Small businesses are lagging behind payment trends

The new ʻI want to pay that wayʼ report found that Aussies remain firmly in favour of using credit or debit cards (86 per cent) to make in-person and online payments. However, only 55 per cent of small businesses offer credit or debit cards as a payment method. Bank transfer (68 per cent) is the most common payment method offered by small businesses, followed by cash (59 per cent).

Gen Z consumers (40 per cent) are more than four times more likely to use Apple Pay or Google Pay than Baby Boomers (9 per cent). Despite this, only 18 per cent of small businesses accept mobile payments as a payment method.

Similarly, consumer demand for buy now, pay later options is outstripping availability of this payment option from small businesses. While 23 per cent of consumers want pay later options, only 14 per cent of small businesses offer these. The demand increases for millennials, with 31 per cent saying they use buy now, pay later for purchases.

Meanwhile, 28 per cent of customers say they would seek out another business that accepts more payment options if a business didnʼt offer at least one of their preferred ways to pay, highlighting the importance of meeting consumer expectations around payment preferences.

“Aussie consumers are increasingly embracing digital payment methods, particularly younger generations,” said Theo Konstantas, Sales Director Australia, Xero. “However, small businesses don’t seem to be meeting their customers where they are. There’s still a gap when it comes to options like Google Pay, Apple Pay, and even traditional credit and debit cards among small businesses. You can really see the hesitation to adopt new payment methods.”

What small businesses are saying

According to the research, Aussie small businesses that have implemented new payment methods say they are seeing clear benefits. 24 per cent say they don’t wait as long to be paid, 18 per cent say they are spending less time chasing late payments, and 20 per cent have seen increased sales.

However, 53 per cent have not adopted new payment methods in the past six to 12 months. According to Xero, many businesses are nervous about added costs. 36 per cent of SMEs reported expense as the biggest barrier preventing them from offering new or different payment methods.

“There are many benefits to offering more ways for people to pay, such as faster payments and the potential to expand your customer base,” said Konstantas. “With a drive to digital, small businesses that don’t meet consumer preferences might find themselves falling behind.”

Customers and SMEs alike are “anxious” about the future of payment

The research also reported that 79 per cent believe that the sudden move to a cashless economy would have some impact on their business but overall, the use of cash and cheque may be declining. Only 25 per cent of consumers rely on them to buy products and services, and 41 per cent say they rarely use cash and cheque payments, only when a business asks for it.

Despite the mismatch between what consumers want and what small business offers, their feelings align on future payment methods. Emerging payment methods are causing a level of anxiety amongst consumers and small businesses alike, with digital currencies like crypto causing the most anxiety (27 per cent) among small businesses. Implantable payment chips are the greatest source of apprehension with 37 per cent of small businesses and 47 per cent of consumers feeling ʻterrifiedʼ about it.

Bharathi Ramavarjula, SVP of Payments, Xero, commented, “Understanding how different consumers prefer to pay and giving them the flexibility to pay the way they want, will help small businesses get paid faster and grow their revenue.”

The post Small-business payment options don’t meet shopper preferences, Xero finds appeared first on Inside Small Business.

The petition reveals the support behind the move to give businesses access to the lowest-cost payment option through a mandated Multi Network Debit Cards system. It asks that such a system is imposed on all banks, irrespective of their size, and that the lowest cost payment route be the default for all debit transactions, whether consumers tap their card, wave their device or pay online.

Alongside COSBOA, the petition is backed by: the National Retail Association (NRA); Australian Association of Convenience Stores (AACS); Australasian Convenience and Petroleum Marketers Association (ACAPMA); Australian Association of Commerce and Industry (ACCI); Australian Lottery and Newsagents Association (ALNA); Franchise Council of Australia (FCA); The Institute of Certified Book keepers (ICB); MGA Independent Retailers; and Restaurant & Catering Industry Association of Australia (R&CA).

COSBOA CEO Alexi Boyd noted small businesses already pay significant transaction fees on the eight billion debit transactions made each year, and the RBA’s proposed changes would result in further costs.

“With the impact of COVID already causing financial pressures to businesses, the last thing we need is to add greater stress to them,” Boyd said. “The payments landscape is a complex one for most small businesses and this, combined with a lack of transparency in fee structures, has created an environment of higher than necessary costs which ultimately impact small-business owners and in turn, their customers.

“We are calling on the RBA to make a fair and equitable environment for businesses in terms of payments and merchant fees.”

Boyd said that the RBA also needs to work with the banks to eradicate what it calls “confusing” pricing methods introduced by the big banks over recent years which he said made switching to the least cost route appear (LCR) less attractive to small-business owners.

“We have evidence where small businesses have asked about LCR and their banks have come back with a new service proposal where transaction fees were increased by 275 per cent compared to existing pricing, and the previously free terminal rental had a surprising new monthly fee, potentially putting the business in a worse position overall,” Boyd said.

“The continued lack of transparency and complicated ‘switching processes’ where the small business must rely on advice from the bank that has an interest in keeping merchant fee costs high, has resulted in stifled competition and an inability to adopt LCR.

“This cannot keep going on like this, and we urge the RBA and Federal Government to make low-cost payments the default for local and small business, so we ensure the future of Australia’s local payment network, eftpos, as a choice on all debit cards,” Boyd concluded.

The post RBA urged to act on bank fees that are “crippling” small businesses appeared first on Inside Small Business.