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4 Payment Trends that will Impact Small Businesses in 2024

Consumer payment trends
Photo credit: Shisu_ka - stock.adobe.com

In today’s business landscape, every decision can have a ripple effect on overall success. For example, small business owners face the daily challenge of trying to be profitable while operating efficiently. Every business owner knows that the key to long-term success is generating more sales and keeping costs down. However, what a small business owner may not know is the impact that payments can play in these critical areas.

How a business receives payments can significantly impact the bottom line, customer satisfaction, and profitability. Whether your small business sells products, services, or a combination of the two, there is much you can do to optimize operations and future-proof your business for long-term growth. It starts with understanding the impact of different payment methods and emerging payment trends.

Every business owner has a solid understanding of cash, bank transfers, and credit or debit cards, no doubt because they have used them personally. But what else do they need to know?

1. Americans Adore Digital Wallets

In the U.S., use of tap-to-pay options are much more common, approaching an estimated $300 billion across Apple Pay, Samsung Pay, and Google Pay. According to a recent McKinsey survey, more than two-thirds of Americans expect to have a digital wallet in the next two years, and it’s likely that many will hold multiple wallets in the coming years.

By 2026, over 60% of the population will be using digital wallets. What does this mean for small businesses? If you are not offering digital wallet payments to your customers, then you could be missing new sales. Investing in updating payment technology to make it easier for consumers to pay with digital wallets will meet growing consumer demand for convenience and offers the chance to appeal to a wider group of customers. For example, Xplor Technologies’ health club, fitness studio and recreation center customers have seen more sales from adding digital wallets to their payment options, especially for online and in-app class bookings.

2. People Want Personalization

This month, concerns about inflation decreased slightly from the previous quarter, and consumer optimism about the U.S. economy reached its highest level in almost two years. Renewed consumer confidence is great news for small businesses. But today’s shoppers are also looking for more value in their purchases. Regardless of their generation, Americans want value — and value means different things to different consumers. It could be better prices, to be rewarded for loyalty, or the ability to order ahead and then collect. Or it may mean faster delivery options, the ability to pay using a mobile device or with a favorite payment method, or getting product promotions and offers that are tailored specifically to the individual.

According to Clearent by Xplor’s Year in Payments: Recapping 2023 & Unlocking Future Trends webinar, shopping behaviors now reflect more expensive and technology-focused buying decisions, and expectations are higher. Consumers want a seamless, convenient shopping experience that feels personal to them. So that means small businesses need to offer more flexibility for customers, deliver an experience that is tailored to individual preferences, and meet these needs consistently across sales channels. The small businesses with the best chance for future success will be those that take the time to find out what their customers value most, and then cultivate a shopping experience that feels personalized to the individual.

3. Payments are Getting Faster and More Invisible

Over the past five years, demand for real-time payments has steadily risen, and it continues to accelerate. According to a recent Federal Reserve study, 62% U.S. businesses noted cash flow management as one of their most impactful challenges. Respondents also reported that they needed greater flexibility and speed when it comes to payments. As more financial institutions adopt the Federal Reserve’s new instant payments service, FedNow, small businesses will start to see much faster movement and settlement of money. Settlement lags will become a thing of the past and business will have more control over their day-to-day cashflow.

At the same time, technology advances mean payments are becoming more invisible, with payment processing functionality being embedded into more daily business management tools.

Embedded payments are solutions that link directly into a SaaS (Software-as-a-Service) platform, application, or website, like an all-in-one field service management platform for electrical contractors that manages scheduling, estimates, and payments for them. With this, small businesses can retry failed payments automatically, streamline cash flow tracking, and save time on reconciliation and reporting by not needing to manage multiple systems. Embedded payments also allow small businesses to improve their sales conversion rates, reduce errors and operational costs, and improve their cashflow.

A new study from Juniper Research has found that the global revenue from embedded payments is set to grow 84% between 2023 and 2027, as more businesses see the benefits of letting their consumers pay for goods and services without ever leaving their app or website. Forward-thinking small businesses are ones that minimize the number of systems they use. Rather than thinking about payment processing as separate to business management technology, invest in software with payment processing already embedded.

4. The Right Payment Methods for Your Business is Not a One-Size-Fits-All Initiative

When it comes to choosing the right payment solutions for your business, one size does not fit all.

Consumer preferences vary depending on the type of industry you are in, the products or services you offer, if you operate online or in-store, and who your customers are. Understanding your target market is the first step in choosing payment methods because different generations want different things. For example, younger more tech-savvy consumers may appreciate digital wallets, tap-to-pay, or even Buy Now Pay Later (BNPL) options, while older shoppers might prefer more traditional methods like credit cards. Research customer preferences to understand who they are and how they prefer to pay.

