What are the different ways customers can pay a business, and what are the good and bad points of each?
Describe the main methods of payment - cash, card and electronic payment - and explain an advantage and disadvantage of each for a business
A simple guide to methods of payment. Cash, card and electronic payment such as PayNow and e-wallets, with an advantage and disadvantage of each, and Singapore examples.
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What this dot point is asking
You need to describe the main methods of payment - cash, card, and electronic payment - and explain an advantage and a disadvantage of each for a business. Customers today pay in several ways, and a business must decide which to accept. Keep your answer practical and tied to a real shop or stall, and be ready to suggest that accepting more than one method suits more customers.
The answer
What a method of payment is
A method of payment is the way a customer pays for goods or services. The main ones today are cash, card, and electronic payment. A business chooses which to accept based on its customers, the cost, and convenience.
Cash
Cash is paying with notes and coins.
- Advantage: simple, accepted by everyone, received straight away, and with no fees.
- Disadvantage: cash can be lost or stolen, the business must keep change, and counting and banking it takes time, with a risk of mistakes.
Card
Card is paying with a debit or credit card, by tapping, inserting, or swiping.
- Advantage: convenient for customers, no need to carry cash, and the money goes safely to the business account.
- Disadvantage: the business needs a card machine and usually pays a small fee on each card sale, and it cannot work if the machine or internet is down.
Electronic payment
Electronic payment is paying by phone or online, for example PayNow, an e-wallet, or scanning a QR code.
- Advantage: fast, no change needed, the money goes straight into the business account (safer than cash), and it keeps an easy digital record.
- Disadvantage: it needs a phone, internet, and the right app, so it fails if these are down, and some customers (for example some elderly customers) may not use it.
Why accept more than one method
A business often accepts more than one method because customers differ: some prefer cash, some cards, some their phone. Accepting several means no customer is turned away, queues move faster, and less cash is kept in the till. The downside is a little more equipment and some fees.
Examples in context
Example 1. A hawker stall going cashless. A hawker adds a PayNow QR code beside his cash box. Office workers now pay in seconds by phone with no change needed, queues move faster at lunch, and he holds less cash overnight, which is safer. But he keeps the cash box too, because some elderly regulars still prefer notes and coins, showing why a mix works best.
Example 2. A clothing shop accepting cards. A clothing shop installs a card machine so customers can tap to pay for larger purchases without carrying cash, which suits tourists and bigger spenders. The shop pays a small fee on each card sale, but the convenience wins more sales. It still takes cash and PayNow too, so every customer can pay their preferred way.
Try this
Cue. State three methods of payment a shop could accept, and explain one advantage of electronic payment. List cash, card, and electronic payment, then link an advantage such as speed, no change, or safety to electronic payment.
Cue. Explain one advantage and one disadvantage of accepting cash. Remember cash is simple and instant but can be lost or stolen and is slow to count and bank.
Cue. A new stall asks which payment methods to accept. Suggest what it should do and give reasons. Recommend accepting more than one method, and link it to suiting all customers, faster queues, and holding less cash.
Exam-style practice questions
Practice questions written in the style of SEAB exam questions on this dot point, with worked answer explainers. The year tag is the paper they imitate, not the source.
Original4 marksA small shop accepts different ways for customers to pay. (a) State three methods of payment a shop could accept. (b) Explain one advantage of accepting electronic payment such as PayNow or an e-wallet.Show worked answer →
(a) Three methods: cash, debit or credit card, and electronic payment such as PayNow, an e-wallet, or a QR code.
(b) One advantage of electronic payment: it is fast and there is no need to handle cash or give change, so queues move quickly; the money goes straight into the business account, which is safer than keeping a lot of cash in the till.
What markers reward: three correct payment methods, and a clear advantage of electronic payment (speed, no change needed, safer than cash, easy records).
Original5 marks(a) Explain one advantage and one disadvantage of accepting cash. (b) A new stall is deciding which payment methods to accept. Suggest, with reasons, what it should do.Show worked answer →
(a) Advantage of cash: it is simple, accepted by everyone, and the money is received straight away with no fees. Disadvantage: cash can be lost or stolen, you must keep change, and counting and banking it takes time, with a risk of mistakes.
(b) The stall should accept more than one method - both cash and electronic payment (such as PayNow or an e-wallet). This is because some customers prefer cash and some prefer to pay by phone, so accepting both means no customer is turned away, queues move faster, and less cash is kept in the till. Adding card payment too would suit customers who prefer cards.
What markers reward: a clear advantage and disadvantage of cash, and a sensible recommendation to accept more than one method, with reasons (suit all customers, faster, safer, more sales).
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