Digital payments have surged since the pandemic. More smartphone use, the explosion of eCommerce, and higher Internet penetration across the globe have curbed the use of cash and shifted the payment landscape firmly toward digital.
What are digital payments?
Simply speaking, digital payments are payments done electronically, whether in-person or online. Value is transferred from payers to payees between accounts through digital devices, such as mobile phones, computers, or card technologies, and intermediary payment providers. Credit, debit and prepaid cards are digital payments. So are mobile and digital wallets (Apple Pay, Google Pay, Coinbase Wallet), virtual cards, Interac transfers, electronic funds transfers (EFTs), and technologies like Venmo and Apple Square.
While the story of digital payments is often told from the consumer perspective, the shift to digital is having a huge impact on SMBs (Small and Medium-Sized Businesses). New research by Payment Canada released in June 2022 reports a significant rise in digital payment methods for SMBs. Interac transfers have gone up by 33%, virtual currencies by 25%, electronic funds transfers by 23%, wire transfers by 21%, and prepaid cards by 20%.
Another study by PYMTS reported that 82% of SMBs were changing the way they’re sending and receiving payments to and from other vendors. Many are using digital payments for B2B (Business to Business) transactions, to manage their AP / AR (Accounts Payable and Accounts Receivable), and to control employee purchasing and expense accounts.
A few years ago, enterprise payment technologies were only available to large corporations, but the emergence of financial technology (FinTech) companies have leveled the playing field. Now SMBs have access to a range of convenient, secure, and affordable payment options that are helping them rise above the financial and operational challenges they’ve faced since the pandemic.
The benefits of digital
- Ease of use: Digital payments feel effortless. The technology makes paying easier by eliminating the hassle of cash. Payments can be made anywhere, anytime, as long as payers and payees have accounts and digital devices. When payment methods are set up in advance, all that’s necessary to perform a transaction is a simple tap or the press of a button. For SMBs, that convenience translates into better workflows, as transaction data is entered into account records instantly and seamlessly.
- Tracking: Digital payments automatically store all payment and transaction data so customers and SMBs alike have full records. There’s no need to do any manual work to keep this “paper trail” as it’s instantly stored. Customers can choose how or if they want a proof of purchase and it’s provided automatically. SMBs need to maintain financial records for accounting and tax purposes, and digital payment solutions make this easier.
- Enhanced security: According to the June 2022 Payment Canada survey, Canadian SMBs are facing more payment fraud attempts, but about 50% are now better equipped to recognize these attempts and protect themselves. Digital payment technology makes security even easier. Digital solutions verify user identifies and limit transactions to preapproved amounts. Many digital methods, such as virtual cards, generate unique card numbers for every transaction, making them more secure. Mobile wallets use tokenization so merchants are not responsible for any breach of customer account information.
- Increased sales: Digital payment methods can be an important motivator that encourages people to check out faster and spend more. Customers often choose digital payment methods because of reward or cashback programs and look favorably on SMBs that let them use their preferred digital methods. Digital payment also makes it easier for SMBs to reach new customers, enter new markets, and accept more currencies.
Bottom Line Benefits for SMBs
With so much enthusiasm for digital payments tied to customer convenience, we don’t always hear how they’re impacting businesses. But digital payments are bringing major benefits to SMBs, with mounting evidence to back it up. Visa’s Digital Transformation of SMBs report not only showed that customers preferred paying digitally, but that preference had a positive downstream effect on business’s bottom line. Visa found operational advantages as well. 79% of SMBs surveyed said that accepting digital payments helped them manage their businesses more effectively. Accepting digital payments cut down their transaction processing time by three times compared to non-digital payment methods.
The most dramatic result was in sales revenues. Just by accepting digital payments, SMBs reported an average increase of 7%. Those results were from SMBs that had been in operation for over five years that had started accepting digital payments within the last five years.
With digital payments rising across Canada and the world, it’s the perfect time for SMBs to start meeting customer expectations and leveraging the benefits of digital payment for their own businesses.
Embracing the digital future
While the pandemic has been especially tough on SMBs, it pushed business leaders to get creative and do things differently. One of the clearest outcomes has been the ease and security of digital payments. Not just for online B2C transactions, but for all kinds of transactions, including B2B sales, in-person transactions, subscriptions, and even employee salary payments. Huge, multinational chain stores and tiny, farmer’s market vendors can now transact business using the same easy methods, instantly, through mobile phones, apps, e-transfers and cards.
Everyone benefits from digital payments. However, with smaller margins and more immediate risks, smaller businesses that take advantage of digital payments can face the future with confidence.
OTT Pay is a leading Canadian financial technology company and payment services specialist. We provide secure, fast and convenient payment aggregator services that allow merchants to accept various types of payment methods to meet customer needs. Our mission is to build an ecosystem that connects consumers and businesses globally in a cashless world.
Have questions or need help with digital payments? We can help develop a payment services strategy that is right for your business. Contact us at [LINK].