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?
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.