How to set up online payments: A step-by-step guide for small businesses

With ecommerce users in the UK predicted to reach 62.1 million in 2025 and online sales accounting for over a quarter of all retail sales in the UK (26.1%), accepting online payments is essential for businesses today, no matter your size or industry. Whether you’re running an online store or offering services that can be paid for online, setting up a reliable and secure payment system makes it easier for customers to buy from you.

So, how do you get started?

From choosing the right payment system for your business to understanding how much it costs and the benefits and risks involved, we’ll break down everything you need to know. Find out how you can offer a smooth, secure payment experience for your customers and keep your business running efficiently.

What are online payments?

Online payments are transactions where customers can pay for products or services over the internet. These payments are processed through secure systems, providing a fast and convenient way for businesses to receive money without the need for physical in-store transactions.

When you set up online payments, you’re offering your customers the ability to pay for their purchases from anywhere, at any time, using a variety of methods. From a subscription service to a one-off payment for a product, online payments make the transaction process easier for both businesses and customers.

How online payment processing works

Whether you’re an e-commerce-only website or are setting up an online storefront to complement your brick-and-mortar business, the key players involved in accepting website payments are the same. 

Here’s what, or who, you need to know:

1. Payment gateway — Think of the payment gateway as the digital equivalent of a card machine. It's the software that sits on your website or app, securely capturing your customers' payment details and encrypting them for safe transmission. When a customer enters their card details on your checkout page, the gateway is what makes sure that information stays secure.
2. Payment processor — This is the behind-the-scenes facilitator that actually moves the money around. The payment processor takes the encrypted information from your gateway and communicates with the various banks and card networks to authorise and complete the transaction. They're essentially the middleman who makes sure everyone gets paid.
3. Merchant account — Your merchant account is a special type of bank account that temporarily holds funds from card payments before they're transferred to your regular business bank account. Not all payment solutions require a separate merchant account – some providers bundle this service into their offering – but it's an essential part of the process.

There are a few more steps involved in the entire end-to-end process, but these are the most important elements that you need to know. In a nutshell:

• Your payment gateway accepts and processes the online transaction
• Your payment processor moves the funds from your customer’s bank account into your merchant account

The step-by-step online payment process

Now that you know who's involved, here's exactly what happens during those few seconds between your customer clicking ‘pay’ and receiving their confirmation:

1. Customer initiates payment

Your customer selects their items, heads to checkout, and enters their payment details, including card number, expiry date, CVV, and billing address. This all happens on your website or through your online payment system.

2. Payment gateway encrypts data

Your payment gateway immediately encrypts all of this sensitive information using secure protocols like HTTPS, ensuring the data can't be intercepted or read by anyone who shouldn't have access to it.

3. Authorisation request

The encrypted payment details are sent to your payment processor, which forwards the authorisation request through the appropriate card network (like Visa or Mastercard) to your customer's bank.

4. Bank verification

The customer's bank receives the authorisation request and quickly checks several things:

• Is the account in good standing? (for example, is the account in credit and active?)
• Are there sufficient funds? 
• Does this transaction look legitimate? 

Based on these checks, they either approve or decline the transaction.

5. Response sent back

The bank's decision travels back through the same route: card network to processor to gateway, usually with an authorisation code if approved. This entire back-and-forth typically takes just 1-2 seconds.

6. Transaction completion

If approved, your customer will see a success message and can access their purchase or service. If declined, they will be prompted to try a different payment method or contact their bank for more information.

7. Settlement

Behind the scenes, the actual movement of money happens during settlement, usually within 1-3 business days. The funds move from your customer's account into your merchant account, and then into your business bank account.

How to set up online payments on a website

When it comes to accepting online payments, you've got four main systems to choose from. Each approach suits different business models, technical capabilities, and customer interaction styles. 

Here's how to decide which one is right for your business.

1. Integrated payment gateway

Best for: E-commerce stores, high-volume businesses, and companies with websites

A payment gateway is the most well-known method of taking online payments. It's the digital checkout page where customers enter their card details to complete a purchase. This is what you'll find on most e-commerce websites, from Amazon to your local retailer's online shop.

