When Xero added the capacity for online invoices to its accounting software in 2012, James Carey CA signed up immediately. His firm, Sydney-based Prime Partners Chartered Accountants, was averaging 50 to 60 days to receive payment.

Giving clients the option to click on a link in an email, view the invoice online and pay directly with a credit card reduced Prime Partners’ debtor days to 30.

“It made a huge difference in collecting money because it made it easy for clients to pay when they got our invoice,” Carey says.

Handing over payment from one human to another is one of the simplest, most powerful of actions. But when payments go electronic, unfortunately things become more complicated.

A plethora of payment platforms

Electronic payment methods vary depending on what you’re buying. Are you paying for a dress in a store? Shopping online for groceries? Or setting up a recurring bill payment? In each scenario, the payment platforms, networks and transaction costs involved are different.

Take online invoices and payments. In 2012, Xero gave four options; Stripe, eWAY, Authorize.net, Worldpay. Now you can also choose from PayPal, GoCardless, Braintree and DPS Payment Express (renamed Windcave), as well as Stripe and eWAY. Or plug in a custom payment platform.

MYOB’s in-house approach simplifies the payment set-up but it also reduces your options. Australian users of AccountRight and Essentials can receive payments made with Amex, Visa, MasterCard and BPAY but can’t set up direct debits, recurring subscription payments or part payments.

MYOB’s M-Powered Payments predated online invoicing in its desktop software. Its replacement, MYOB PayBy, is a far more complex group of payment products and services.

Besides the invoice payments, MYOB PayBy includes gateway services that accept real-time credit card payments via a website, shopping cart or bill payment receivables; another service to take payments securely over the phone; and fraud management services.

The search for simplicity

There is a constant tug-of-war between providing more payment options and having simpler set-ups. The trend among online accounting software companies is to simplify.

MYOB has its in-house option, as does Intuit QuickBooks in the US. In Australia, QuickBooks Online promotes Square and PayPal as the best options for credit card, in-store and mobile payments.

Shuttle (previously branded as Pay with Bolt), an integration in the Intuit App Center, connects to payment platforms Adyen, Authorize.net, Braintree, GoCardless, PayPal Business, PayPal Payflow Pro, Paysafe, Square, Stripe and Worldpay.

Reckon One is firmly behind PayPal Checkout. Customers can pay up to US$60,000 directly from an online invoice using Amex, MasterCard and Visa debit and credit cards. PayPal will also automatically issue Reckon One users with a merchant account, bypassing the usual on-boarding process.

Although Xero offers the biggest number of native integrations, it is clearly picking winners that can support its global ambitions. The first option in its Payment Services tab is dedicated to “Credit Cards powered by Stripe”.

Xero has thrown its weight behind one solution not just for simplicity but also for depth of integration. It added Stripe as a bank feed, which means that all Stripe transactions are automatically categorised and reconciled, including Stripe fees.

The second option is PayPal. Even though PayPal can take credit card payments, its inclusion is mainly for consumers paying a new supplier for the first time. PayPal hides the customer’s bank card details and provides a form of consumer insurance.

The only other dedicated option is GoCardless. GoCardless gets its Xero guernsey because it is a global platform in direct debit payments.

Why Xero is starring Stripe

The integration of payments into accounting software is a real advantage – for both small-to-medium businesses (SMEs) and their accountants. The Stripe-Xero partnership has greatly improved the quality of information in the accounting file, says Georgia Goodman CA of Leech & Partners, a 50-staff firm with offices in Christchurch and Ashburton in New Zealand.

The Stripe bank feed updates transactions daily. “This has been great for our clients because they can see the month in which the sale occurs. It’s much better than waiting for the payment to hit the bank account a few days later, which then makes it difficult to allocate to the right period,” Goodman says.

Automated reconciliation between Stripe payments and invoices has several benefits. Perhaps the most important is that accountants have a much higher level of trust that the data in the customer’s file is accurate. (Goodman reviews the reconciliations but has found no errors so far.) It also means the debtors ledger is always up to date. This helps with management accounting; there’s no waiting for the client to reconcile their feeds before sending out reports.

