While online transactions have surged in recent years, in-person payments still play a significant role. Businesses need to choose which in-person payment methods they will accept from their customers. Understanding how these payment methods work can help your business meet customer needs, improve their experience, increase revenue and customer retention, and successfully operate in the markets you want to reach.

Even if in-person transactions are not your only sales channel, improving your in-person payments experience will positively impact every other sales channel (such as ecommerce) as well.

Below, we’ll review what in-person payments are, widely used types of in-person payments, and how to choose the best methods for your business.

What’s in this article?

• What are in-person payments?
  
• Types of in-person payments
  
• How to choose in-person payment methods
  
• How Stripe supports in-person payments
  

What are in-person payments?

In-person payments are transactions that are completed with the customer physically present at the point of sale (POS). This form of payment occurs at brick-and-mortar retail stores, restaurants, event spaces, service providers, and other locations.

Types of in-person payments

In-person payment methods have significantly evolved in recent decades, giving businesses and customers a wide range of payment options. Here’s an overview of five popular in-person payment methods, how they work, their pros and cons, and the types of businesses or payment environments they tend to be most suitable for.

Cash

Cash is the oldest form of in-person payment; it has been a fundamental part of commerce for millennia. Its universality, simplicity, and independence from technological infrastructures have enabled cash to remain relevant, even in the digital age.

How it works

Cash transactions are fairly straightforward and consist of a direct, real-time exchange of physical money—banknotes or coins—between the customer and the business. The customer pays the exact amount owed for a product or service, and the business provides change as necessary.

Best suited for

Cash payments are typically preferred by small businesses, market stalls, pop-up events, local shops, and businesses operating in areas with poor internet connectivity. They are also valuable for businesses serving customers who don’t have access to banking services or prefer the anonymity of cash transactions.

Pros to cash as a payment method

• Universally accepted
  Cash is a universally recognized medium of exchange and is typically accepted in most places, although this has recently started to shift.

• No additional infrastructure
  Cash transactions require no additional hardware or software, making them accessible for businesses of all sizes.

• No transaction fees
  Unlike card or digital payments, cash transactions incur no processing fees, preserving profit margins.

• Immediate payment
  Cash payments are instant and eliminate any risk of delayed payments or defaults.

Cons to cash as a payment method

• Incompatible with shift to cashless payments
  As cashless payments increase in popularity and ubiquity, some businesses are shifting to not accepting cash at all.

• Inconvenient for large transactions
  Handling large amounts of cash can be impractical and risky, limiting its use in high-value transactions.

• Risk of theft or loss
  Physical cash can be lost or stolen, posing security concerns that might necessitate additional protective measures.

• Time-consuming
  Counting cash, providing change, and reconciling registers can be a manual and time-intensive process.

Example of cash as an in-person payment method

At a local bakery, walk-in customers choose their bread, pay in cash, receive any necessary change, and leave with their purchase—all within a matter of minutes. This process ensures quick service and high turnover, which is particularly important during peak hours.

While cash may seem out-of-date compared to emerging digital payment methods, it offers significant advantages. Its simplicity, zero transaction fees, and broad accessibility make cash a viable and often preferred payment method for many businesses and customers.

Paper checks

Paper checks are often overlooked in payments discussion, but they remain a viable and—in some instances, preferred—method of in-person payment. People have used paper checks for centuries, imbuing them with an inherent trust factor—particularly among certain demographics and in specific business situations.

How it works

A paper check is a written order from an account holder instructing their bank to pay a specific amount of money from their account to another individual or entity. The recipient—or payee—can deposit or cash the check at their bank, which will then request the funds from the check writer’s bank. The funds are then transferred from one account to the other, completing the transaction.

Best suited for

Paper checks are often used by businesses dealing with large transaction amounts, where immediate payment is not necessary and a record of payment is beneficial. They are also commonly used in B2B, rental, and real estate transactions.

Pros of using checks as a payment method

• Transaction size
  Checks can be written for large amounts, making them suitable for transactions where carrying cash may not be viable or card limits might block the transaction from completing.

• No need for immediate funds
  It takes some time for a check to clear, which can offer the payer some financial flexibility.

