Small businesses have to remain aware of customer preferences not only in terms of the products and services they buy, but how they pay for them as well. Without a strong grasp of the payment methods used by shoppers and a strategy for efficiently and securely capturing them, companies run the risk of falling out of alignment with the many preferences of the patrons who provide valuable revenue.
What does the payment landscape look like currently, and which trends are emerging? Take a look at this review of developments in the consumer payments world to gain a better understanding of your own customers:
Cash still leads, but other options grow in popularity
"Understanding customer payment trends is vital for business success."
Cash is, for most consumers, easily accessible and convenient – it's accepted at nearly every business, after all. It also has a lot of tradition behind it, with hundreds of years of transactions with paper money and coins supporting its use. Money magazine reported on the most recent set of statistics and related research released by the Federal Reserve Bank of San Francisco, noting that cash maintained its spot on the top of the rankings of most-used forms of payment.
Remaining the most popular method of compensation doesn't tell the whole story, however. Cash fell off from a 40-percent utilization rate – recorded the last time the San Francisco Fed completed the study in 2012 – to slightly below one-third of all transactions in 2015. That 7-percent drop doesn't signal the end of cash as a common form of payment, but it reveals a widespread trend: Consumers in general are slowly migrating toward other ways to pay.
Depending on how you look at the divisions in payment types, there's a strong argument in favor of recognizing cards in general as the most common tool for payments. With credit cards utilized for 21 percent of all transactions and debit cards used for 27 percent, these two methods of payment account for nearly half of all purchases.
While they differ significantly in how they're funded and many other considerations, the end result for customers is similar, especially during the moment of purchase. They take out the card, insert it into an EMV-enabled card reader, and then put it back in their wallet. The convenience is clear, but shouldn't be overlooked.
Also worth noting is the desire for credit-card companies to further reduce cash transactions and focus more on card payments. That is perhaps clearest in efforts by Visa to entice businesses into skipping cash entirely in favor of card and mobile payments, as detailed by MarketWatch.
While your business likely won't avoid cash entirely, understanding the growing preference for and use of credit and debit cards is vital for continued success. To learn more about effective card processing software, get in touch with Cloud 9 today.