Why you can't afford to ignore innovation in payment
7 min read
09 June 2016
As a small business you must give customers every opportunity to spend their money. Providing them with the easiest and most convenient methods to part with their hard earned cash will ultimately boost your bottom line.
From Apple Pay to contactless, PayPal to Amazon Payment, there are new and evolving payment methods that you can’t ignore; simply because in this digital age customers are quickly opting to adopt them. It’s really important that you invest in new payment methods. Cash is no longer king. Customer preferences have changed and crucially they encourage customers, subconsciously, to spend more.
2012’s cashless street
Two years ago, a street in Manchester proved that cash’s heyday was long gone. Beech Road, home to 20-plus independent shops, bars and cafes, undertook a social experiment and went cashless for a day – courtesy of Handepay, the company behind the stunt. The small businesses on that road wanted to see: a) how consumers would respond to card-only transactions and b) if turnover would be higher as a result of going cashless.
What resulted captured the headlines. You can read some of the reaction via The Guardian and the experiment’s dedicated website. It was controversial on the day – one in every 50 customers refused to embrace the spirit and rallied against the drive for modernity. But the result of the business’ bottom line spoke louder than any critique. In that one day, traders collectively experienced a 22 per cent increase in turnover.
The experiment proved that customers spend more with small businesses when they can pay by card. The motto of that story? Take card payments. Yes you will incur a service charge from your payment provider. But it will be compensated by an increased value turnover. Customers typically spend more, when they can spend by card.
Read more about the payments revolution:
- UK’s appetite for mobile payments increases as Liverpool FC embraces tech
- Barclays uses Pingit to become first UK bank to process Twitter payments
- World’s first wearable international payment app
On that point, I would advise against imposing a minimum spend or surcharge for card payments. I understand why it might be attractive in order to offset merchant services‘ charges. However, by making that demand, you give customers a second to reconsider their purchase. Time to question whether the really want to purchase. Which is not good. I know myself that I have refused to buy an item because I just don’t feel I should be penalised, just because I want to use card. Think like a customer and offer what they want.
Easy payment = increased sales
It’s also imperative that you make it as seamless as possible for customers to complete a transaction, whether you take payments online or in the real world. With the range of options, there are no excuses not to offer optimum efficiency.
For example, we offer the Amazon-style “one click” and invisible payment checkout process. This is because we know from exhaustive trial and testing that adding an obstacle, such as a security check, increases the rate of abandoned baskets. We have seen a slight increased in fraudulent payments as a result. But the money we make through increased transactions, both in terms of the volume we can process and the baskets that are completed, outweighs this negative.
Read on to fid out how payment data can help you understand your customers better.
In the real world, contactless is key when it comes to speedy payment. As a consumer, I find it so convenient; so much so that typing in my pin seems archaic and unnecessary. My patience for waiting in a queue or for a card machine to process is diminishing. And I’m not alone.
Customer behaviour has evolved and customers want things now. I know that big retailers such as Sainsbury’s have resisted installing contactless terminals because of the cost involved. However for small to medium sized businesses like ourselves, merchant payment service providers are geared up to leasing countertop devices that have contactless and Apple Pay as standard.
Trial and test new payment methods in their infancy
Customers have higher expectations today. They want to be able to use a variety of ways to pay. Uber owes a lot of its success to its understanding of this. As a result it’s now estimated to be worth in excess of $62bn, just seven years after starting up.
It makes payment especially easy because it offers multiple ways to spend. It embraced new payment options like Google Wallet when only a handful of people were using it. Meaning that now that Google Wallet is widely embraced, Uber has already addressed any technical teething problems to offer a seamless payment service. The same is true in its processing of PayPal, credit cards and Apple Pay.
Using payment data to better understand your customer
SMEs can benefit from using payment data to better understand customers, not least because they can integrate payments with loyalty programmes.
Starbucks is a great example to learn from. In the US and UK, they recently launched mobile order and pay, which allows customer to pre-order using their mobile, and simply pay on arrival. Completely removing the need to queue. (And let’s face it, how many of us have walked in to Starbucks and straight out, once you’ve seen the length of the queue?)
So, for customers, it’s a great time-saving device.
But the real value is to the business. Starbucks is able to keep a track of the customer’s preferences, of the times of the day they are receptive to marketing, and when and what to market to them.
Sean Blanks is marketing director at cartridgesave.co.uk.
The wind of change in the payments world is gaining in strength as financial technology’s (fintech) potential to alter how, where and when payments are made is further explored and leveraged, World First COO Graham Stanton told Real Business.