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Customer retention and business revenue could be negatively impacted by a disconnect between the way consumers want to pay and how small businesses want to be paid, according to a recent Xero study.
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Aussie shopper payment preferences need to be met, data reveals
15 August 2024
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Xero’s latest report, I want to pay that way, demonstrated the various payment habits among consumers and how small businesses adapt to these.
The report found a distinct mismatch in payment expectations between SMEs and consumers.
Eighty-six per cent of Australians prefer to use a credit or debit card to make payments but only 55 per cent of SMEs offer this as a payment method.
Bank transfer was found to be the most common payment method with 68 per cent of small businesses offering this, followed by cash at 59 per cent.
The data showed 28 per cent of Australians would rather seek out another business that accepts more payment options if their preferred payment method was unavailable.
Only 18 per cent of small businesses accept mobile payments as a suitable method, despite 40 per cent of Gen Z consumers being four times more likely to pay using Apple or Google Pay.
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The report also revealed that 31 per cent of millennials are choosing buy now, pay later services as their preferred payment method.
Consumer demand for BNPL options is outstripping the availability of this payment option from small businesses as demand sits at 23 per cent compared to only 14 per cent of SMEs providing it.
According to the results, Australian small businesses that have implemented new payment methods said they have experienced “clear benefits.”
These benefits included a reduced period to be paid, reduced time chasing late payments and a 20 per cent increase in sales.
Despite this improvement, 56 per cent of small businesses have not adopted new payment methods in the last six to 12 months.
Xero sales director Australia Theo Konstantas said this limited uptake could be related to perceived added costs as business leaders want to avoid the barrier of expensive fees.
“Aussie consumers are increasingly embracing digital payment methods, particularly younger generations but small businesses don’t seem to be meeting their customers where they are,” he said.
“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.”
The hesitation to adopt new payment methods is clear, Konstantas noted.
The data revealed that “cash is still king” for small Australian businesses as 79 per cent said the sudden move to a cashless economy would impact their business.
The use of cash is declining in the economy, with only 25 per cent of consumers relying on it to buy products and services.
Forty-one per cent of Australians said they rarely use cash and cheque payments, opting to only use it when a business has specifically requested it.
Konstantas said businesses need to be more open-minded towards varying 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,” he said.
“With a drive to digital, small businesses that don’t meet consumer preferences might find themselves falling behind.”
Despite the payment differentiation between what consumers want and what SMEs offer, the report said feelings and sentiments towards future payment methods are aligned.
Research revealed a level of anxiety amongst consumers and SMEs has been adopted, with cryptocurrency causing anxiety for 27 per cent of small businesses.
Similarly, the development of payment chips has left 37 per cent and 47 per cent of consumers “terrified.”
Xero SVP of payments Bharathi Ramavarjula said understanding how consumers want to pay will be revolutionary for small business growth.
“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,” Ramavarjula said.
To help Australian SMEs collect payments more seamlessly and maintain a healthy cash flow, Xero said new payment solutions are currently being built and developed by the team.
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