Since the onset of the COVID-19 pandemic, digital payments have become an essential tool for many entrepreneurs. New data from the Small Business and Entrepreneurship Council’s latest business survey highlights the value that new entrepreneurs place on the importance of electronic payments. Among new business owners who started a business during the pandemic, 87% said that access to electronic payment options was important. Additionally, access to electronic payments tied for first (68%) as the most important tool or technology in starting a new business.
Combine SBEC’s data with the fact that over the past two years the U.S. saw the fastest growth in entrepreneurship in our nation’s history and it’s easy to understand why so many businesses have made the switch to accepting digital payments: it’s what their customers demand.
Many of these new small businesses had to come up with a completely new playbook for delivering their products or services and managing payments amid a global pandemic. The good news for these new entrepreneurs is that the payment technologies they adopted to get through the pandemic will prove to be beneficial long after COVID-19 has subsided.
Here are the top five ways that small businesses are improving their bottom line by switching to digital payments:
1. Improves customer experience
In addition to convenience, digital payments offer contactless transactions — a safety feature many consumers demanded during the pandemic. The use of contactless payments has surged in recent years with approximately 84% of consumers owning contactless cards leveraging those enhanced safety features in the first half of 2021 — an increase of 24 percentage points in six months. This technology speeds up the checkout process considerably because a simple tap is needed to complete a transaction. These convenient payment mechanisms provide an opportunity for small businesses to address the needs of consumers by removing the need to carry a wallet or remember numerous passwords required to make a payment.
2. Enhances fraud protections
As consumer shopping habits continue to shift to mobile and online platforms, advancements in tokenization provide seamless and secure transactions without exposing customers’ sensitive account information. These features also protect small businesses by making tokenized payment data useless if compromised.
3. Saves time and money
While cash payments may not require extra processing fees, accepting cash payments comes with a lot of unexpected costs. Research shows that the average cost of cash for a business is about 9.1% of the average transaction value. These costs include the time spent manually counting cash, the cost of theft protection and the cost of longer lines at checkout, which scares away repeat customers. Even the National Park Service is jumping on the digital payments bandwagon. Beginning April 1, 2022, Devils Tower National Monument will only be accepting entrance fee payments via digital payments. According to NPS, this action will reduce their administrative burden managing cash and allow them to reinvest the savings into visitor services.
4. Increases customer sales
Consumer spending, which has long been the most important factor in U.S. economic growth, continues to be fueled by the innovation of digital payments. Even during the COVID-19 outbreak, digital payments have allowed small businesses to pivot to online sales, curbside pick-up, and in-store self-checkout. Additionally, studies have shown that card users account for 61% of total transactions and spending, on average, $42 more per purchase than cash users.
5. Allows for instant payments
Digital payments are much faster than traditional payment methods such as cash and checks. With online payment options, customers are not tied to a limited time or place to make a transaction. Customers can easily pay anytime, anywhere in the world. The electronic payment system eliminates the need to go to the bank to make payments. Now your customers don’t have to waste time waiting in long lines at the bank. They can easily pay with their mobile device.