How it works: The payment gateway integrates directly into your website, creating a seamless checkout experience. When customers are ready to pay, they're either taken to a secure checkout page (hosted by your payment provider) or can complete their purchase without leaving your site (if you use an API integration).

What you'll need: A website with e-commerce functionality, an SSL certificate for security, and integration with your chosen payment provider. Many platforms, like Shopify, WooCommerce, or Magento, make this integration straightforward with simple plugins. Learn more about how takepayments can support your site with a payment gateway.

2. Virtual terminal

Best for: Service businesses, phone orders, and businesses without websites.

A virtual terminal is essentially an online version of a card machine that you access through your web browser. Instead of your customer entering their details, you manually input their payment information whilst they're on the phone, or from details they've provided by email or post. Virtual terminals let you process card-not-present transactions or remote payments, despite not actually having your own website.

How it works: You log into a secure web-based dashboard, enter your customer's card details, and process the payment in real-time. The customer receives confirmation, and the funds are processed just like any other card payment.

What you'll need: Just an internet connection and a device with a web browser. Most providers charge a small monthly fee, plus transaction fees.

3. Pay by link

Best for: Freelancers, service providers, and businesses sending invoices

Pay by link is like email invoicing with a modern twist. You create a custom payment request and send it directly to your customer via email, text message, or even social media. They click the link and are taken to a secure payment page to complete their transaction.

How it works: Using your payment provider's platform or mobile app, you create a payment request with the amount, description, and customer details. The system generates a unique, secure link that you can share in any way that suits you.

What you'll need: An account with a payment provider that offers pay-by-link functionality. Most charge per transaction, with no monthly fees.

4. Mobile payment solutions

Best for: On-the-go businesses, market traders, and face-to-face service providers

Mobile payment apps like takepayments' Beepaid combine the convenience of payment links with additional features designed for businesses that work away from a fixed location. To use it, you simply pick up your mobile phone, open the app, create and send a custom invoice to your customer, and get paid once they send the payment.

You’ll have access to all your payment information, quite literally in the palm of your hand. You can extract your transaction data from the app and upload it straight to an accounting platform or send it to your accountant.

How it works: Download the app to your smartphone, create custom invoices, and send payment requests directly to customers. They can pay immediately using the secure payment link, and you can track all transactions from the palm of your hand.

What you'll need: A smartphone, the payment provider's mobile app, and a business account with the provider.

Types of online payment methods for small businesses

With UK consumers now having their preferences on their favourite payment options, the key question isn't what payment methods exist: it's which ones are right for your specific business. 

For example, 40% of online purchases in the UK were made using a digital wallet in 2024, predicted to rise to 68% by 2030, but that doesn't mean every business needs to prioritise digital wallets.

The smart approach is understanding which payment methods your customers expect and which ones drive the best results for your business model. Here's how to match online payment methods to your business type, so you can work out which payment system could be right for you:

Online retailers and ecommerce businesses

Online shoppers expect choice and convenience. Digital wallets reduce checkout friction and cart abandonment, and card payments remain essential as they're universally trusted and accepted.

• Credit and debit cards – Still the foundation for most online purchases. We surveyed 2,000 UK consumers, and 63% said they preferred to pay via debit or credit card when purchasing online.
• Digital wallets (Apple Pay, Google Pay, PayPal) – 53% of UK consumers have used PayPal for online purchases recently.
• Buy Now, Pay Later (BNPL) – 2 in 5 UK adults have used BNPL at some point; it’s particularly effective for higher-value items. Read more about how Buy Now, Pay Later works here.

Subscription services and recurring billing

Subscription businesses need payment methods that reliably handle recurring billing. Direct debits have the highest success rate for ongoing payments – their average failure rates can be as low as 3%, compared to as high as 7.9% with cards.

• Direct debits – Lower fees and higher success rates for recurring payments.
• Digital wallets with recurring capabilities – Apple Pay and Google Pay now support subscription billing.

