New research by global small business platform Xero has revealed a significant disconnect between how consumers prefer to pay and the payment methods accepted by small businesses. This mismatch could be severely impacting customer retention and revenue, according to the report, “I want to pay that way,” launched today.
Consumer Preferences Outpace Small Business Offerings
Australian consumers overwhelmingly favour credit or debit cards (86%) for both in-person and online purchases. However, only 55% of small businesses offer this payment option. Bank transfers (68%) and cash (59%) remain the most common payment methods accepted by small businesses. This discrepancy highlights a potential risk to customer loyalty, as over a quarter of Australian consumers (28%) would seek out alternative businesses that offer their preferred payment methods.
Younger generations are driving the demand for newer payment options. Gen Z consumers are four times more likely to use Apple Pay or Google Pay than Baby Boomers, yet only 18% of small businesses accept mobile payments. Similarly, the popularity of buy now, pay later (BNPL) options is surging among consumers, particularly millennials, while only 14% of small businesses offer this payment method.
Benefits of Adopting New Payment Methods
Small businesses that have embraced new payment methods report significant advantages, including a 24% reduction in payment times, an 18% decrease in time spent chasing late payments, and a 20% increase in sales. Despite these benefits, over half of Australian small businesses (53%) have not adopted new payment methods in the past six to 12 months, primarily due to concerns about high fees (36%).
Theo Konstantas, Sales Director Australia at Xero, emphasized the importance of adapting to changing consumer behavior. “Aussie consumers are increasingly embracing digital payment methods, especially younger generations. Small businesses need to meet their customers where they are,” Konstantas said. “Offering more payment options can accelerate payments and expand customer reach.”
The Future of Payments: A Double-Edged Sword
While cash and cheque usage is declining, nearly four in five small businesses (79%) acknowledge that a sudden shift to a cashless economy would impact their operations. Consumers are also wary of emerging payment technologies, with implantable payment chips causing the most anxiety among both consumers (47%) and small businesses (37%).
Bharathi Ramavarjula, SVP of Payments at Xero, highlighted the importance of understanding consumer preferences. “Giving customers the flexibility to pay how they want can accelerate payments and boost revenue for small businesses,” Ramavarjula said. Xero is committed to developing payment solutions that streamline the payment process and improve cash flow for small businesses.
By embracing new payment methods and understanding consumer preferences, small businesses can enhance customer satisfaction, increase sales, and stay competitive in the evolving payment landscape.
