New research by global small-business platform Xero reveals a disconnect between how consumers want to pay and how small businesses want to be paid which could impact customer retention and revenue.
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.”
