Expanding your business into the United States can open up a broad market. As the world’s largest economy, the US recorded ecommerce revenue totaling $905 billion USD in 2022. However, there are a diversity of payment options in the US to consider, as well as security concerns, regulatory compliance, and the intricacies of handling international payments. But these challenges also offer businesses opportunities to create highly competitive, refined experiences that reflect the way customers prefer to pay.

Here, we’ll explore specifics of the US payment system:

• Investing in expansive security protocols
  
• Embracing emerging payment methods
  
• Simplifying the checkout process
  

The state of the market

In the United States, the primary currency is the US dollar (USD). Credit and debit cards have been widely accepted in the US for decades, but electronic payment methods are becoming more common. For example, mobile-based digital wallets such as Apple Pay and Google Pay, which allow people to make purchases using only their phones, have gained traction. Advances in technology, such as open banking, are quickly shaping the landscape of financial institutions and newer fintech challengers—and the regulatory frameworks that govern this environment are changing to keep pace.

State regulators and multiple federal agencies oversee the financial sector, including the Treasury Department, the Federal Reserve, the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC), and the Consumer Financial Protection Bureau (CFPB). These entities set guidelines and regulations to maintain transparent and secure financial activities, prudential safety and soundness, consumer protection, Anti-Money Laundering (AML) laws, and Know Your Customer (KYC) policies. AML laws and KYC policies are mandated to prevent fraud and illicit activities.

Payment methods

Cash payments have a long history in the US, but digital and electronic payment technologies have increasingly replaced them in recent years. Online shopping—already a growing trend—increased significantly during the pandemic, reinforcing that many customers prefer digital payments. Here’s an overview of popular payment methods in the US:

Current usage

Since credit cards were introduced to the US market in 1958, they have become a dominant method of payment for nearly every type of customer and business transaction. From 2017 to 2023, almost a third of American customers used credit cards when shopping online, and roughly the same percentage used digital wallets.

The majority of US customers use contactless payments. North America was the largest market in the world for contactless transactions in 2022, with 30% of revenue share. Contactless payments appeal to customers due to speed, convenience, and integration with other popular payment technologies, such as digital wallets. Apple Pay and Google Pay are major players in the digital wallet space, but these technologies are not just limited to credit cards—debit and prepaid options are also available.

Popular B2C payment methods in the US

• Credit cards
  
• Debit cards
  
• Digital wallets (e.g., Apple Pay and Google Pay)
  
• Buy now, pay later (BNPL) payments (e.g., Affirm, Afterpay, and Klarna)
  

Popular B2B payment methods in the US

• Credit cards
  
• ACH payments
  
• Wire transfers
  

Emerging trends

QR codes are growing in popularity as a convenient method of payment. Approximately 89 million smartphone users in the US scanned a QR code on their mobile devices in 2022, a 26% increase compared to 2020. Globally, the QR code payment market is forecast to grow from $11.2 billion USD in 2022 to almost $51.6 billion USD by 2032, with North America emerging as the most prominent market.

When a customer scans a code with a smartphone, they can make a payment without physical cards or cash. QR codes can also simplify the process of paying invoices: customers can scan a code to transfer funds directly to the business’s bank account.

US consumers are also interested in buy now, pay later (BNPL) payments through providers such as Affirm, Afterpay, and Klarna. The US BNPL market was valued at about $1.6 billion USD in 2022, and it’s expected to increase at a compound annual growth rate of 24% from 2023 to 2030.

Ease and friction of entry

While accepting payments in the US can be simpler than in emerging markets, entering a market as complex as the US involves unique challenges around taxes, chargebacks, international payments, and payment security. Here’s what to consider when thinking about expanding into the US:

Taxes

The tax environment in the US is multilayered, influenced by a mix of regulatory frameworks. There are several taxes businesses must pay in relation to payments:

• Federal taxes: Income and corporate taxes are the main concerns at the federal level.
  
• State taxes: These can include franchise or excise taxes, varying by state.
  
• Sales taxes: Obligations for sales taxes differ by state and sometimes by municipality.
  

Chargebacks and disputes

The US does not have a central regulatory body specifically for chargebacks, but general consumer protection laws apply. Chargebacks are not just a one-time loss of sales—they can also involve a chargeback fee, as well as termination of your business account if the amount of chargebacks is excessive.

International payments

If your business will need to accept payments from outside the US or in different currencies, consider these factors:

• Currency conversion
  Currency conversion is necessary for businesses involved in international trade. In the US, the exchange rate system is largely directed by floating rates, where market demand and supply determine currency value. Businesses can convert currency via traditional banks, online platforms, or forex brokers. Each entity has its pros and cons, such as higher fees with banks and potential security risks with online platforms.

