Bank transfers are great. Right? You don’t need to pay any fees and you get your money instantly.
Well…depending on how long it takes for your customer to pay your invoice.
A study by The UK Cards Association stated that “Cards are the most popular payment method in the UK by value. They allow cardholders to pay for goods and services easily, conveniently and securely. Card spending accounted for 35% of GDP in 2015 and is critical for the economy. Card spending is expected to continue to grow over the next decade and to overtake cash as the predominant way to pay in volume as it already is in value.”
Card Payments have been growing more and more popular in recent years. Visa and MasterCard strive to make paying by card easier with the introduction of contactless payments. Apple and Android Pay have been developed for the consumer through paying by card without even needing your physical plastic card. SmartTrade App has been developed for your business, to make accepting cards possible without the need for a physical reader!
With all this convenience, it’s not surprising to hear that a study by Barclays earlier this year reckoned one in six consumers walks away from a purchase if they can’t pay by card, costing those businesses £7bn a year.
Why is this? Why do these businesses not take card payments?
I have listed the most frequent objections against taking card payments below. If you are not accepting customer card payments for your business for any of the reasons listed, then you owe it to yourself (and me) to read the rest of this post.
- My customers always pay cash
- My transactions are too large (bank transfer only)
- The processing time is too long
- Card readers are too expensive
- I only take in-person payments sporadically (events, trade-shows etc…)
- Contracts are too long
My Customers Always Pay Cash
You are absolutely right. But then again, how could they not? You are not letting them! In fact, BARCLAY’S CONDUCTED A STUDY which showed 18% of potential customers had left a store in the last six months because they did not accept card payments.
And it doesn’t end there. If you have something people want, that’s great. It’s great for you and for the people who found that you happen to have it. However, when you force people to dig in their pockets for cash, go to an ATM of borrow cash from someone else, you are risking a severe negative impact on retention. When you sell a product or service, the best you can hope for is for the customer to come back for more. If a customer is forced to go out of their way to accommodate a store that refuses to take card payments, they may have done it once to get what they initially wanted, but you are very likely to not see them again.
My Transactions are Too Large
You have a business where payments come in large, bulk transactions. Because of their nature you only conduct your collections via bank transfers. What many don’t realise is that card payments are not mutually exclusive to bank transfers. You simply have added flexibility. If you are with someone who can pay with a card, face-to-face or over the phone, the payment is processed immediately. Bank transfers can be very inconvenient for the customer, but even more inconvenient for you if you trust the wrong customer to go home and complete a transfer.
Let’s say your average transaction is £5,000. Then add SimplyPayMe App’s business plan to the equation at 1.85% per transaction. If only 1 customer decides to go MIA after you trusted them to complete a bank transfer, that £5,000 cost equates to roughly £270,000 in card transactions. In other words, at the same cost of losing one single £5,000 transaction, you could have taken £270,000 in secure, immediately processed card payments.
FUN FACT: Hollywood star Kim Basinger once used credit cards for a single payment of $20 million to buy the town Braselton in Georgia, US. Maybe your transactions aren’t too large for card payments after all?
Processing Time is Too Long
No. Card payments take 2-5 days to process. Any small business owner will be able to plan for this.
Card Readers Are Too Expensive
These days you can have card readers which cost nothing unless you actually take the payments. Just make sure your profit margin is above 1.85% and you’re all covered!
I Only Take Card Payments Sporadically
There are mobile payments solutions, such as SimplyPayMe App, which will allow you to stay on a plan which has £0 in monthly charges. You only pay for usage, which means you can attend one event a year, and still only pay for the transactions you accept during your time there.
Contracts Are Too Long
This was true, 5 years ago, and for some of the larger payment providers who still haven’t realised it’s time for change.
SimplyPayMe App offers a discounted annual plan, but with all subscriptions available on a monthly pay-as-you-go option. You can cancel your plan at any time and that’s it. We’ll still be more than happy to have a coffee or a chat about how your business is doing and take you back at any time.
The main reasons boil down to merchants preferring bank transfers. Bank transfers are seen as the best way to get paid. They are fee-less (usually) and are quick. But people overlook the negatives.
Bank transfers are only slightly more convenient for the merchant. They are extremely inconvenient for customers. A bank transfer requires you to have access to your online banking or for you to visit a brick and mortar location.
Your customer will first need an online banking app. For that they will need a compatible smartphone. They then need to remember 3 random digits of a security code to log in + customer numbers on some occasions. They will then need to set up a payee, including the merchant’s bank details. The bank will then send an automated call for you to verify that you wish to add this payee. Once confirmed, you can then send a bank transfer.
Now, imagine the time it takes for the customer to do this. Not to mention the inconvenience that this brings and the negative impact it has on the customer experience.
Further, imagine that this customer wasn’t able to send a bank transfer immediately, and promised to do it later. Now you, as a merchant, have to wait for the bank transfer to come through once the customer has the time. You can’t start the job until the payment is received, so you wait. In the meantime, you could be on the phone with other potential customers, or could begin actually carrying out the work and moving onto another project. Precious time is wasted and it negatively impacts your cash flow and productivity, or even worse, you have already performed the work and have to wait for the customer to pay the invoice at a later time.
How do card payments differ?
All you need is an app on your mobile. You hand over your device for the customer to scan their card. They process the payment, and you are done.
As for the fee’s associated with card payments. This can be as low as 0% with services like SmartTrade App and at most will be 2.15% + 20p. This small cost will be offset by the gain in efficiency and convenience for both you and your customers.
Okay, now that sounds a lot easier, but what else do card payments offer?
You can refund customers that pay by card very simply in a couple taps. You can’t do that with a bank transfer, the process is way more convoluted.
One Click Payments
Charging card details is very easy. Requesting further bank transfers, not so much.
Security for Customers
If a customer is a victim of credit card fraud, they can work with the bank to resolve these issues and get their money back, usually through charge backs. For bank transfers, it’s a lot more difficult to retrieve lost funds and this makes customers uneasy.
Credit/Debit cards were the most frequently used payment method in many countries once again in 2016.
Let’s say you have SmartTrade’s 1.85% + 20 rate. Your average charge is £240. You would pay £4.64 in card fees per transaction.
If only ONE of your merchants did not pay their invoice, it would take you 52 transactions, totaling £12,480 before you would incur the same cost by taking card payments.
Now add that 1 in 6 walk away, by the time you hit 52 transactions you’ve lost at least another 8 clients totaling £1920 you never would have had if you only accepted bank transfers or cash.
Overall, having a range of payments is advised. Restricting yourself to only bank transfers will not work in your favour in a card dominated marketplace.