In addition, this automatic reconciliation means Xero’s automated invoice reminders work properly. As Goodman explains, clients using Xero often switch off invoice reminders if they receive an angry call from a customer who has already paid the invoice.

“Your customers paid two weeks ago but they are getting a reminder because you’re too lazy to update your bank rec. Whereas with Stripe it auto-reconciles those invoices, so clients only get them when they need them,” she says.

Stripe’s auto-pay function is also popular for subscription-based businesses such as gyms. “Every time that repeating invoice is raised in Xero, the payment is taken out on that date from the customer’s debit or credit card, like your Spotify membership,” Goodman says.

“Every time that repeating invoice is raised in Xero, the payment is taken out on that date from the customer’s debit or credit card.”

All that automation comes at a price. Stripe charges 1.75% + A$0.30 for domestic cards and 2.9% + A$0.30 for international cards.

“When you’re talking many hundreds of thousands of dollars those small percentages do make up a reasonable amount,” says Prime Partners’ Carey. “A standard merchant facility might be 0.5%; the highest fee is 1.5% for non-Amex, international cards.”

More automation is worth the higher fees

Prime Partners was already using a merchant facility with NAB when Xero added online invoicing. The firm connected it to Xero via the eWAY payments platform, which charges a minimal transaction fee. eWAY also marks invoices in Xero for matching payments easily.

However, his firm has been prepared to pay higher transaction fees in return for more automation.

Prime Partners uses Practice Ignition (PI) software to streamline its onboarding and job-task creation. PI also has a payments feature that allows a practice to collect both direct debit and credit card payments from clients. These payments are then automatically reconciled with Xero or QuickBooks Online ledger.

Depending on what plan a practice is on (there are three), PI charges from 1.75% to 2.5% + A$0.30 to process a domestic credit card payment, and 2.2% to 3.4% + A$0.30 for international or Amex credit card payments. Each direct debt payment has a handling fee from A$0.85 to A$2.

To trim costs, a practice can insist a client pay by direct debit rather than credit card; alternatively, it can pass on the transaction fee to clients.

“When we have a client that is on a 50% upfront and 50% on completion, or an individual with a large number of tax returns outstanding, we will use PI for a direct debit to process those payments,” Carey says.

“As soon as we complete the engagement, we notify them that we are going to process the second payment and then process it through the system. In that case, we find that the higher fees versus what we pay on our merchant facility are worth the effort.”

One-stop-shop platforms have competition

The sheer number of payments platforms testifies to the ongoing level of complexity. Companies such as Windcave, eWAY and Pin Payments offer a single way to manage credit cards, direct debits, e-commerce and in-store payments.

And yet the specialist players appear to be growing even faster.

Xero chose Stripe for credit cards, for example, even though it only takes e-commerce payments. Queensland accounting firm SBO Financial uses Chargebee, a specialist in subscription and recurring payments, for repeat billing its clients.

A new player that works with most small business accounting software, Pinch Payments, can create payment plans, set thresholds and pass on transaction fees.

The reason why the one-stop-shop platforms haven’t won the game is because they aren’t innovating enough in each area, says Carolyn Breeze, GoCardless general manager for Australia and New Zealand.

“When digital payments were taking the stage there was an idea in enterprise that people wanted an all-in-one supplier. But bank mechanics are very different for them all.”

Setting up a direct debit can still be a relatively manual process. Ezidebit and the banks require customers to submit forms to sign up. Some banks ask businesses to send through a CSV file with direct debit information before 9pm each day.

The online accounting software companies are choosing between simplicity and pace of innovation. Xero just renewed an exclusive, multi-year, global partnership with GoCardless for direct debit, and is working on a stronger integration, Breeze adds.

“We will be able to surface at the right times during the invoicing cycle and prompt the customer to use more reliable payment methods. That’s why we were chosen with Stripe – for reliability.”

Don’t expect banks to take this lying down. NAB spent millions of dollars upgrading its internal systems and building APIs to create a NAB Payments integration with Xero.

