Why Small Businesses Must Keep Up With Payment Tech

Adapting to new technologies can benefit both you and your customer


You’ve attracted the customer, they’ve chosen the product or service they need and they’re ready to pay for it - the hard work is done. The customer approaches the register, card in hand, and you tell them it’s cash only or there’s a limit on card. Regardless of how close you may be to an ATM, the delay in service or the additional fee they’ll have to pay could be enough to lose a sale, both immediately and in future when the customer remembers the inconvenience. If a nearby competitor is offering contactless card payment instead, which do you think the casual consumer will opt for?

Most customer-facing small businesses will have card payment facilities. With the world of payment tech moving so quickly, though, it has never been more important to be up to date with quicker, more convenient methods of payment, and simply having a card machine may not be enough. It has been estimated by Virgin that, by 2020, 20% of transactions in Europe will be alternative payments - mobile, e-wallet, etc. This is already a significant slice of an industry resistant to fast change, and it will only continue to grow as alternative payments becomes more widely accepted.

The benefits of the alternative payments industry are not limited to improving the customer experience, though. Incumbents like McDonald’s and Starbucks are already collecting vast amounts of data from customers who pay through card, and even more through those who order and pay in advance through an app. The capabilities of small businesses will naturally be far lower, but they should still be able move as many payments as possible onto card, or even mobile, for a minimal cost. The data collected can have a huge effect on a business’ ability to analyze and predict the behavior of their customers, and such anonymized data around their customers’ spending habits can be more valuable than any loyalty scheme. Finextra give the example of an SME being able to offer a reward to customers that hit $200 spent in store - a digital loyalty card, of sorts.

Small business owners should also consider a number of other benefits of pushing card payments over cash. Card payment is still seen by many as the ‘expensive’ option thanks to interchange fees, but this is no longer always the case, with fees now capped at 0.2% for debit cards and 0.3% for credit cards. According to the British Retail Consortium, this move will save UK merchants alone £480 million each year. There is also the question of the length of time it takes cash to reach a small retailer’s bank account at an average of 4.5 days, as well as possibly the most obvious reason - that nobody uses cash now. It was overtaken by other payment options almost exactly a year ago, and the Payments Council predicts that by 2024, only 34% of UK transactions will be made in cash.

Issues with payment tech extend further than just in-store deficiencies, too. There is also a problem that not enough small businesses are trading online. For some, online trading simply isn’t applicable but, for others, barriers include the complexity of setting up online payments and concerns over fraud. A lot is made of the necessity for a company to have a digital presence, but if this cannot be translated directly into conversions, it is not serving the businesses as it could be. Companies and services are being developed all the time to help small businesses process not just payments from customers but B2B payments from anywhere in the world.

Companies like French startup PayPlug have designed solutions ‘specifically for SMEs’, aiming to address the online payment needs of small enterprises, from e-commerce businesses to freelancers. 'The EU has stated that the number of SMEs selling online must increase if we are to hit our economic growth targets, and that a shift towards secure online payment technology will create a high number of jobs,’ says Camille Tyan, CEO of PayPlug. The startup’s model has developed from a simple online payment product, to enabling merchants to send links to payment pages in both emails and SMS, to addressing the more advanced fraud protection needs that Tyan explains were surprisingly unmet by the existing providers. A well-oiled and secure checkout process can significantly impact conversion rate, a metric that can hugely affect a small business’ top line.

Small businesses - in both B2B and B2C industries - that enable their customers to take full advantage of innovations in payment tech will reap the rewards. Ensure that your business isn’t unnecessarily turning away customers, as well as preparing your revenue stream for a future in which cash is further sidelined to make way for mobile payment and other more streamlined payment tech. Cash won’t die any time soon and even cheques still make up 2% of transactions, but with alternative means making up over half of transactions, be careful not to ignore the majority. 

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