The pandemic has greatly sped up innovation in consumer payments—and many people don’t even carry cash anymore. In fact, cash accounted for only 19% of all consumer payments in 2020, according to a 2021 study by the Federal Reserve Bank of San Francisco.
“The more ways you can allow customers to pay, the more potential sales you’ll receive.”
As consumer payments technology expands, it’s important for small businesses to stay up-to-date—and to consider adopting payment methods that customers will find simplest and most useful. Businesses that offer customers more flexibility in how they can pay will potentially reap more sales by doing so, says Brendan Miller, head of global marketing strategy and operations for Rapyd, a business payments solution provider.
“The more ways you can allow customers to pay, the more potential sales you’ll receive,” Miller says.
Here are three payment trends worth paying attention to:
1. Digital wallets
Digital wallet apps such as Venmo, Google Pay and Apple Pay essentially store someone’s payment details—such as their credit card or bank account information—and any related passwords electronically. Digital wallets are usually kept on the customer’s smartphone, so they can use it whenever they need to make a payment.
Digital wallet usage has soared over the past couple of years and is expected to account for 52% of global ecommerce payments by 2023, according to a report by PYMNTS.com. Digital payments made at the point-of-sale (POS) terminal are also growing quickly and should reach 30% of POS payments by 2023.
Surveys also show that Millennials and Gen Zers are gravitating to mobile payments quickly and driving their growth.
Not only are digital wallets generally considered safer than using physical credit cards because they encrypt card numbers, but they also can make payments “contactless” and faster.
Small businesses can offer digital wallet payments by upgrading to a payment terminal that is near-field communication (NFC)-enabled and allows them to easily offer mobile payments.
2. QR code payments
Another digital payment trend is making it easy for customers to pay by using their smartphone camera to scan a quick-response (QR) code. How it usually works: When the customer scans the code, they are directed to a link with their specific purchase information and asks them to authorize the payment amount.
A growing number of payment processing solutions for small businesses, including PayPal Business and Square, have QR code capabilities built-in.
“Using QR codes for payment is very popular in some parts of the world, with a 70% rate of use in China, for example,” says Miller. The market for QR-code payments is growing, and by 2025, over 2.2 billion users are expected to pay with QR codes, according to Juniper Research.
3. Buy Now, Pay Later
Buy Now, Pay Later (BNPL) allows customers to buy for products or services using low- or no-interest installment loans over time instead of making a one-time full payment. More companies that sell big–ticket items or high-priced services have been rolling out BNPL as a payment option in order to entice customers who may otherwise be uncomfortable with the price point.
A recent McKinsey survey found that 30% of consumers reported financing a purchase with BNPL in 2021, up from 27% in 2020. It’s also helping drive up sales: 29% of survey respondents who used BNPL reported that without BNPL they would have made a smaller purchase or no purchase at all.
“BNPL options are desirable to consumers because it gives them predictability,” Miller adds.
BNPL is being adopted across a growing array of industries from travel agencies to exercise equipment retailers and to B2B companies that sell products and services to other businesses. BNPL payment providers include Afterpay and Klarna, but new providers are entering the market all the time One BNPL provider, Sunbit, focuses on offering BNPL options for local businesses and customers, including to dentists, eye doctors and automotive repair.
Consumers today expect to have more flexibility and simplicity in how they pay for products and services. Businesses that meet those expectations will be best positioned for the future.Print this article