Why Digital Payments for Small Businesses are More Important than Ever

• Digital payments are quickly becoming an essential part of the payment ecosystem
• Small businesses that accept mobile payments meet customer needs
• Maximize revenue, save money, and enhance your customers experience

The global trend toward digital payments, having grown steadily for a decade, has started to accelerate rapidly in recent years. As a small business owner, it is easy to be confused by the rapid proliferation of digital payment options. The modern customer seems ever more demanding.

Should you offer NFC? What does EMV mean? EFT or Interac? Should you be offering mobile payments? What about e-commerce? In a very diverse payment landscape, it’s important to cut down the range of options we have to think about and focus on the fundamentals. The single most essential digital payment option that most small businesses should accept right now is digital wallets (also known as e-wallets or mobile payments). Maybe you’ve used them yourself, or perhaps you’ve experienced a customer showing you their phone when it is time to pay.

Digital wallets work in one of two ways – either customers send money from their bank account to be stored in the digital wallet and accessed from their smartphone, or the digital wallet itself connects directly to a bank account using the customers card details as an intermediary.

While there are many digital wallet providers, including PayPal, Amazon, and Samsung, by far the most common are Google Pay and Apple Pay. While the combination of cash and physical card is still common for small businesses, there are several significant advantages of digital payments. We’ll look at a few in detail here.

Speed and Convenience. One of the key advantages of digital payment options, especially for small businesses, is that they reduce the time and hassle of cash management. Fewer trips to the bank, and less time waiting for checks to clear means higher productivity. When your revenue is available immediately to restock and pay staff, it can take a weight off your mind. And because digital payments are bank-to-bank, there are no reconciliation errors.

Customer Preference. Many consumers prefer digital payments. If they are forced to pay in cash, they may choose not to buy from you or return.  This may be for reasons of convenience, or security. Since mobile payments are often approved using a biometric identifier on their phone (usually fingerprint or facial recognition), and do not require consumers to enter a PIN or open their wallet or purse, they feel much more secure. While this trend is more pronounced in cities and among younger age groups, the attitude is spreading. If cash is increasingly seen by the customer as inconvenient, even the most resistant business owner may be forced to go digital to maximize revenue.

Safety and Security. When transactions are digital, theft by light-fingered employees is eliminated. Holding less cash on the premises reduces the risks and losses of a robbery or break-in. This could reduce the business’ need for insurance against such events.

Continuous Monitoring. While cash theft may be reduced, many small business owners have shied away from digital payments because of the risk of fraud. While digital fraud is certainly a concern, technology is also available to combat it. All major financial institutions will provide real-time alerts to customers, flagging suspicious transactions for review. And of course, when handling cash, it is important to remember that the risk of accepting counterfeit currency is not zero.

Paperless Reporting. Because digital payments naturally fit alongside digital reporting, the move to digital can eliminate the mountain of paperwork that often accompanies it. Digital reporting systems mean automation and AI can be used to reduce or remove duplication, send invoices, generate receipts, and handle payments without human intervention.

Real-Time Data. The digital reporting systems mentioned above lead to a second major benefit –: the ability to analyze the data reported to quickly understand major revenue drivers, most valuable customers, best-selling items, and customer lifetime value. You can use these insights to make informed decisions, such as scheduling additional deliveries or arranging special offers, on the fly. Understanding customer behaviour can be essential for small businesses in an increasingly competitive market.

Choosing the Right Option for Your Business

Of course, while these advantages are undoubtedly true, the main reason many small business owners have not moved to accepting digital transactions is cost. However, the cost of digital payment has to be set against the cost of cash. The main cost of cash transactions lies in the time lost opening and closing cash drawers. This includes: counting and reconciling the cash drawer with the register, recounts, audits, and discrepancies.

As mentioned above, cash can shrink due to fraud and theft. Although the following factors may be difficult to know in advance, they must also be accounted for: the cost of cash transit to and from the bank, bank charges for cash handling, and the security required to hold substantial cash.

By contrast, fees for both major mobile payment providers are moderate. Importantly, unlike some digital payment processors, there is no minimum fixed transaction fee, so these platforms are suitable for businesses with low average transaction values such as newsagents or corner stores.

While transaction fees are one of the most important factors when choosing a payment method to offer, setup fees can be another substantial cost. For businesses that want to offer more extensive digital payment solutions, all-in-one terminals such as Clover Flex offer contactless, chip-and-PIN, and traditional card swipe options, although this would cost hundreds of dollars if bought outright. However, it is possible to rent such terminals monthly instead, giving your business the chance to assess both the device itself and the customer reaction to it. MONEXgroup also offers lease-to-own options on Clover devices.

Another option to introduce digital payments at a low cost is via contactless mobile payment readers. These are typically much more affordable than a full POS terminal, and are effective for small businesses that operate off-site or from customer locations. When combined with a payment app, they allow your smartphone to be used as a secure virtual POS terminal to accept mobile payments from customers.

Probably the two most important factors to consider when assessing which payment options make sense for your business are cost and customer preference. However, we have discussed some of the other advantages of digital payment options, especially mobile, to small businesses in Canada, including improved security, sophisticated analytics, and reduced paperwork.

Whatever option you choose, MONEXgroup offers a one-stop shop for all your digital payment needs, including in unattended, on-premise, and on-the-go scenarios. MONEXgroup also offers a full suite of online payment and e-commerce solutions using virtual terminals and Clover POS devices. Contact MONEXgroup today to learn more about the best online payment processing system for your business!