23/04/2015

By Raj Sond, General Manager, First Data Merchant Solutions


Not so long ago, payments options simply involved accepting cash or cheques across the counter, or taking a debit or credit card. But today, with the rise of contactless payments, mobile payments and changing regulations, taking a payment isn’t such a straight forward procedure.

Now that small businesses have to contend with multiple options it is useful to assess which payments methods would most benefit their business. The use of cash has steadily been falling over the years, having reduced by 10% in the past five years, so now might be the right time for independent retailers to invest in new technologies to be able to accept a variety of payment options.

However, the benefits attached to each payment method depend on a number of factors, all of which should be carefully considered before embracing these new options. For example, the cost of the transaction and the usual types of purchase are key to deciding whether a certain payment method is worthwhile. Owners need to really get to know the trends and stats surrounding their businesses in order to make informed investment decisions.

What kind of shoppers do you attract?

If the majority of your customers are aged 18-30, it might be worth considering mobile payments. Recently, Visa announced the launch of new security technology for mobile payments, which some have argued will result in an uptake of mobile payments usage. With the largest use of mobile payments coming from those in this age range, this could be a worthwhile investment. Experian estimates that smartphone payments could outpace traditional card transactions by 2020 due the interest from so-called ‘millennials’. Now could be the right time to jump on the mobile payment wave if these are your key customers!

How much do your customers usually spend in store?

In December 2014 alone, 46.1 million contactless transactions were made, an increase of 15.6% since November 2014. Busy Londoners have had the hassle of topping up their Oyster card eradicated with access to contactless cards at TfL terminals. However, it is important that SMEs note that the average transaction made by this method is only £8.26. There is also a £20 limit on transactions, soon increasing to £30. As such, if your store deals with higher priced items, this might not be the best option for you. Conversely, if your store is in a busy city, or specialises in lower priced items, this could be one way to increase efficiency for your customers and maximise on this already growing trend - last year alone, 60% of all cash payments were for £5 or less.

Is your customer base generally from overseas, or is it domestic?

On the 1st March 2015, the fees charged for acceptance of UK Domestic VISA Debit cards changed from a fixed pence rate per transaction to a percentage based rate. This resulted in a change of debit fees for UK retailers – those with higher priced goods are now more likely to see an increase in their costs because of this.

These fees are known as ‘Interchange fees’ and are charged by cardholder’s issuing banks to a retailer’s payment processor to recover the various costs of providing the payment facility. If your store mainly attracts overseas customers, the costs for accepting these types of cards will be higher than those cards issued in the UK.

Another option for overseas customers is Dynamic Currency Conversion (DCC). When presented with an international card, this enables you to offer your customer the option to instantly convert the sale amount to their local currency, giving the customer full transparency on how much they will be billed on their statement before it arrives.

With the number of payments options ever increasing, choosing the best solution can be a minefield for small businesses. But if time is taken to analyse the best methods for each individual business’ needs, the company will reap the benefits. It can be extremely easy to invest in the newest options, and the alluring headlines, but by taking a strategic approach to embracing new technologies and taking time to understand their business, small business owners can make targeted investment choices that fit their business’ evolving requirements.