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3 Trends Changing The Business Of Payments
By Richard Sine
This article was originally published on Forbes BrandVoice.
With the onset of Covid-19, digital payments went from a convenience to a matter of public health as businesses and customers tried to curb the virus by limiting the use of cash and shared devices.
“In the case of contactless payment before the pandemic, businesses had been trying to drive consumer behavior,” said Douglas Mearkle, head of merchant solutions sales at TD Bank. “But during Covid, it was the consumers who were demanding it as the safer way to pay.”
Now companies are learning how the payment technologies they adopted to get through the pandemic will prove beneficial long after Covid-19 has subsided.
In this post, we explore three trends changing how businesses conduct financial transactions with consumers, other businesses and their employees. Read on to find out: What do businesses stand to gain?
1. Payments Arrive Right Away
As digitization makes it easier and faster for people to make payments, they’re increasingly expecting to receive payments just as quickly.
The trend of faster payments gained traction with apps that helped users instantly transfer cash to each other and businesses. Now B2B use cases are growing, helped, in part, by the Federal Reserve rolling out its own instant payments system.
“We’re entering a new era of payments in this country,” said Jo Jagadish, head of corporate products and services at TD Bank. “These new models are going to create competitive differentiation among companies that are early adopters of these payment rails.”
These examples illustrate the benefits of faster payments:
Consumer Transaction
Businesses can deliver service faster, improving the customer experience. For example, they can offer immediate funds to customers who return items, to borrowers who qualify for loans and to insurance claimants like flood victims who need emergency lodging.
Business Transaction
Employers can give workers immediate access to their earned wages between paydays, providing employees with additional financial flexibility and reducing their need for payday loans. Employers can also immediately reimburse employees for expenses
Business Transaction
Companies that pay suppliers instantly can negotiate for better terms and benefit from early-pay discounts, reducing how much they spend on frequently purchased items.
2. Cash and Checks Dwindle
Once an afterthought, offering digital payment options has become integral to attracting and retaining customers. In fact, more than four in five consumers expect digital options when they shop in-person, according to survey data released this year.
Meanwhile, when it comes to payments between business partners, checks continue to lose ground, giving digital transactions a more prominent role.
Explore the implications:
What's Changed – Consumer Transaction
Cash and checks were already on the wane as more customers bought online and used debit and credit cards in stores. When the pandemic hit, e-commerce picked up, and more store customers turned to contactless payment.
What It Means – Consumer Transaction
Customers who use cards spend more on average and conduct transactions more quickly. Cards and contactless are preferred among younger customers. And customers deciding whether to visit a business for the first time—or as a repeat customer—use payment options as a determining factor.
What's Changed – Business Transaction
At many midsize companies, treasury management had remained largely paper-based. With employees working from home and key equipment out of reach, this approach became untenable. The pandemic also created cash flow problems as small businesses struggled to get paid.
What It Means – Business Transaction
More businesses are paying with commercial cards, virtual cards or same-day ACH payments rather than checks. Electronic payments and invoicing pave the way for automation, which can improve cash flow, reduce manual labor and provide a holistic view of business health.
3. Data Creates Opportunities And Efficiencies
Going digital with payments creates a wealth of data that can deepen customer engagement and drive efficiency.
“With the advancements in AI and data analytics, we're seeing businesses turn data into rich insights that serve as a competitive differentiator and benefit their customers with targeted, contextual offers, as an example,” