The way that customers pay businesses is constantly evolving. Instead of paying with paper, like cash and checks, businesses are expected to accept a variety of payment methods ranging from credit cards to digital payments. While these are meant to benefit both the business and the customer, payment trends can sometimes harm your business if you aren't educated, prepared, or knowledgeable in these emerging payment solutions.
To help your business get-off on the right foot in 2017, here are 8 payment trends that could hurt your business.
"The US's transition to chip cards has been an utter disaster. They're confusing to use, painstakingly slow, less secure than the alternatives, and aren't even the best solution for consumers," boldly states Ian Karr in an article for Quartz.
However, Visa is anticipating that America will catch up within the next 4 to 5 years with about 90% acceptance. In other words, don't expect EMV chip cards to go away anytime soon. While this may not be a concern for larger businesses, mom and pop retailers don't see the need of purchasing new equipment. Sure. That may save them several hundred dollars, they problem is that they're now held accountable for any fraud that occurs in their store.
While taking basic security measures and embracing mobile payments can cut-down on fraud, and speed-up the checkout process, for the majority of customers that prefer using plastic, EMV is a necessary evil that business owners are going to have to comply with.
2. Digital Wallet
Not to be bias, but digital wallets are awesome. For merchants, digital wallets can reduce operating costs and increase cash flow since payments can occur anywhere at anytime. For customer's digital wallets are secure and convenient. Still, there are barriers. Customers don't understand how the technology works and are still concerned about security.
While digital wallets are paving the way for the future of payments, you still need to assess whether or not they'll work for your business. If your target audience are less tech-savvy or you're primarily a cash-only business, it may not be worth investing too much into accepting digital payments.
Either way, it's important that you start weighing the pros and cons of digital wallets. If not, you could lose any competitive edge you have going for you.
3. Gift and Loyalty Cards
When done correctly, gift and loyalty cards can improve your cash flow, acquire and retain customers, and increase your overall brand presence. The drawback is that in order to take advantage of these benefits, businesses make mistakes like simply slapping "My" loyalty programs without personalization, creating a one-size-fits-all program, or issuing coupons that do not provide any values.
Customers don't fall for these half-hearted. In fact, according to a survey conducted by COLLOQUY a staggering 76% of consumers reported that they plan to make no changes in their level of participation in reward programs in 2017, while only 12% said that they would participate more.
"In an atmosphere where venerable institutions are being questioned, it should be reassuring to marketers that nearly 60% of consumers believe in their programs, and that consumers identified smart shoppers as the chief beneficiaries," COLLOQUY Editor-in-Chief Jeff Berry said. "At the same time, the survey should remind brands that rewards must be relevant, easy to earn and redeem, and that they must uphold the value exchange."
4. Peer-to-Peer Payments
P2P payments, like Venmo, are gaining popularity. Despite the convenience that P2P payments present, there remain questions about its security. This is because P2P payment solutions collect more consumer data than previous payment methods. Additionally, there are various sets of regulations that businesses need to be aware of when it comes to P2P payments.
As a business owner, you not only have to consider accepting P2P payments, you also have to make sure that they're secure and they you adhere to regulations, as well as provide adequate disclosure and liability. If not, you may lose customers and even face severe penalties.
5. Every Day-On-Demand
Two-day or even next-day shipping for online purchases are no longer fast enough for today's consumers who want instant gratification. The new "on-demand" economy has already become a reality major retailers like Amazon where products arrive on your doorstep the next. Even having the opportunity to make a purchase and pick-it-up the same day in-store has become the norm. And, technology like, digital wallets will be able to make this process run more smoothly.
Like many other upcoming trends, larger retailers have the resources to accommodate every day on-demand. That may not be the case for smaller businesses who will have toupdate their systems in order to accept online payments, along with the resources to ship or track inventory. If you want to compete with larger merchants, then this may be a necessity. However, investing in every day-on-demand may cut into your profits if you don't have the demand or appropriate resources.
There's been a lot of talk surrounding Millennials. And for good reason. They're the largest age demographic in the country and are completely disrupting businesses of all sizes. They demand authenticity, speed, and on-demand. Dismissing this generation would be a mistake for your business.
When it comes to payments, they expect them to be quick, convenient, and secure. And, embracing mobile payments is only a piece of the puzzle. It's your responsibility to still provide multiple methods of payments, believe it or Millennials still use cash, and ensure these group that when they make payments to your business their information will be secure. That's a tall order to fill. But building a connection with and being transparent about your security practices are both great places to start.
7. Global Payments
Face it. Your competitors are no longer down the street, or even in the same country.
That are online storefronts are owned by businesses in London, Beijing, Cape Town, or Vancouver who are selling products and services to your customers in New York, Chicago, Rio de Janeiro, Berlin or Sydney.
In other words, you can no longer afford to just think local. You have to think global by understanding the customs and preferences of your various customers across the world, as well as understanding regulations in different countries and offer local currency options. If not, you can expect to be left in the dust by your competitors who have already embraced the global payments.
8. Cautious Eye on Delinquencies
"Credit card delinquencies remain at record low levels, but issuers are keeping a careful watch over key leading indicators that could indicate trouble," writes Marc Bellanger on the 500friends blog. "While unemployment is at an eight-year low, and consumer spending is strong, June was the worst month for job creation in five years. With continued uncertainty in foreign markets, a skittish stock market, the most unusual presidential campaign in generations, and low consumer confidence, the economy remains on shaky footing," adds Bellanger.
On the bright side, the "average credit card portfolio yield remain exceptionally strong and has capacity to absorb an uptick in delinquency." Still, it's best to be prepared for the uncertainty that lies ahead in 2017 by having an emergency fund on-hand if business slows down. If not, not being able to pay your expenses could have long-lasting consequences for your business, like being considered "risky." This could prevent you from obtaining loans and having to work with credit card processors that have less than desirable terms and contracts.