• Enhanced record-keeping
  Checks provide both parties with a physical record of the transaction, which is useful for financial tracking and tax purposes.

Cons of using checks as a payment method

• Time-consuming
  Writing, depositing, and processing checks can be a lengthy process. Checks also take time to clear.

• Risk of bouncing
  If the account holder doesn’t have sufficient funds when the check is cashed, the check can bounce, leading to fees and potential legal trouble.

• Limited acceptability
  Not all businesses accept checks due to their associated risks and the time required for clearing.

Example of checks as an in-person payment method

A classic example of check usage can be found in the real estate market. Tenants often pay their rent or deposit via check, providing a record of payment for both the tenant and the landlord. Likewise, businesses often pay vendors or receive payments from clients via checks, particularly for substantial amounts.

Paper checks provide convenience, financial flexibility, and enhanced record-keeping that can make them a valuable payment method. Before dismissing them as antiquated and irrelevant, it’s important to understand their advantages and determine whether checks align with your business’s requirements and your customers’ preferences.

Credit and debit cards

In an increasingly cashless society, credit and debit cards have emerged as one of the most common forms of in-person payment. They offer security, convenience, and flexibility that caters to a wide array of customer preferences and business needs.

How it works

A customer presents their credit or debit card at the point of sale. The card can be swiped (magnetic stripe), inserted (chip), or tapped (contactless) on a POS terminal. Once the terminal has captured the card details, it communicates with the cardholder’s bank to check for sufficient funds or credit. If approved, the transaction proceeds, and the amount is debited from the customer’s account.

Best suited for

Card payments are ideal for retail stores, restaurants, supermarkets, and any business that deals with medium- to high-value transactions. They also facilitate seamless transitions between online and offline sales channels for businesses with physical outlets as well as an online presence.

Pros of using credit and debit cards as payment methods

• Universal acceptance
  Credit and debit cards are widely accepted globally.

• Security
  Card payments offer protection against fraud through built-in security features such as EMV chip technology, PIN authentication, and zero-liability policies.

• Enhance customer spending
  Customers often spend more when using cards compared to using cash, since they aren’t limited by the amount of cash on hand.

• Trackable and reconcilable
  Card transactions are electronically recorded, making it easier for businesses to track and reconcile sales.

Cons of using credit and debit cards as payment methods

• Requires hardware
  Businesses typically need to invest in card-reading terminals or card readers to accept card payments. However, this is no longer universally true; many cards are now equipped with NFC technology for contactless transactions, which can be done with a properly enabled smartphone and no other hardware.

• Transaction fees
  Each card transaction incurs a fee that the business must pay, potentially impacting profit margins.

• Dependency on network
  Card payments require an active network connection to process, creating a potential point of failure in case of network issues.

Example of using credit and debit cards as a payment method

At a clothing boutique, customers select their items, proceed to the checkout line, and pay using their credit or debit cards. The boutique can easily handle high-value transactions, offer returns or refunds if needed, and keep accurate records of all transactions for accounting and reconciliation purposes.

Credit and debit card payments offer convenience, safety, and wide acceptance. Their role in facilitating higher spending and bridging the online-offline gap makes them a valuable payment option for most businesses. Even as technology evolves and changes the way payments are conducted, credit and debit cards are evolving alongside these trends. For most businesses, credit and debit cards will remain a relevant payment method.

Digital wallets

Digital wallets have transformed in-person payments. Offering convenience, speed, and security, they cater to today’s on-the-go, tech-friendly customers and promise a streamlined shopping experience.

How it works

Digital wallets, or mobile wallets, store users’ debit, credit, or prepaid card information securely on their mobile devices. At the point of sale, customers can make contactless payments by tapping their phones against the NFC-enabled payment terminal. The payment details transfer securely, and the transaction is processed almost instantly.

Best suited for

Given the explosive popularity of digital wallets in recent years, they are generally a good fit for most in-person businesses. They’re ideal for retail outlets, cafes, restaurants, and any other business that aims to provide a swift, easy customer experience. And since digital wallets work both in-person and online, they are a good option for businesses that want to create a unified commerce experience across sales channels.

