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New Decade, New Digital Payments: What SMEs Need to Know
The past decade has brought with it many changes that have impacted our way of living. Among other advances, the Internet has evolved our means of consumption and has fundamentally led to a shift in the purchase process. Ecommerce has, in effect, turned the Internet into a virtual shopping centre. In the UK, ecommerce sales by businesses were £688 billion last year, rising by a substantial 18% in annual growth.
Changes in payment method
In 10 years, the internet is expected to account for 53% of retail sales, an increase from today of approximately one-fifth, according to Retail Economics. Digitisation affects the way payments are made for these purchases.
In a survey of 500 SMEs across a range of industries in the UK, we found that 2020 will signal a significant shift in the way payments are expected to be made. While consumers will still use cash, the decision makers at the small businesses expect the next decade to bring with it a changing tide that will see alternative and digital payment options pushed to the forefront.
The research conducted by Censuswide showed that SMEs predict that alternative payment options, such as digital wallets (41%) and alternative digital payments, like Pay By Bank — which allows consumers to initiate payments directly from their bank accounts (44%) — will be the methods most used for the majority of transactions. In 2019, only 7% of SMEs said that alternative mobile wallets, such as Alipay and WeChat Pay, accounted for most transactions, but this is set to more than double in 2020 (16%).
The research also shows that almost half (46%) of small businesses expect to see ecommerce far exceed the activity in their physical stores in 2020, which could be indicative of the move to accepting more digital payment methods. Over a third (39%) will accept more digital wallets, nearly a quarter (24%) will accept Pay By Bank, and some will even accept pay later solutions, like Klarna (11%).
Three steps to take now
- Amidst this evolving payment landscape, many SMEs are left wondering how to navigate these changes moving forward. Being aware of the variety of payment options is the first step. Merchants who understand their consumers’ evolving payment needs will be ahead of the curve when it comes to preparing the business for change.
- Second to that is facilitating transactions. Whether it’s Pay By Bank, Alipay or simply a broader range of cards, merchants need to be ready to accept their consumers’ chosen payment method. This requires a frictionless, end-to-end payment system that is seamless, secure and simple for both the consumer and the business delivering it.
- In addition, it’s critical to adopt a system that supports business growth by monitoring consumer payment behaviours, aggregating data and extracting consumer insights. In this sense, payment acceptance begins to look like less of an annoyance and more like a welcome revenue stream. This kind of advanced payment technology will support those ambitious small businesses focused on staying on top. In fact, almost a third (30%) are looking to receive data or management information about their payments and transactions in 2020 and beyond.
It’s never too early to plan. The new decade is nearly here, and although we don’t expect every consumer to suddenly use mobile payment apps immediately after the countdown, merchants should be mindful of underestimating the uptake of technology. It doesn’t take long for word to spread about more efficient ways to get things done, and today’s consumer is more resourceful than ever. They hold customer experience in the highest regard, and those first to market with innovative but effortless experiences will gain an important foothold in an undoubtedly crowded market.
For this to become reality, we can’t overlook the importance of having a trusted partner. Processing alternative payments end-to-end is the critical first step for payment acceptance in the coming year. But for ongoing success, choosing the right payments partner will be key. A valued payment partner will support merchants by providing guidance and insights in an ever-changing landscape. With the right technology to handle the hard work — and the best partner to guide the process — SMEs can meet consumer payment objectives while successfully taking advantage of the endless possibilities that come with innovations in digital payments.
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