How to accept online payments quickly and securely

Published Thursday 27 November 2025

Table of contents

• Benefits of accepting online payments
• Types of online payment methods
• How does online payment work?
• How to set up online payments
• What are merchant service fees?
• Security considerations for online payments
• How do I account for the transaction fee?
• Getting started with online payments
• FAQs on accepting online payments

Key takeaways

• Implement online payment acceptance to receive funds within hours instead of waiting 28 days or more, as small businesses get paid up to twice as fast with digital payment methods.

• Choose payment providers like Stripe, PayPal, or GoCardless that integrate directly with your accounting software to streamline setup and automatically add 'Pay Now' buttons to invoices.

• Budget for transaction fees ranging from 1.4-4% per payment, with credit cards costing 2.5-4% and debit cards 1.4-2.5%, and consider using traditional payment methods for invoices over £5,000 to manage costs.

• Prioritise security by selecting PCI DSS compliant payment providers that handle sensitive customer data and meet UK strong customer authentication requirements, protecting both your business and customers from fraud.

Benefits of accepting online payments

Online payments deliver measurable benefits for both your business and customers:

For your business:

• Get paid in hours instead of 28 days or more
• Reduce admin by avoiding chasing late payments or processing cheques
• Lower costs by eliminating postage and bank processing fees

For your customers:

• Pay invoices immediately from any device
• Choose credit cards, debit cards, or digital wallets
• Spread costs using credit card payments

Types of online payment methods

Online payment methods are digital ways customers can pay your invoices without visiting a bank or writing cheques. The main types include:

• Credit and debit cards: Instant payments processed through secure gateways
• Digital wallets: Services like PayPal, Apple Pay, and Google Pay
• Bank transfers: Direct payments from customer bank accounts
• Direct debit: Automated recurring payments you collect from customer accounts

These methods let you get paid instantly or within hours. Cheques can take days or weeks.

How does online payment work?

Online payment processing works through merchant service providers that handle the technical side of collecting payments. How it works:

Setup (one-time):

• Choose a provider: Select one that integrates with your invoicing software
• Connect your accounts: Link your bank account and business details
• Configure settings: Set up payment methods and fees

Daily use:

• Send invoices: Your invoices now include a 'Pay Now' button
• Customer pays: They click the button and pay instantly
• Money arrives: Funds appear in your bank account within 1-5 days

Most providers offer free setup with transaction fees of 1.4 – 4% per payment.

How to set up online payments

You can set up online payments quickly by connecting a payment service to your accounting software.

Here's how it generally works:

• Choose a payment provider that suits your business. Popular options like Stripe, PayPal, and GoCardless integrate directly with Xero.
• Connect the provider to your accounting software. This is usually a quick setup process within the software itself.
• Add a 'Pay now' button to your online invoices. This gives your customers a simple, secure way to pay you instantly.

Once you connect the service, it processes payments for you, so you can focus on your business.

What are merchant service fees?

Transaction fees are the main cost of accepting online payments. Here's what to expect:

Card payments:

• Credit cards: 2.5 – 4% of invoice value
• Debit cards: 1.4 – 2.5% of invoice value
• Example: £100 invoice = £1.40 – £4.00 fee

Other methods:

• Direct debit: Fixed fee of £0.20 – £2.00 per transaction
• Bank transfers: Usually 1 – 2% of invoice value

Cost management tips:

• Use traditional methods for invoices over £5,000
• Turn online payments on or off for each invoice
• Factor fees into your pricing strategy

Security considerations for online payments

Security is a top priority when you accept payments online. Your customers need to trust that their financial information is safe. You can protect your business and your customers by using a trusted payment service.

When you use a trusted payment service, they manage the complex security requirements for you, including adhering to regulations like the UK's rules on strong customer authentication.

These providers are typically Payment Card Industry Data Security Standard (PCI DSS) compliant, which is the global standard for protecting card data. This means they handle sensitive information securely, reducing your risk and giving everyone peace of mind.

How do I account for the transaction fee?

Transaction fee accounting requires recording fees as business expenses matched to each payment. Here's how it works:

Manual tracking:

• Record the fee as a 'Payment Processing' expense
• Match the fee to the specific customer payment
• Calculate the net payment by subtracting the processing fee from the invoice amount

Automated tracking:

• Use accounting platforms like Xero to automatically record fees
• Link fees to the correct invoice and customer automatically
• See actual profit margins after processing costs in real time

This ensures accurate financial reporting and helps you understand the true cost of each sale.

Getting started with online payments

Offering convenient payment options is a simple way to improve your cash flow and give your customers a better experience. With accounting software, you can add payment services to your invoices and get paid faster.

You can connect a payment service in Xero and add a 'Pay Now' button to your invoices today. Start your free Xero trial to see how simple it can be.

FAQs on accepting online payments

Here are answers to some common questions about accepting online payments.

What is the best way to take payments online for small businesses?

Using a payment gateway that works with your accounting software is often the easiest way. It helps you send invoices and match payments quickly, saving you time.

How can I receive card payments online safely?

The safest approach is to use a reputable payment provider that is Payment Card Industry (PCI) compliant, as these services are governed by official UK rules like the Payment Services Regulations. These services handle the secure processing of card details, so you do not have to manage sensitive customer data yourself.

What is the most secure online payment method?

Payments made through trusted gateways using credit cards are secure. These providers use strong security measures to protect you and your customers from fraud.

Which online payment method has the lowest fees?

Fees vary between providers and payment types. Direct debit can have lower transaction fees than credit cards, so compare your options to find what works best for your business and customers.

Do I need a merchant account to accept online payments?

Not always. Many payment service providers, like Stripe and PayPal, let you accept payments without setting up a separate merchant account with a bank.