The second step is evaluating payment transaction fees. Every payment comes with a transaction fee, but these costs vary depending on the type of payment. The fees for processing a credit or debit card payment are usually slightly higher than the fee for a bank transfer, and a payment made via a digital wallet is different again. Once you find out how your customers prefer to pay, take some time to understand the fees for each type of payment. By evaluating different payment methods against your business revenue and customer preferences, you can prioritize those with the biggest impact on profitability.

For example, Automated Clearing House (ACH) payments are cost-effective for small businesses — and they are especially advantageous for large or recurring transactions because of their efficiency and lower fees. ACH transactions, involving bank-to-bank transfers, help to enhance security, and reduce fraud, so they are a great option for saving on fees.

The last step is embracing frictionless payment technologies. Adopting modern payment technologies not only reflects positively on your business’ image but also aligns with evolving consumer expectations. Every business should not only offer a range of payment methods, but also do everything they can to simplify the payment process. Why? Because a frictionless, reliable payment experience makes your business more attractive to potential customers, boosts sales, and improves overall customer satisfaction. For example, if you are not already offering tap-to-pay instore, or digital wallet payments on your website, then you could be missing new sales.

Another way to reduce friction is to allow customers to store their card or bank details on their account, so they can make repeat purchases more easily. And if you do not yet offer mobile payments or a mobile app for your customers, now is the time to start. It is a great option for enabling consumers to book or buy on the move. Clearent by Xplor offers a mobile payment solution that enables businesses to process payments anywhere, even without an internet connection. As a result, businesses can have peace of mind that they will never miss a sale.

Regardless of where you operate, or which industry you are in, when you choose the right mix of payment technologies, you can give your customers what they want, boost sales, control costs, and position yourself for success in the coming year.

Jean Boling is Director, ISV business development at Xplor Technologies, responsible for serving Clearent by Xplor independent software vendor partners with all their payment processing solution needs. In her short time at Xplor Technologies she has contributed to the growth of the ISV partner channel while exceeding sales goals. With over 15 years’ experience in the payments industry, Jean’s career also includes roles working in business development for both Global Payments and TSYS, along with agent sales and corporate recruitment at PayPros. Jean is an Electronic Transaction Association Certified Payments Professional (CPP) and a winner of the 40 under 40 Rising Star Award 2023-24 by the Retail Solutions Providers Association.

4 Payment Trends that will Impact Small Businesses in 2024

by | Mar 11, 2024

Consumer payment trends

In today’s business landscape, every decision can have a ripple effect on overall success. For example, small business owners face the daily challenge of trying to be profitable while operating efficiently. Every business owner knows that the key to long-term success is generating more sales and keeping costs down. However, what a small business owner may not know is the impact that payments can play in these critical areas.

How a business receives payments can significantly impact the bottom line, customer satisfaction, and profitability. Whether your small business sells products, services, or a combination of the two, there is much you can do to optimize operations and future-proof your business for long-term growth. It starts with understanding the impact of different payment methods and emerging payment trends.

Every business owner has a solid understanding of cash, bank transfers, and credit or debit cards, no doubt because they have used them personally. But what else do they need to know?

1. Americans Adore Digital Wallets

In the U.S., use of tap-to-pay options are much more common, approaching an estimated $300 billion across Apple Pay, Samsung Pay, and Google Pay. According to a recent McKinsey survey, more than two-thirds of Americans expect to have a digital wallet in the next two years, and it’s likely that many will hold multiple wallets in the coming years.

By 2026, over 60% of the population will be using digital wallets. What does this mean for small businesses? If you are not offering digital wallet payments to your customers, then you could be missing new sales. Investing in updating payment technology to make it easier for consumers to pay with digital wallets will meet growing consumer demand for convenience and offers the chance to appeal to a wider group of customers. For example, Xplor Technologies’ health club, fitness studio and recreation center customers have seen more sales from adding digital wallets to their payment options, especially for online and in-app class bookings.

2. People Want Personalization

This month, concerns about inflation decreased slightly from the previous quarter, and consumer optimism about the U.S. economy reached its highest level in almost two years. Renewed consumer confidence is great news for small businesses. But today’s shoppers are also looking for more value in their purchases. Regardless of their generation, Americans want value — and value means different things to different consumers. It could be better prices, to be rewarded for loyalty, or the ability to order ahead and then collect. Or it may mean faster delivery options, the ability to pay using a mobile device or with a favorite payment method, or getting product promotions and offers that are tailored specifically to the individual.

