Accepting new and emerging payment methods can provide major benefits for small businesses. Discover how digital payments can enhance your receivables management and help you better connect with your customers.
The pandemic has revolutionized the way customers pay. With cash usage declining and online transactions spiking, consumers now expect modern, technologically driven payment methods that are convenient, safe, and fast.
As payment digitization among consumers continues to accelerate from pre-pandemic levels, accepting digital payments is increasingly top of mind for small business owners. Advances in the digital payments space give consumers an increasing number of ways to pay: including mobile devices, contactless payments, and through online commerce and third-party providers.
This ongoing shift has led many businesses to reconsider their existing receivables practices, as it becomes increasingly clear that digital payments can help them get paid faster. For those who haven’t yet made this transition, embracing the digital payment trend and selecting the right merchant services tools can provide your customers with greater flexibility to pay how they prefer with very low up-front costs for your business.
In this article, learn more about the shifting nature of the payments landscape, what it means for your small business, and what to consider before you begin accepting digital payments.
How the Payment Landscape is Changing
The world of digital payments was already expanding before the COVID-19 pandemic began. Contactless payments first arrived in the United States in 2014 and took four years to reach broad adoption among consumers. The technology has expanded ten times faster than other in-person payment options. By 2020, eight out of ten cardholders said they had used contactless in the past 12 months.
COVID-19-related social distancing rules and public health precautions made cash, credit cards, and checks less viable, and contactless emerged as an efficient and safe alternative to traditional payments. The rise of digital wallets and wearable technology has also encouraged consumers to reach for a digital device (like a smartphone or smartwatch) to pay for goods on the go, whether in-store or via mobile device for online purchases.
During this period, consumers also pivoted to e-commerce on a grand scale, which further accelerated the digital payments trend. Eighty-two percent of Americans use digital payments as part of their online or in-app purchases, in-store checkout (via mobile payments or scannable QR codes), as well as person-to-person (P2P) payments. The sheer variety of digital payment options available to consumers helps them pick the right option for their needs. With consumers now prioritizing convenience and comfort in their payment methods, business owners can see real benefits from onboarding these platforms and accommodating the new payment preferences of their customers.
Payment Options Your Customers Expect
As your business prepares to enter the digital payment space, part of deciding on the right receivables direction is understanding the payment expectations of your customers.
A few digital payment types have emerged as particularly popular among consumers in recent years. These technologies include mobile wallets, contactless and near-field communication (NFC), and third-party P2P apps:
- Mobile wallets make it easy to pay for items from a smartphone or other enabled device and can replace a physical credit card in stores and online.
- Contactless and NFC technology allows consumers to seamlessly pay without having to swipe their card or insert a chip at the point of sale.
- Third-party P2P payment apps can be used to pay for online purchases as well as in-person purchases where accepted.
Consumers may expect one or more of these tools to be available at different purchase points. Mobile wallets play a dual role for both in-store and online purchases, while contactless payments are becoming standard in most brick-and-mortar stores. Third-party P2P apps vary in their uses but lean heavily toward e-commerce transactions (with a substantially smaller number of in-store payments).
The Benefits and Potential Challenges of Accepting Digital Payments
Accepting digital payments offers small businesses a big opportunity to enhance their customer relationships. By offering a variety of payment options at the register or in an online checkout portal, you can provide a frictionless experience for customers. This, in turn, can increase customer satisfaction and even capture sales that might otherwise have been lost.
Another hidden upside of digital payments is their integration with data and marketing. Some payment platforms enable data capture for customers and track their spending patterns, which can help you gather important sales data. Platforms can even provide features that automate your marketing campaigns, such as satisfaction surveys, loyalty programs and promotions for customers who spend with you.
However, while accepting digital payments can be a great way to streamline your receivables management and improve the customer experience, there are potential drawbacks to consider as well, such as added merchant services costs and other fees that may pose financial challenges (e.g. third-party payment provider fees). If you have to pay a monthly fee for a payment tool that few customers use, you may find some payment types less appealing than others. Services that take a higher cut from a transaction on their network may also eat into your bottom line, depending on your business. It’s important to explore multiple payment options, get a sense of what your customers prefer and speak with vendors or your banking partner to find out what’s the best fit for you.
Making Digital Payments Work for You
Digital payments are here to stay, and they’re primed to emerge as the go-to option for the majority of consumers in the coming years. For small business owners, this means that accepting digital payments provides an opportunity to reach new customers, maximize your sales, and grow your business.
The good news for small businesses is that these tools are increasingly cost-effective and easy to set up and integrate into your existing receivables system. There are certainly costs associated with accepting digital payments and no single strategy will work for every business. Weighing the pros and cons and selecting the merchant tools that work for your business can result in major long-term benefits.
When you’re ready to begin your receivables transformation, Santander is here to help. Check out our Merchant Services solutions or get in touch with us today to discover how you can better meet your customers’ evolving needs and streamline payments to your business.
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