Accepting mobile payments has become more the rule than the exception at small businesses — but why? Here’s a look at some of the advantages mobile payments provide, regardless of whether your business sells directly to consumers, or to other businesses.
It conquers cash flow issues for buyers and sellers.
As a small business, the consistency with which you can manage your cash flow dictates your ability to sustain customer-facing operations, your product or service offering and internal infrastructure. Yet, cash flow constraints are one of the most common hindrances that impair small businesses. A study conducted by the National Federation of Independent Business (NFIB) reports that one in five small businesses experience a continual cash flow problem; one in two experience cash flow strains occasionally. Further, about 30 percent of those businesses say the amount of time it takes to collect payments is to blame. Mobile payments provide an alternative to this vicious cycle of cash flow constraint. Because mobile payments allow businesses to collect and process customer payments from anywhere, including brick and mortar storefronts, over the phone, or from a remote location like a trade show or the customer’s home or place of business, payments can be collected and processed as soon as work is complete, or orders placed. Unlike merchant charge accounts your business may offer as a customer convenience, mobile payments don’t put your own cash flow at risk. Assuming the customer’s credit card transaction is approved, funds owed to your business will be electronically transmitted by your mobile payment processor electronically, typically within 24 to 72 hours from the time the transaction is deemed complete. Should the customer fail to pay the amount charged to his or her creditor when payment is due, the credit card issuer, not your business, handles the collections task.
Mobile payments can improve sales and reduce infrastructure costs.
One study sponsored by Intuit revealed that 83 percent of small businesses that accepted credit cards experienced increased sales — and that more than half saw a revenue lift of more than $1,000 a month. Despite such a strong financial case for accepting credit cards, the ability to do so in a secure manner once required that a small business invest in a point of sale terminal that wasn’t conducive to many small-business budgets. Mobile payment providers now provide a cost effective alternative, allowing small businesses to use a smartphone or tablet to act as a point of sale device. With a mobile payment checkout process, any employee who is authorized to accept payments on their mobile device can “meet the customer” where they are in their purchase decision, to complete a secure customer transaction. Because a mobile payment processor that is PCI compliant encrypts a customer’s payment data for secure processing, a small business isn’t in direct contact with sensitive customer information like it is when handling paper checks, or collecting credit card numbers on invoices for manual processing. Such security and flexibility enhances customer convenience and reduces a business’s exposure to risk, while simultaneously improving the return on investment every employee contributes to the business’s bottom line.
Mobile payments now appeal beyond early adopters.
According to SmartCard Alliance (link is a PDF file), mobile contactless payments were first introduced in the U.S. back in 2005, but mobile payments as consumers and merchants know them today were not commercially deployed to the masses until about 2011. Like any emerging innovation, mobile payments have gone through the expected product life cycle, and have moved past “early adopters” into the mainstream marketplace. In October 2014, Loyalty 360 cited an Accenture study indicating that as many as 40 percent of smartphone users have used their device to make a mobile payment. Gartner Research predicts (link is a PDF file) that mobile payments will account for more than $700 million in transaction volume by 2017. Taking notice of such changing consumer payment behavior, businesses large and small are realigning their business models appropriately. By 2016, Bloomberg Business reports that sales on mobile devices are expected to exceed sales made on traditional checkout terminals.
© 2015, Kristen Gramigna. All rights reserved.