Payment strategies should be reactive to consumer behaviour

As the owner of a small business, you will have spent hours considering your business location, stock, and target customers. You will have given thought to the price of each individual item, and when there’s opportunity to discount or promote products around specific seasonal peaks or customer demand.

Something you may not have considered in such great detail, is your payment acceptance strategy. It goes without saying that accepting payments is the lifeblood of your business, but as technology in this area continues to evolve, are you sure that you’re catering to consumer demands?

You don’t have to look too far to find the headlines that point to a radical shift in the way consumers prefer to pay for goods and services. Most recently, a new report from Payments UK predicted that debit card payments will overtake cash transactions by 2021, with usage of notes and coins anticipated to represent just over one in four (27%) payments by 2025. Even these ‘card transactions’ will likely no longer involve the customer pulling a rectangular piece of plastic out their pocket, as we see increasing adoption of mobile wallets.

Innovation is coming from all directions, with retailers, FinTechs, and technology giants all competing with traditional payments providers to win a piece of the payments pie, and lucrative customer mindshare. The result? A somewhat fragmented marketplace, and a daunting amount of choice for consumers and businesses alike.

While payment acceptance might seem like an unimportant part of a sale, it plays a crucial role in customer experience and loyalty. Each card transaction also brings a wealth of rich, data for the business. If analysed correctly, this crucial sales data can provide valuable insight into customer purchase behaviour, and be fed back into marketing strategies to help provide an even more targeted service.

For many SMEs, fearful of high charges, cash is the preference. However, against the backdrop of the trend highlighted above, a “sorry, cash only” sign strapped to your counter risks irritating, and maybe even losing a sale from your convenience-conscious customers, who are used to being offered a tap or swipe option.

Choosing which payment methods to accept depends on a range of factors, including your location, average ticket price, and customer demographic. Let’s take contactless as an example. As of October last year, the spend limit for a contactless transaction is £30. For cafes, news agents and bars, where quick service is crucial and items are generally high value, this will be an important offering. Clearly, it becomes less relevant where most items are priced above this value.

The key here is choice. Consumer expectations are set through their shopping experience with large retailers – an expectation that will not be easily adjusted simply because they are shopping on their local high street.

Small businesses are increasingly awake to the value that technology and data insights can bring to their business. Think not only of what a variety of payment acceptance mechanisms can do for your customer, but what it can do for your business. An integrated approach to capturing, mapping and analysing transaction data should form part of your broader business strategy. In today’s ultra-competitive environment, this level of customer insight has moved far beyond a ‘nice to have’.

By Raj Sond, general manager at First Data