Pros of using digital wallets as a payment method

• Speed and convenience
  Digital wallet payments are quick and contactless, creating a smooth checkout experience.

• Enhanced security
  Digital wallets use tokenization to keep card details secure, providing an additional layer of fraud protection.

• Integration with loyalty programs
  Many digital wallets can integrate with businesses’ loyalty programs, providing a more engaging customer experience.

• Lower handling costs
  Digital wallets eliminate the need for handling physical cash, reducing associated costs and risks.

Cons of using digital wallets as a payment method

• Requires NFC-enabled hardware
  To accept digital wallet payments, businesses need to have NFC-enabled POS terminals.

• Dependence on smartphones
  Digital wallet payments rely on customers having compatible smartphones and digital wallets, which may limit their use.

• Potential compatibility issues
  Not all digital wallets work with all payment systems and cards, which may lead to compatibility issues.

Example of using digital wallets as a payment method

At a busy coffee shop, customers place an order, tap their smartphones against the NFC terminal, and collect their coffee. This quick transaction process helps keep the line moving, ensuring customer satisfaction—particularly during peak hours.

Digital wallets are redefining in-person payments by combining the best elements of physical and digital payments. They offer businesses a chance to enhance customer experience, improve operational efficiency, and adopt a future-ready payment approach. For businesses that want to meet the payment preferences of modern customers, digital wallets are worth considering.

Peer-to-peer payments

Peer-to-peer (P2P) payment systems have transformed the way individuals exchange money, turning smartphones into virtual wallets. While primarily used for transfers between friends and family, their usage for in-person payments in a business context is steadily growing.

How it works

P2P payment apps allow users to link their bank account or card details to the app. When making a payment, the payer selects the recipient’s account (often identified by a phone number or email address), enters the payment amount, and confirms the transaction. The money is then transferred directly from the payer’s to the recipient’s account.

Best suited for

P2P payments are excellent for small businesses, independent contractors, and service providers who want to accept digital payments without investing in expensive hardware. They’re also beneficial for businesses that regularly engage with younger, tech-savvy customers.

Pros to using P2P payment methods

• Easy to use
  P2P apps have a user-friendly interface, making it easy for anyone with a smartphone to make and receive payments.

• Immediate transfers
  Funds are typically transferred in real time or within one to two business days, offering faster access to funds compared to some other payment methods.

Cons to using P2P payment methods

• Limited protections
  P2P payments lack the same level of protection as traditional banking systems, which may leave businesses exposed to fraud or disputes.

• Not universally accepted
  Not all businesses accept P2P payments, and not all customers use P2P apps, limiting their reach.

• Potentially unprofessional
  Some may view P2P payments as less professional than traditional payment methods, which could impact a business’s image. This could be more or less of an issue depending on which industry and payment setting you operate in and who your core customers are.

Example of using P2P payments for customer transactions

An independent artist selling their artwork at a local fair can accept payments directly through a P2P app, allowing customers to purchase artwork easily without the need for cash or cards.

P2P payments are a convenient, cost-effective, and user-friendly method of accepting in-person payments. They allow businesses to take advantage of the growing trend of digital and mobile payments, providing an attractive payment option to modern customers. However, businesses must also consider the limitations of this payment method, particularly around protections and perceptions, when deciding whether to integrate P2P payments into their payment offerings.

How to choose in-person payment methods

It’s important to choose the right in-person payment methods for your business. The chosen methods not only influence your operational efficiency but also impact customer experience and satisfaction. Here is a step-by-step guide to help you make this decision:

Understand your customer base

The first step in choosing an in-person payment method is understanding who your customers are and how they prefer to pay. Do they expect the convenience of digital wallets or P2P payments? Do they value the security of credit or debit cards? Or do they prefer the traditional method of cash? Conduct research or use data analytics to determine the most popular payment methods among your customers.

Evaluate your business needs and capabilities

The next step is to evaluate your own business needs and capabilities. For example, if your business deals with high-value transactions, credit and debit cards or checks could be more appropriate. If you operate in a fast-paced environment, the speed of digital wallets might be beneficial.

