A recent report by Xero has revealed a significant disconnect between the payment options offered by small businesses and the preferences of their customers. The report, titled “I want to pay that way,” highlights the impact of this mismatch on customer retention and revenue. Despite the growing popularity of digital payment methods, many small businesses are hesitant to adopt new payment options due to perceived costs and other barriers. This article delves into the findings of the Xero report and explores the implications for small businesses.
The Xero report found that a majority of Australian consumers (86%) prefer to use credit or debit cards for both in-person and online payments. However, only 55% of small businesses offer these payment methods. Instead, bank transfers (68%) and cash (59%) are the most common payment options provided by small businesses. This disconnect between consumer preferences and available payment options can lead to customer dissatisfaction and lost sales.
The report also highlights the growing popularity of mobile payments among younger generations. Gen Z consumers (40%) are more than four times more likely to use Apple Pay or Google Pay compared to Baby Boomers (9%). Despite this trend, only 18% of small businesses accept mobile payments. Similarly, the demand for buy now, pay later options is outstripping availability, with 23% of consumers wanting this option, but only 14% of small businesses offering it.
The reluctance of small businesses to adopt new payment methods can be attributed to various factors, including perceived added costs and the complexity of implementation. However, the benefits of offering more payment options, such as faster payments and increased sales, can outweigh these challenges.
Benefits of Adopting New Payment Methods
Small businesses that have implemented new payment methods report several benefits. According to the Xero report, 24% of businesses that adopted new payment options experienced reduced time to be paid, while 18% spent less time chasing late payments. Additionally, 20% of businesses saw an increase in sales after offering more payment options. These benefits highlight the potential positive impact of meeting consumer payment preferences.
Offering a variety of payment options can also help small businesses expand their customer base. Consumers are more likely to choose businesses that offer their preferred payment methods, and 28% of Australians stated they would seek out another business if their preferred payment option was not available. By catering to diverse payment preferences, small businesses can attract and retain more customers, ultimately boosting their revenue.
The adoption of digital payment methods can also streamline business operations and improve efficiency. Modern payment systems often come with features that simplify accounting, inventory management, and customer relationship management. These tools can help small businesses save time and resources, allowing them to focus on growth and customer satisfaction.
Overcoming Barriers to Adoption
Despite the clear benefits, many small businesses remain hesitant to adopt new payment methods. The Xero report found that 53% of small businesses have not implemented new payment options in the past six to 12 months. The biggest barrier to adoption is the perceived added cost, with 36% of businesses citing expensive fees as a deterrent.
To overcome these barriers, small businesses can explore affordable payment solutions that offer flexible pricing plans and minimal setup costs. Many payment providers offer tiered pricing based on transaction volume, allowing businesses to choose a plan that fits their budget. Additionally, some providers offer incentives and discounts for new customers, making it easier for small businesses to get started.
Education and awareness are also crucial in encouraging small businesses to adopt new payment methods. Business owners need to understand the long-term benefits of offering diverse payment options and how these can positively impact their bottom line. Industry associations, government agencies, and payment providers can play a role in providing resources and support to help small businesses navigate the transition.
By addressing these barriers and embracing new payment methods, small businesses can better meet consumer preferences, enhance customer satisfaction, and drive growth. The findings of the Xero report serve as a reminder of the importance of staying attuned to changing consumer behaviors and adapting to meet their needs.
