New research by global small business platform, Xero has revealed that a disconnect between the ways consumers want to pay and how small businesses want to be paid could be directly impacting customer retention and revenue.
Xeroʼs latest report ʻI want to pay that wayʼ delves into the changing payment habits among consumers and how small businesses are adapting.
Australians remain firmly in favour of using credit or debit card (86%) to make in-person and online payments, but only 55% of small businesses offer credit or debit card as a payment method.
Bank transfer (68%) is the most common payment method offered by small businesses, followed by cash (59%). Over one in four (28%) Australians would seek out another business that accepts more payment options if a business didn’t offer at least one of their preferred ways to pay.
New payment methods are growing in popularity, with younger generations leading the charge. Gen Z consumers (40%) are more than four times more likely to use Apple Pay or Google Pay than Baby Boomers (9%), however, only 18% of small businesses accept mobile payments as a payment method.
Similarly, consumer demand for buy now, pay later (BNPL) options is outstripping availability of this payment option from small businesses (23% versus 14%). The demand increases for Millennials, with 31% saying they use buy now, pay later for purchases.
Australian small businesses that have implemented new payment methods say they are seeing clear benefits, including reduced time to be paid (24%), reduced time chasing late payments (18%), and increased sales (20%).
However, the research shows more than half of Australian small businesses (53%) have not adopted new payment methods in the past six to 12 months. The limited uptake could be due to perceived added costs, with expensive fees (36%) reported as the biggest barrier preventing business leaders from offering new or different payment methods.
Xero Australia sales director, Theo Konstantas said, “Australian consumers are increasingly embracing digital payment methods, particularly younger generations. 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.
“But there are many benefits to offering more ways for people to pay, such as faster payments and the potential to expand your customer base. With a drive to digital, small businesses that don’t meet consumer preferences might find themselves falling behind.”
Nearly four in five small businesses (79%) say the sudden move to a cashless economy would have some form of impact on their business. But overall, the use of cash and cheque may be declining. Only one in four (25%) consumers actually rely on them to buy products and services, and two in five (41%) Australians say they rarely use cash and cheque payments, only when a business asks for it.