‘Should I pay or should I go?’

Research from PayPal finds that small businesses are missing out on sales as they get left behind by consumer enthusiasm for new ways to shop and pay.

British small businesses are losing sales by limiting themselves to the 20th century’s most common forms of payment like cash, bank transfers and cheques, according to research by PayPal. A nationwide study, of 2,000 small businesses and more than 2,000 consumers, reveals the stark contrast between business owners who are failing to modernise and their customers who in the last few years have completely transformed how they browse, order and pay.[1]

Two in five (44%) small businesses have never reviewed how they take payment from their customers, despite the radical changes of the 21st century being embraced by consumers, including the arrival of digital wallets, contactless payments and the rise of the smartphone.

When it comes to doing business online, many small businesses are missing out on the smartphone revolution and this is leading them to being left behind by customers enthusiastic about the convenience of new technology. Mobile shopping is growing at nearly four times the rate of overall online spending in the UK[2] and a fifth of consumers most frequently buy goods or services online using their smartphone. However, only 17% of small businesses have a website designed for access on a smartphone and just 4% have a mobile app that takes payments.

For businesses doing trade in person, cash (70%), bank transfer (62%) and cheques (56%) are still the methods of payment most relied upon by the majority of small businesses, despite contactless card payments overtaking cheque books for the first time this year.[3]

Consumers’ payment preferences are increasingly incompatible with outdated small business, and it appears to be hitting their bottom line. Almost two thirds (63%) of consumers admitted to abandoning a purchase whilst shopping online in the last three months because they couldn’t pay the way they wanted. Meanwhile, 56% of consumers have abandoned a purchase in a physical store over the last three months for the same reason. This proved to be the most significant barrier to making a purchase, putting more consumers off than poor customer service, queues at the checkout, restrictive returns policies or delivery charges. 

Commenting on the findings, Nicola Longfield, director of small business at PayPal UK said:

“For small businesses, understanding the number of new ways to take payment may seem daunting. At times it can feel like a new “pay” launches almost every week. However, consumers are embracing these changes and opting to use digital wallets, contactless cards and their smartphones when they go shopping. Businesses that don’t join the 21st century stand to lose out.”

Nicola adds, “The good news is that much of this technology is designed to make life easier for small businesses, as well as consumers. Integrating a simpler check-out process, where customers don’t have to enter their card and delivery details every time on a tiny screen can help convert more sales. Meanwhile, NFC-enabled card readers such as PayPal Here mean businesses of any size can accept Chip & PIN, contactless payments and even Apple Pay on the move. No long term contracts and low pay as you go processing fees make PayPal Here suitable for a wide range of businesses previously solely reliant on cash, cheques and bank transfers, such as plumbers, taxis or market traders.”

[1] All statistics, unless otherwise stated, are taken from research conducted by Censuswide on behalf of PayPal between 09.07.16 – 16.08.16. Censuswide surveyed 2120 consumers in the UK, aged 18+, and 2000 UK business owners/self-employed with a turnover of up to £1million per annum and fewer than ten employees. Censuswide abide by and employ members of the Market Research Society which is based on the ESOMAR principles.

[2] Source: Research undertaken by PayPal and Ipsos into global attitudes to cross-border shopping, released in November 2015

[3] Source: Recent Mintel analysis: http://www.mintel.com/press-centre/financial-services/use-of-contactless-payments-overtakes-cheques-in-2016