Xero users with a NAB transaction account can purchase the Xero-NAB Pay add-on and then pay multiple bills directly from Xero, eliminating the need for an ABA [Australian Banking Association] file. Once the batch is approved, the business owner receives a smartphone notification and can approve or decline each invoice.

It is a sure sign that the banks are willing to innovate alongside the fintechs – the feature just won an Innovation Excellence Award from CanStar. “Some of the best and most impactful innovations are ones which remove what can seem like an innocuous pain point – this is one of those,” the judges said.

Bye bye push, hello pull

You can divide payment mechanisms into push and pull technology. A push payment is where a customer has to take action to make a payment. For example, paying invoices with an electronic funds transfer or BPAY.

A pull technology, such as direct debit, guarantees that a payment will arrive on a specific day, so long as there are funds available. This is the preferred payment method for all businesses because it improves cash flow, says Carolyn Breeze, GoCardless general manager for Australia and New Zealand.

For this reason, businesses are shifting towards payment platforms that offer pull technology. This includes software companies that previously conditioned customers to pay by credit or debit card.

However, Breeze claims software-as-a-service (SaaS) companies will swing hard to direct debit. One advantage is that the direct debit relationship is with the customer’s bank account, not their bank card.

Bank account details very rarely change, while debit and credit cards are updated every couple of years.

“Every time you ask a customer to update these details you are asking them to re-evaluate their relationship with you,” Breeze says. “No one payment method has a 100% success rate all the time. But the more of your payments that fail, the more you will lose to involuntary churn.

The rise of pull technology dovetails with another major trend – consumers are moving away from credit. Millennials favour debit cards and direct debit arrangements over credit cards, Breeze claims.

What about the boom in pay-later programs? “Millennials don’t see AfterPay and Zip as lines of credit even though they are,” she says.

Popular online payment options for you and your clients

The following table outlines some of the key facts users need to know about nine of the most popular online payment gateways. The options listed here are by no means exhaustive. A product’s inclusion should not be regarded as an endorsement by Chartered Accountants Australia and New Zealand. Information included in this guide has come from the relevant vendors or associated websites.