Service businesses and consultants

Service businesses typically don't need full e-commerce functionality. Pay by link lets you invoice professionally without a website, whilst virtual terminals enable phone payments.

• Pay by link – Perfect for invoicing clients after service completion.
• Virtual terminal – Take payments over the phone during consultations.
• Digital wallets – Quick payment option for smaller services.

Nonprofits and charities

Donor behaviour varies dramatically by age and donation size, which means you need flexibility and multiple options. Digital wallets capture spontaneous small donations, whilst bank transfers suit planned, larger gifts. 

• Digital wallets – Enable quick, impulse donations.
• Card payments – Essential for larger donations and older donors.
• Text-to-donate – Excellent for event-based fundraising.

Food delivery and restaurants

Food delivery customers prioritise speed and convenience. Digital wallets enable the fastest checkout experience, whilst card payments handle the bulk of transactions. Phone orders still require flexible payment options.

• Digital wallets – 21% of Brits regularly use mobile payments, perfect for quick food orders.
• Card payments – Universal acceptance for all order values.
• Cash on delivery – Still preferred by some customers, even though it’s declining.

How much does it cost to accept payments online?

The cost of accepting payments online can vary depending on the payment methods you choose, the number of transactions you take, and the service providers you work with. 

While the benefits of online payments are clear, it’s important to understand the costs involved so you can choose the right solution for your business without any surprises.

Here’s a breakdown of the most common costs associated with setting up online payment systems:

• Transaction fees – Most payment processors charge a fee for each transaction processed. This fee is typically a percentage of the transaction amount, and could range from 1.5% to 3.5% per sale. For example, a processor may charge around 2.5% plus a fixed fee (e.g., £0.20) per transaction.
• Set-up fees – Some payment providers may also charge a one-off set-up fee when you first start accepting payments online.  
• Monthly fees — Certain providers may charge a monthly fee for using their payment gateway or processing system. This fee could cover access to the platform, customer support, and ongoing updates.
• Additional fees – You should also watch out for any additional fees that might come with your payment solution. These could include: chargeback fees, international transaction fees, and refund fees. 
• Equipment costs – If you’re accepting payments through a card machine or POS system, there may be costs for the hardware.
• Payment method fees – The payment methods you offer can also affect the cost. For instance, credit and debit card payments often come with higher processing fees than bank transfers or e-wallets. Some methods, such as Buy Now, Pay Later, may also involve service fees or interest charges for customers that could add to your costs.

Frequently asked questions

How can I ensure my payment process is secure?

Ensuring the security of your payment process is essential. Here are a few key steps to take:

• Make sure your website has an SSL certificate so that all transactions are encrypted and sensitive customer data is protected.
• To help protect against fraud and security breaches, ensure that your payment system complies with the Payment Card Industry Data Security Standard (PCI DSS). Learn more about PCI DSS here.
• Implement 3D Secure (such as Verified by Visa or Mastercard SecureCode) to provide an extra layer of security by requiring customers to authenticate their identity during the checkout process. Read about Strong Customer Authentication (SCA) regulations here.
• Keep your payment systems and plugins updated to prevent any security vulnerabilities.

Want to brush up further on your security measures? Check out our guide to different types of card payment security methods here.

Can I accept payments on my website without a shopping cart?

Yes, you can. If you don’t have a shopping cart, you can still accept payments through other methods like pay-by-link or virtual terminals. 

How long does it take to set up online payments?

Setting up online payments can take anywhere from a few hours to a couple of days, depending on the complexity of your website and the payment solution you choose. For most businesses, integrating a payment gateway with an existing website is relatively straightforward and can be completed in a day. 

However, if you need custom integration or are using a more complex system, it may take longer. Many payment providers also offer tools to help streamline the setup process, making it as quick and easy as possible.

You can count on takepayments for safe online payments

At takepayments, we make it simple for small businesses to start accepting online payments. With secure solutions and expert support, we’ll help you choose the right system and get up and running quickly. 

If you have any questions or need help setting up, our team is just a call away. Reach out to us at 0808 274 2017, or you can head to our blog for more expert insights.

John Clark

Product Manager