• Localized platforms
  Each market has different preferred methods of payment, requiring businesses to adapt to specific customer needs. For example, iDEAL is a popular online payment method in the Netherlands that can make checkout easier for Dutch customers.

• Legal and regulatory compliance
  Compliance requires accurate recordkeeping and reporting. Currency gains also might be subject to taxation, which businesses need to be aware of when handling different currencies.

Security and privacy

In the US, security, compliance, and regulatory factors significantly impact a business’s payment operations. These factors are often complex and high stakes. Let’s look at these issues one by one.

• Fraud prevention
  To mitigate the risk of fraudulent activities, many businesses are adopting machine learning and artificial intelligence (AI) solutions. These include automated systems analyzing user behavior and algorithms scanning for suspicious payment activity to spot irregularities.

• Data protection and privacy
  Strict laws govern data protection and privacy. Following California’s lead, more states are implementing broader data protection laws. Even if a business operates primarily in the US, compliance with international laws such as the European Union’s General Data Protection Regulation (GDPR) may be necessary, depending on the customer base.

• Anti-Money Laundering (AML)
  AML is a set of procedures, laws, and regulations designed to halt the practice of generating illegal income and moving it through the financial system as if it were legitimately earned. AML legislation is rigorous and requires due diligence from companies. Some basic practices businesses are required to uphold in this area include verifying customer identities and keeping detailed records of transactions, which are subject to review by regulatory agencies.

• Financial security and consumer protection
  Several US governmental bodies oversee compliance and regulations. Among them are the CFPB and the Federal Trade Commission (FTC)—which regulate unfair business practices—and the Securities and Exchange Commission (SEC), which focuses on securities and stock trading.

Key success factors

Businesses in the US face several challenges related to payments that can impact the way they operate. A well-rounded strategy can help your business succeed in this market.

• Appropriate cybersecurity measures
  Ever-evolving cyber threats pose a real risk for any business accepting payments online. In 2023, the monetary damage caused by cybercrime reported to the US’ Internet Crime Complaint Center amounted to a historic peak of $12.5 billion USD. Incorporating fraud prevention measures—such as 3D Secure and machine learning algorithms—and complying with the Payment Card Industry Data Security Standard (PCI DSS) to protect sensitive cardholder data can help businesses enhance their fraud detection capabilities.

• Efficient chargebacks systems
  Businesses bear the most responsibility for handling chargebacks, which can be costly and time-consuming. Setting up a transparent system for handling such disputes quickly will help avoid financial and reputational damage.

• Focus on mobile payments
  With many US customers shopping via smartphones, implementing a mobile-friendly payment gateway is increasingly important. For businesses with mobile apps, in-app payment methods can simplify transactions.

• Elevated checkout experiences
  Ensuring your business’s payment page is simple, with concise instructions and minimal steps, will encourage customers to complete a payment. Allowing customers to complete transactions without creating an account can also speed up the process.

Key takeaways

Businesses accepting payments in the US must employ a multifaceted approach to meet customer expectations, including bolstering security protocols, embracing emerging payment trends, and making the checkout process as smooth as possible. Here’s a brief summary, along with tips to build your payment strategy.

Implement strong security measures

• Check customer identities in multiple ways
  Employ multifactor authentication by verifying each customer’s identity through multiple means, such as password and biometric confirmation.

• Prioritize data protection
  Comply with state-specific data protection laws and PCI DSS requirements to avoid fines and give your customers peace of mind.

• Mitigate fraud risk
  As ecommerce grows, so does the risk of card-not-present (CNP) fraud—transactions where the card isn’t physically present. Use fraud detection tools for online purchases, such as 3D Secure authentication and machine learning algorithms.

Embrace emerging payment methods

• Expand card payment options
  Given the widespread use of credit and debit cards, businesses should accommodate these payment methods, but think beyond the traditional physical card by accepting contactless card payments.

• Optimize for mobile
  With digital wallets and QR codes gaining traction, offering these options can increase convenience for customers.

• Align payment options with your customers
  Whether you’re accepting payments from individuals or corporations, determine which payment options work best for your customer segment. Consider payment alternatives other than credit cards, such as BNPL payments.

Simplify the checkout process

• Make checkout fast
  Implementing one-page or one-click checkout can save time and reduce cart abandonment.

• Be transparent about any taxes or fees
  By displaying any additional costs—taxes, service fees, or delivery fees—early in the checkout flow, you can prevent customers from leaving due to a higher total price than expected. Customers care about transparency, and it can build long-term customer loyalty.

• Offer multicurrency support
  For tourists and other international customers, accepting payments in other currencies can make shopping more accessible. Some international customers may be more inclined to use local payment options, and having these available can capture a wider audience.