Product/Company	Upfront costs	Ongoing costs	Certified partners	Where is the data stored?	Transaction fees
Pinch Payments	None.	None. Transaction fees only.	Xero, Intuit and Reckon in the Accounting Software space and referral partnerships with Bookkeepers and software integration specialists.	Azure cloud servers within Australia.	2.5% + A$0.30 for credit card transactions and 1% + A$0.30 for direct debit bank account transactions. Volume discussions can be had.
Windcave	None.	A$30 per month or NZ$30 per month.	Xero, Shopify, WooCommerce, Magento, Chargify.	New Zealand.	Australia – A$0.30 + 1.7% (Mastercard/Visa) New Zealand – NZ$0.30 + 2.8% (Mastercard/Visa). Most pricing is on application and depends on volume.
GoCardless	None.	Depends on business size. Self serve – no monthly fees. Custom pricing – from A$100 per month.	Over 200 billing and subscription software partners globally, including Xero, Zuora, Salesforce, Chargebee, Chargify.	Cloud.	Self serve – 1% + A$0.40 per transaction. A$4 max. (An additional fee of 0.1% applies to transaction values above A$3,000.) Custom – volume-based pricing.
Pin Payments	None.	Transaction fees only.	Integrates with a number of platforms such as Xero, Shopify and Timely. Obee and ezyCollect use Pin Payments to add payment features to their platforms to collect payments.	Payment card information is encrypted and stored in a system completely isolated from Pin Payments. At no time is unencrypted card data stored on disk either inside Pin Payments' system or in the card storage system. Internally card information is referenced only through the use of a token, and the token is not derived from card information in any way.	1.75% + A$0.30 for domestic card transactions. 2.9% + A$0.30 for international card transactions.
eWAY	All-in-One pricing plans that include an Internet Merchant Facility and Payment Gateway start from 1.5% +$0.25 per transaction with a minimum monthly fee of A$29 in Australia. The minimum monthly fee is currently being waived for the first 6 months. All-in-One pricing plans that include an Internet Merchant Account and Payment Gateway start from 3.4% per transaction in New Zealand.	All-in-One option in Australia, minimum monthly fee of A$29. If your business’s transaction fees do not reach A$29, your business will be required to pay the difference. The minimum monthly fee is currently being waived for the first 6 months. All-in-One option in New Zealand, processing fees are based on usage. Some pricing plans do attract a monthly fee.	eWAY partners with the major banks in both Australia and New Zealand and integrates with more than 250 shopping cart and software providers.	eWAY has redundant data centres in multiple cities and data is replicated across all sites to ensure that customer information is never lost.	Transaction fees vary depending on the pricing plan chosen. In Australia, transaction fees start from A$0.25 per transaction on our All-in-One pricing plan. In New Zealand, the All-in-One pricing plans don’t charge transaction fees, just a percentage fee per transaction, starting from 3.4% per transaction.
PayPal Australia	None.	None. However, Website Payments Pro – Hosted Solution and Virtual Terminal has a A$25 monthly fee.	BigCommerce, Magento, Shopify, WooCommerce, Intuit and Xero among others.	PayPal keeps its users’ financial data stored in a single online "vault". Businesses can use the Vault’s API (application programming interface) to securely store customer credit cards in the PayPal vault rather than on their server. The API returns the ID of the vaulted card.	Online payments – 2.6% + $0.30. Website Payments Pro – Hosted Solution* – 1.75% + $0.30. Invoices – 2.6% + $0.30. PayPal Here card reader – 1.95%. PayPal Here, manual entry – 2.9% + $0.30. Virtual Terminal* – 3.6% + $0.30. Donations** – 1.1% + $0.30 *Website Payments Pro – Hosted Solution and Virtual Terminal also have a A$25 monthly fee. **Donation fees apply to approved charities only.
Stripe	None.	Transaction fees only.	Stripe works with hundreds of certified partners, including Xero, Shopify and Salesforce.	Stripe relies on the most secured and advanced web hosting services to handle data.	Standard price – 1.75% + A$0.30 per local transaction. Larger businesses can benefit from custom pricing options.
Chargify	Depends on the implementation.	Depends on Chargify Plan chosen. Plans start from US$149 per month.	N/A	Data stored in the US - payment information is stored with gateways in their specific locations.	N/A
IntegraPay	Depends on the plan. Customised solutions are available, price on application.	Minimum monthly fee of A$16.50 per month (only charged if not meeting minimum with transaction fees).	IntegraPay offers API integration solutions for a number of industry software providers. IntegraPay also provides Xero App Solutions and Salesforce App Solutions for additional efficiencies.	Australia – Tier 4 service to host mission critical servers and computer systems, with fully redundant subsystems (cooling, power, network links, storage etc).	For each bank debit and BPAY transaction, a relevant flat 'per transaction fee' applies when paid from a bank account. If the payer uses a credit card or debit card to make payments, applicable agreed fees include a ‘percentage of transaction value fee’ plus an agreed ‘per transaction fee’.
FeeSynergy Collect	From A$995 for 1 billing entity to A$1495 for up to 5 billing entities.	A$360 per year for hosting and support.	FeeSynergy Collect can operate as a standalone facility or be integrated with FeeSynergy's Collect debtor management software platform which integrates with accounting practice management systems including Reckon APS, MYOB AE and AO, Xero, GreatSoft, CCH and Sage Handisoft.	Non-sensitive details on AWS in Australia. Sensitive card data is passed to Level 1 PCI compliant bank partners.	Australia – 0.26% plus bank interchange fees, irrespective of volumes. Average all-up merchant fee is about 1.0% for credit cards and 0.6% for debit cards. A transaction fee of $A0.30 also applies. American Express is available at a rate of 1.75%. New Zealand – 0.49% plus bank interchange fees. Average all-up merchant fee is about 2.23% for credit cards and 1.68% for debit cards. A transaction fee of NZ$0.10 also applies. American Express is available at a rate of 1.6%.