Knowing how today's customers want to pay for purchases can help your business improve efficiency as well as your customer experience during the checkout process.
While it might be obvious that understanding your customers' purchasing habits can help you increase sales, it might come as a surprise to some that knowing how customers prefer to pay can also help you increase your sales and even improve customer retention as well.
In addition to the more traditional payment methods of debit, credit, and cash, customers now have access to digital wallets, payment apps, and peer to peer payment methods to process their transactions and give them access to the goods and services that they desire. With all these different payment methods, which ones are customers actually using, and what would benefit your business the most to accept.
Cash is still used, but for smaller purchases
According to a 2017 US Bank Behavior Survey, 47% of consumers preferred digital apps over cash, the survey also noted that in general, customers aren't carrying large sums of cash with them anymore. Over 50 percent of respondents said they carried cash less than half of the time. The Bank of Canada found similar trends with Canadian consumers and notes that "The credit card share of POS [Point-of-Sale] purchases has continued to rise, at the expense of both cash and debit cards." Both countries found that consumers will still use cash for small purchases (under $50) and in Canada, a large portion of peer to peer transactions are still completed using cash.
So, what does this mean if you're a business owner? If your business sells products or services that are above a $50 price point, or if you want to encourage customers to spend over $50 when they visit your establishment, then your customers will most likely want to pay with credit or debit and you should have the hardware infrastructure required to accept these types of payments.
Forget cash, credit cards reign supreme
We all remember being asked, "Cash or credit?" at the checkout, well consumers have spoken. In both Canada and the US, consumers are turning to credit cards to complete their everyday purchases. Consumers enjoy the quick and easy payment experience that is provided by credit cards and are incentivized to use their credit cards thanks to the rewards and points offered by the card brands and issuing banks. According to the Payments Canada 2017 Trends Report, credit cards are the dominant payment method for point-of-sale transactions totally more than $462 billion in 2016 and that a growing number of Canadians are using their credit cards for their monthly spending. For comparison, debit cards were only $226 billion of the point of sale spending. There's no denying that most businesses today will benefit from being able to accept credit cards.
In the US, consumers reported that they are carrying less cash them today then they did previously and when they do have cash with them it's usually less than $20. With fewer US consumers carrying cash and the amount of cash, they're carrying decreasing this can impact the number of transactions and size of purchase a consumer would be able to make at a cash-only retailer.
Digital wallets are getting more popular with the help of wearables
If a customer is using Apple Pay, Android Pay, or another mobile application to pay for a purchase, then they are using a digital wallet. Although digital wallets have been available for a few years, they are beginning to gain more mainstream acceptance as customers become more comfortable with the technology, like smartwatches, that gives them quick and easy access to their digital wallets. According to the 2018 Payment Trends report by Capgemini, mobile and wearable contactless payments are expected to reach $95 billion this year. Capgemini also noted the upcoming partnership between Mastercard and Visa to offer payment capabilities in fitness trackers will drive an increase in contactless payments. Luckily, if your business has terminals that can accept NFC or Tap and Pay technology, then you'll already be able to offer a payment option to customers looking to use wearables or digital wallets to make a purchase.
Online shoppers are using credit cards
In 2016, around 92% of e-commerce purchases were done using a credit card according to the 2017 Payments Canada Trend Report. The high use of credit cards for online shopping is driven by the added security customers receive from the card brands that help make them more confident in their online purchases. Luckily, technology has made it easier than ever for business owners to set up an online store and accept payments.
If you have an existing site that you'd like to add payment functionality to, Helcim Hosted Payment Pages can help get you started with online payments quickly and easily.
Upgrade your hardware or face penalties
Now that EMV (Chip and Pin) technology has rolled out to consumers and merchants, if you are not set up to accept EMV chip cards and you process a fraudulent credit card by swiping it, then you will be responsible for the fraudulent charge. This EMV liability shift came into effect on October 1, 2015, and applies to all merchants.
How you can offer the best payment experience
Ultimately, all the trends point towards consumers valuing the same things that you most likely already prioritize as a business owner: the ability to process payments quickly and easily. Consumers want to minimize the amount of time that they spend waiting in line and you want to process transactions as quickly as possible so you can move on to the next customer. Today's payment trends highlight the importance of being able to accept NFC or contactless payments as most credit, debit, and digital wallet payment methods can now perform contactless payments. This is most likely the first way consumers will look to pay for a purchase.
By paying attention to what your customers are expecting when they make a purchase from your business, you can adapt and upgrade your card readers and POS when needed to help ensure a smooth and efficient customer experience.