Choosing the best payment methods to accept is especially crucial for small businesses. Unfortunately, accepting digital payment methods can significantly cut into their profits. Some companies must charge extra fees at checkout to cover the costs, which might be bad for business. How do small businesses feel about modern payment methods, and are customers willing to pay extra fees to use them? And how do shoppers feel about using cryptocurrency? A new study from Clarify Capital sheds light on the digital era's most popular and trusted payment methods.
The study first explored the most reliable forms of payment according to shoppers and small business owners. Visa and Mastercard were the top two most trusted payment methods, while well-established PayPal ranked third, and newcomer, Zelle, came in last place. The top spots indicated that people still prefer credit cards in the age of digital payments. PayPal’s high ranking is likely due to its brand name recognition, which can play a major part in consumers’ willingness to trust a brand. Some other big brands that have entered the merchant space as viable methods of payment include Apple, Google, and Amazon.
As cryptocurrency continues to rise in popularity, it’s becoming a more common payment method among consumers. While it has its pros and cons, many consider crypto to be a more secure payment method than credit and debit cards. Crypto transactions don’t require third-party verification, and the blockchain general ledger verifies and records each transaction – both of which decrease the possibility of a data breach. On the merchant side, accepting cryptocurrency can reduce transaction fees, and the finality of a crypto payment protects sellers and helps them better manage their cash flow.
While these findings are encouraging, do people feel comfortable using crypto to pay for goods and services? According to the Clarify Capital study, the answer to this question is a resounding “no” – crypto was the least trusted payment method among the consumers surveyed. However, 65% of them also said that businesses offering crypto as a payment method would make them more loyal to that store or brand. It’s an interesting juxtaposition. Whether the hesitancy around cryptocurrency stems from a lack of knowledge or apprehension because of its newness, consumers are having a hard time accepting the concept as part of their daily life.
When it comes to the payment methods that consumers do trust, the big question is whether or not they’re willing to pay more to use them. The study showed that while 60% of small businesses paid fees to offer certain payment platforms, 22% relied on consumers to cover the costs, and 17% split the cost between themselves and their customers.
It’s understandable that most businesses would cover the costs of accepting certain payment methods, considering 34% of respondents would feel negatively toward a company that charged them a fee to process their payment. Despite this finding, some consumers were willing to pay extra to use their payment method of choice: 21% said they’d shell out a little extra to use Amazon Pay, while 20% said they’d do so to use Google Pay.
Consumers have varying payment preferences, but can some payment options actually attract business? Forty-six percent of those surveyed said they’d be most likely to shop at a small business that accepted Visa, while 44% said they’d shop where PayPal was an option. Forty-one percent said Mastercard, 39% said Amazon Pay, and 34% said cryptocurrency – which was significantly more than Venmo (26%), despite its popularity for making digital payments. Perhaps that’s because people more often use Venmo to send and receive money between friends than to pay merchants.
The average amounts spent using newer digital payment methods (ones other than the traditional credit card or cash) varied widely. On average, those who used Google Pay spent $459 per month, while those who used Amazon Pay spent $412. Apple Pay users spent an average of $223 per month, while for those who use PayPal, it was $212. The number dropped to $206 for Venmo and $185 for Cash App. Could there be a reason behind these rates of use?
Beyond brand recognition, the overall experience is what often leads users back to digital apps and platforms, making user experience a key factor for merchants to consider when choosing which payment methods to offer. With so much shopping done online these days, people are used to a quick and streamlined checkout process, so it’s more important than ever to ensure a simple and easy checkout experience. This study revealed some of the pitfalls that might cause businesses to lose sales at this stage.
When study respondents were asked what might cause them to abandon their online shopping cart, 51% said it would be surprise costs and charges, while 48% said they’d most likely be deterred by security concerns. Other top deal breakers were asking for too much information and having to navigate multiple checkout pages. Less concerning were things like an online shop either not being mobile-friendly (29%) or not having an autofill option (20%), but these could still tip the scales for some shoppers. On the flip side, 76% of consumers said that having a one-click payment option would increase their chance of completing a purchase. On average, consumers spend $369 per month through one-click purchases.
The Clarify Capital study indicated that amidst a sea of payment options, Americans still seem to prefer their Visas and Mastercards. While digital payment methods are certainly the way of the future, there’s still a long way to go before consumers widely trust some of the newer payment platforms. Still, small businesses would benefit from offering multiple options as long as they don’t burden their customers with extra fees. And while most consumers aren’t quite ready to do their shopping with crypto, small businesses will also want to consider accepting this increasingly common form of currency at some point. As long as it’s easy to use, it's only a matter of time before people become more amenable to using crypto and other digital payment methods.
by Web Desk via Digital Information World
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