According to Clearent by Xplor’s Year in Payments: Recapping 2023 & Unlocking Future Trends webinar, shopping behaviors now reflect more expensive and technology-focused buying decisions, and expectations are higher. Consumers want a seamless, convenient shopping experience that feels personal to them. So that means small businesses need to offer more flexibility for customers, deliver an experience that is tailored to individual preferences, and meet these needs consistently across sales channels. The small businesses with the best chance for future success will be those that take the time to find out what their customers value most, and then cultivate a shopping experience that feels personalized to the individual.

3. Payments are Getting Faster and More Invisible

Over the past five years, demand for real-time payments has steadily risen, and it continues to accelerate. According to a recent Federal Reserve study, 62% U.S. businesses noted cash flow management as one of their most impactful challenges. Respondents also reported that they needed greater flexibility and speed when it comes to payments. As more financial institutions adopt the Federal Reserve’s new instant payments service, FedNow, small businesses will start to see much faster movement and settlement of money. Settlement lags will become a thing of the past and business will have more control over their day-to-day cashflow.

At the same time, technology advances mean payments are becoming more invisible, with payment processing functionality being embedded into more daily business management tools.

Embedded payments are solutions that link directly into a SaaS (Software-as-a-Service) platform, application, or website, like an all-in-one field service management platform for electrical contractors that manages scheduling, estimates, and payments for them. With this, small businesses can retry failed payments automatically, streamline cash flow tracking, and save time on reconciliation and reporting by not needing to manage multiple systems. Embedded payments also allow small businesses to improve their sales conversion rates, reduce errors and operational costs, and improve their cashflow.

A new study from Juniper Research has found that the global revenue from embedded payments is set to grow 84% between 2023 and 2027, as more businesses see the benefits of letting their consumers pay for goods and services without ever leaving their app or website. Forward-thinking small businesses are ones that minimize the number of systems they use. Rather than thinking about payment processing as separate to business management technology, invest in software with payment processing already embedded.

4. The Right Payment Methods for Your Business is Not a One-Size-Fits-All Initiative

When it comes to choosing the right payment solutions for your business, one size does not fit all.

Consumer preferences vary depending on the type of industry you are in, the products or services you offer, if you operate online or in-store, and who your customers are. Understanding your target market is the first step in choosing payment methods because different generations want different things. For example, younger more tech-savvy consumers may appreciate digital wallets, tap-to-pay, or even Buy Now Pay Later (BNPL) options, while older shoppers might prefer more traditional methods like credit cards. Research customer preferences to understand who they are and how they prefer to pay.

The second step is evaluating payment transaction fees. Every payment comes with a transaction fee, but these costs vary depending on the type of payment. The fees for processing a credit or debit card payment are usually slightly higher than the fee for a bank transfer, and a payment made via a digital wallet is different again. Once you find out how your customers prefer to pay, take some time to understand the fees for each type of payment. By evaluating different payment methods against your business revenue and customer preferences, you can prioritize those with the biggest impact on profitability.

For example, Automated Clearing House (ACH) payments are cost-effective for small businesses — and they are especially advantageous for large or recurring transactions because of their efficiency and lower fees. ACH transactions, involving bank-to-bank transfers, help to enhance security, and reduce fraud, so they are a great option for saving on fees.

The last step is embracing frictionless payment technologies. Adopting modern payment technologies not only reflects positively on your business’ image but also aligns with evolving consumer expectations. Every business should not only offer a range of payment methods, but also do everything they can to simplify the payment process. Why? Because a frictionless, reliable payment experience makes your business more attractive to potential customers, boosts sales, and improves overall customer satisfaction. For example, if you are not already offering tap-to-pay instore, or digital wallet payments on your website, then you could be missing new sales.

Another way to reduce friction is to allow customers to store their card or bank details on their account, so they can make repeat purchases more easily. And if you do not yet offer mobile payments or a mobile app for your customers, now is the time to start. It is a great option for enabling consumers to book or buy on the move. Clearent by Xplor offers a mobile payment solution that enables businesses to process payments anywhere, even without an internet connection. As a result, businesses can have peace of mind that they will never miss a sale.

Regardless of where you operate, or which industry you are in, when you choose the right mix of payment technologies, you can give your customers what they want, boost sales, control costs, and position yourself for success in the coming year.

Jean Boling is Director, ISV business development at Xplor Technologies, responsible for serving Clearent by Xplor independent software vendor partners with all their payment processing solution needs. In her short time at Xplor Technologies she has contributed to the growth of the ISV partner channel while exceeding sales goals. With over 15 years’ experience in the payments industry, Jean’s career also includes roles working in business development for both Global Payments and TSYS, along with agent sales and corporate recruitment at PayPros. Jean is an Electronic Transaction Association Certified Payments Professional (CPP) and a winner of the 40 under 40 Rising Star Award 2023-24 by the Retail Solutions Providers Association.