combine the best of both worlds. The key will be to figure out the fees and security aspects, so there's confidence in the market to use it.

SaaS and other subscription businesses will do well to carefully analyze and assess payment options to determine what's best for them and their customers.

As my colleague Iain Hassal rightfully points out, "Nailing down the right payment strategy is not only critical to doing business globally, but it's also one of the easiest things you can do to grow your business."

Related: Everything You Need to Know About Merchant Services

Tien Tzuo

Co-founder & CEO of Zuora

Tien Tzuo, widely recognized as one of the thought leaders in the software-as-a-service industry, founded Zuora in 2007 after serving as Chief Strategy Officer at salesforce.com. As Zuora's CEO, Tzuo has not only built one of the fastest growing SaaS companies, he's also evangelized the shift to subscription based business models and the complex billing structures they inherit, coining the phrase Subscription Economy. 

Related Topics

Editor's Pick

This 61-Year-Old Grandma Who Made $35,000 in the Medical Field Now Earns 7 Figures in Retirement
A 'Quiet Promotion' Will Cost You a Lot — Use This Expert's 4-Step Strategy to Avoid It
3 Red Flags on Your LinkedIn Profile That Scare Clients Away
'Everyone Is Freaking Out.' What's Going On With Silicon Valley Bank? Federal Government Takes Control.
Leadership

How to Detect a Liar in Seconds Using Nonverbal Communication

There are many ways to understand if someone is not honest with you. The following signs do not even require words and are all nonverbal queues.

Business News

A Retired Teacher and Her Daughter Were Scammed Out of $200,000 Over Email: 'I'm 69 Years Old and Now I'm Broke and Homeless'

The mother-daughter duo was in the process of buying a townhouse when their email chain with the title company was hacked.

Business News

Twitter's PR Department Is Now Automatically Replying With a Poop Emoji

Musk's ongoing battle against the media seems to have taken a rather undignified turn.

Leadership

Your Workplace Habits Need a Good Spring Cleaning, Too. Here Are 5 Steps to Get Started.

When was the last time you did a good spring cleaning on some of your unhelpful repetitive behaviors at work?

Leadership

How Great Entrepreneurs Find Ways to Win During Economic Downturns

Recessions are an opportunity to recalibrate and make great strides in your business while others are unprepared to brave the challenges. Here's how great entrepreneurs can set themselves up for success despite economic uncertainty.