Owners of small to medium-sized businesses (SMEs) ought to contemplate adopting a three-point strategy to guarantee that the payment options they provide, especially as cash transactions decrease, are optimal for both their customers and business model.
A Reserve Bank of Australia (RBA) survey released in June shows the number of cash payments made by Australians halved in the three years to 2022 – from 32 per cent to 16 per cent of all in-person transactions. Of all payments, including online transactions, cash made up just 13 per cent by number in 2022. The question for SMEs is how to provide payment solutions which cater for all customers in this environment, including the just over one-quarter who indicated to the RBA they would suffer a “major inconvenience” or “genuine hardship” if cash was hard to access or use.
“Business is already responding to this challenge and considering how to better accept digital payments as consumers change their purchasing habits to include everything from online transactions to mobile wallets,” said Julie Rynski, NAB Executive Business Banking Metro and Specialised. “However, the increasing number of payment channels means there is no one-size-fits-all solution for SMEs adapting to this new environment”, Ms Rynski said.
The key to making the right choice is to consider which technologies and payment channels are most suited to an individual business model. Below are three critical considerations to guide a final decision.
Tailor a solution
“Understanding the needs of both customers and third parties involved in transactions is paramount to determining the right payment solutions – as every business has different requirements,” Ms Rynski said.
For example, a business which make sales through third-party platforms may need payments infrastructure that is compatible with multiple systems. By contrast, a business which takes over-the-counter payments for small ticket items is most likely to require easy access to branches or a local post office with banking facilities, as well as a simple merchant terminal.
Companies with high turnover – such as fast-food operators – may benefit from packages that include merchant terminals, a payments app and cash collection. An integrated reporting system will be a core component of any package for a group business model. And an efficient online banking platform is an obvious essential for all companies.
“In all instances, the aim should be to fashion the right package for each business type and its customers,” Ms Rynski said.
Companies don’t just receive payments – they also make their own payments to third parties. Business credit cards such as NAB’s Virtual Corporate Card can be a foundation for this service, as can a digital platform that allows a user to authorise multiple payments in one go.
Consider cost and access to cashflow
Cost is always a pain point for business, no more so than in an environment of high inflation and rising interest rates. This applies to payments solutions as much as any aspect of operating a business, so it’s important to understand the bottom line.
The pricing offered by banks can vary widely in this hotly competitive market, so it’s important to consider all options. Managing cashflow is vital. If a customer pays online, how quickly does that money hit the business account? Or if another pays via a merchant’s terminal, is the cash settlement complete within the same 24 hours, or do you need to wait until the following day to access it?
Most banks tend to provide same-day settlement to a business which holds both its merchant’s terminal and business account with them. But for those who hold a terminal with one bank and an account with another, settlement is usually on a next-day basis.
Have a contingency plan
All businesses need a backup in case a merchant terminal goes down due to an outage, or there is another technical issue that could cause a potential loss of sale.
For a SME business, this plan B could be as simple as a contactless solution which allows users to operate a phone as a payment terminal like NAB Easy Tap. Businesses can also employ this as a backup option using a secondary telco provider. There are other solutions available like the electronic fallback capability that enables merchants to continue trading up to a predetermined amount in the event of an outage.
Such solutions are on offer with no up-front setup cost and don’t require a separate terminal. Same day settlement is still provided, and all payments are secure. The fact there are no minimum contract terms makes it an ideal option for occasional use and the technology has the added advantage of offering data insights that can help establish sales trends.
An additional option for managing cashflow are products such as NAB’s Flex-Flow loanwhich allows approved merchants to access a short term loan of $125,000 within one business day.
Rapid advancements in technology have transformed the manner in which Australians expect to make and receive payments. The advent of the National Payments Platform – or the system which allows fast payments to occur within minutes – has further changed peoples’ expectations of how everyday transactions should occur.
The good news for SMEs is that major Australian banks are at the forefront of these developments – and able to support business in their efforts to maximise the opportunities on offer.