Additionally, consider your infrastructure capabilities. Can you invest in NFC-enabled terminals for digital wallet acceptance or card readers for card payments? For example, if you’re making decisions about payment methods for a network of several thousand drug stores, deciding to accept contactless payments might require a huge investment to equip every location with new POS terminals.

But if you’re making this decision for a platform of independent businesses that can be set up to accept contactless payments, including digital wallets, by adding the right payment software to their phones—such as Tap to Pay on iPhone—then you can quickly and efficiently deploy this payment method at scale without any new hardware.

Consider cost implications

Each payment method comes with its own set of costs. While cash might seem cost-free, it requires secure storage, handling, and bank deposit procedures. Card payments, digital wallets, and P2P payments often involve transaction fees that could impact your profit margins. Weigh these costs against the benefits and customer preferences to make an informed decision.

Review security and compliance

The security of your customers’ data should be a top priority when choosing a payment method. Ensure that any digital payment methods you choose have robust security measures in place and are compliant with relevant financial and data protection regulations.

Assess integration with existing systems

Choose payment methods that can easily integrate with your existing business systems, such as your accounting software, CRM system, or inventory management system. This integration can help businesses streamline operations, track transactions more efficiently, and offer better customer service.

Look for flexibility

Choose payment methods that are flexible and can adapt to future changes in technology and customer behavior. The payment landscape is continually evolving, and staying ahead of the curve can provide a competitive advantage.

Selecting in-person payment methods is an opportunity to deepen your understanding of your customer’s behavior, refine your operational efficiencies, and position your business for growth. It’s about anticipating change, embracing innovation, and nurturing a payment ecosystem that is as diverse as your customer base.

The payment process is often the last interaction a customer has with your business during a transaction, which makes it especially important to get right. Ensuring this process is simple, intuitive, and secure can leave a lasting positive impression on your customers, increasing the likelihood of repeat business and fostering a culture of loyalty.

How Stripe supports in-person payments

Stripe is a comprehensive payments platform that supports a wide variety of in-person payment methods. It offers dynamic, customizable solutions to streamline the payment process, bolster security, and enhance the customer experience. In particular, Stripe Terminal and Stripe Reader play important roles in facilitating in-person payments. Here’s what you need to know about both:

Stripe Terminal

Stripe Terminal is a programmable POS solution that extends Stripe’s infrastructure to in-person transactions. Businesses can integrate Stripe Terminal with their existing Stripe account and software stack to unify their online and offline channels. Terminal supports a range of payment methods including credit and debit cards, digital wallets, and even mobile payment apps. This versatility ensures businesses can cater to a broad spectrum of customer preferences.

Stripe Terminal uses end-to-end encryption, a key component of a secure payment environment that ensures sensitive card data is not exposed. Additionally, Stripe Terminal complies with PCI standards, enabling businesses to meet their regulatory requirements with minimal effort and better accuracy.

Stripe Terminal offers precertified card readers and SDKs that allow developers to create custom payment experiences. It also provides APIs that facilitate integration with existing business applications, ensuring a seamless flow of transaction data and simplifying reconciliation processes.

Stripe Reader

Stripe Reader is an integral component of the Stripe Terminal ecosystem. It’s a card reader designed to accept a variety of in-person payments, including chip-and-PIN and contactless payments from cards and digital wallets—and it can be used with just a smartphone or as part of a POS terminal, allowing for expansive application in a variety of in-person environments.

Stripe Reader pairs with Stripe’s SDKs and APIs, enabling businesses to build their own POS applications. The hardware communicates directly with Stripe, which reduces exposure to sensitive data and minimizes the scope of PCI compliance.

Stripe Reader is thoughtfully designed to perform quick, reliable, efficient transactions. Its support for contactless payments can reduce queues and wait times, contributing to a simple in-person customer experience. This can not only increase turnover of long lines for in-person retail businesses, but also improve customer satisfaction.

Overall, Stripe’s support for in-person payments stems from its commitment to providing flexible, secure, developer-friendly infrastructure. Stripe Terminal and Stripe Reader enable businesses to quickly and easily accept their customers’ favorite payment methods, secure their payment environment, integrate with existing software, and create custom payment experiences. These tools can help businesses improve their operational efficiency and customer satisfaction in all kinds of in-person payments. To learn more and get started, go here.