As is true with any business, you need to make sales in order to actually make money. Your business might be one-of-a-kind because you offer the only place to do so-and-so or you’re the only place the offers such-and-such product, but all of that means nothing if customers can’t pay you for your products or services.
Payment for anything has stayed relatively the same for centuries; you offer something someone else wants, and they give you money in exchange for it. But within the past few decades, payment has begun to drastically change. Old fashioned coins and bills still remain in use across the globe, but with the drastic advances in technology society has experienced recently, more and more diverse forms of payment have been coming into popular use. If you wish to maximize your business’s profits, you need to make as many sales as possible, and to do that, you need to be willing and able to accept all the different forms of payment you’re likely to see.
What Payment Methods are Most Popular?
Currently, there are four payment methods that dominate the market: cash, check, debit card, and credit card. There are other payment types in use, like contactless payment cards and eWallets, but these are still in their infancy and they have yet to really make their way into common use. The Federal Reserve Bank of San Francisco conducts studies about payment methods and their uses on a triennial scale (every three years), the latest study, conducted in 2012, found that based on number of consumer transactions alone, cash is still the dominant payment method by a large margin. Cash is used for 46.1 percent of average transactions a customer will make. Debit cards follow at 26.4 percent; credit cards are used 19.2 percent, other payments are used 4.7 percent, and finally checks are used 3.6 percent of the time.
According to those numbers, you might think that focusing of cash transactions should be the priority. However, if you look at transactions based on their actual monetary value, the balance of use shifts, with debit card payments responsible for 27.9 percent, closely followed by credit cards with 27.6 percent. Cash payment makes up 24.1 percent of transactions and checks take 14.1 percent. Other payment methods comprise the final 6.3 percent.
As you can see, while cash may be used for the most transactions, card payments are responsible for over half the actual value of all transactions. This means your business absolutely needs a method of mobile payment processing; otherwise you can lose out on a lot of profit.
Variety is Good
While homogeneity can be useful in some situations, a business needs to be diverse and capable of dealing with a variety of circumstances. Accepting payments is most definitely not an exception. If your business is unable to accept a customer’s preferred payment method, you will lose customers and you will miss out of sales you would have received otherwise. Though some consumers will be willing to forgo their preferred payment method in favor of using another to buy your products, other customers won’t be so lenient.
The capability of your business to accept a variety of payment methods doesn’t just help you in avoiding lost transactions; it also improves the vision of professionalism your customers will associate with your business. Additionally, accepting diverse payment forms can provide a better layer of security for your business. Investopedia emphasizes the fact that debit and credit cards are protected by other security means while cash is only as safe as your ability to defend it. If all your profits are in physical cash, you run the risk of losing a lot more if a thief manages to get a hold of your money.
Another reason for accepting all payment types is the differences in spending habits customers have based on how they’re paying. If your business has a method of accepting and processing card payments, you might actually see a slight increase in your profits. According to Seeking Alpha, a study conducted by Dun & Bradstreet discovered that customers who use credit cards are likely to spend from 12 to 18 percent more than if they used cash. It’s a lot harder for a consumer to be actively aware of how much money they have and how much they are spending with a credit card. Plus, as Psychology Today states, using a credit card to pay is less psychologically painful (paying in cash can actually stimulate the pain receptors in the brain) compared to handing over some bills and coins.
Losing a sale because your business was unable to accept the payment method a customer offers is a very stupid way to lose out on potential profit. It isn’t difficult to equip your business with the hardware required for accepting multiple payment methods; vendors like Shopify offer everything from mobile card readers to cash drawers.
Don’t lose out on another sale because you couldn’t process a customer’s credit card. Make sure your business is equipped with the hardware needed for each payment type in order to accept any and all customers who visit.