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From cash, cheque, credit card and bank transfer, to direct debit, buy now pay later, Apple Pay and Google Pay — there’s definitely no one-size-fits-all payment option in 2024. As Xero’s recent I want to pay that way report reveals, the breadth of payment options is offering more choice than ever, while also creating a divide between consumers and small businesses when it comes to which is best.
So, how do you navigate the fast evolving world of payment trends? Understanding the latest developments and looking to the future can be great places to start. With that in mind, here are a few of the major talking points to take on board:
Both businesses and consumers are clear in how they prefer to give and take payments. The problem, though, is that the two sides have quite different opinions. According to the I want to pay that way report, while 86% of Australian consumers prefer credit or debit card payments, only 55% of small businesses offer the option. Similar disparities can be seen with direct debit (63% of consumers want it, 48% of small businesses offer it) and buy now pay later (23% vs 14%).
While plenty of us are still paying with cash (69%), the overall numbers might be a sign for small businesses to start expanding their payment options, particularly in light of one stark survey result: 25% of consumers said they’d consider shopping elsewhere if their preferred payment method wasn’t available.
Where consumers prefer modern digital payment options like buy now pay later, Apple/Google Pay and direct debit, it’s the younger generations leading the way — and it’s something small business owners should pay attention to.
Digital payments like Apple and Google Pay are used by 24% of all shoppers, but it’s Gen Z doing the heavy lifting with 40% using the method. In fact, 52% of those surveyed from this generation are only taking their phones when they go to the shops. Millennials are driving the digital payment trend, too, with 31% preferring buy now pay later transactions. In both cases, facilitating these online transactions could be smart moves by small businesses looking to capture younger markets.
The short-term takeaways are clear: businesses need to meet consumers where they are by offering the payment methods they prefer. There are some issues (for instance, 56% of consumers dislike surcharge fees while 46% of businesses pass those fees on to customers) but, overall, looking to the above trends can only help to retain and attract customers.
For small businesses still on the fence about card payments, Blok Design CFO Alistair Scarrott has some advice. Scarrott recommends Xero for accepting online card payments for invoices with Stripe, which offers streamlined payments for consumers while unlocking cash-flow and saving time on admin for businesses.
“The golden rule is always ʻa sale is never a sale until the cash hits the bank account,’” says Scarrott. “You can easily pick up half a month’s worth of operating capital by clearing 50 to 80 invoices less than $300 each, just by putting software and easy payments like credit cards in place. Instead of spending time doing admin and operations, you’ll be able to spend the extra time tendering, winning more contracts, moving customers that bring more revenue in, knowing that your systems behind it can cope with the increase in scale.”
Small businesses can also look to Xero’s ‘pay now’ feature on invoices. It ticks some important boxes for both businesses and customers, avoiding the slow, manual process of traditional bank transfers while offering customers the ability to pay how they prefer – like credit/debit card, Apple/Google Pay and PayPal.
While nothing is ever set in stone, it’s always helpful to understand potential future trends. For small businesses hoping to get ahead of the curve or get a sense of emerging payments, I want to pay that way gives us a sense of how payments might evolve:
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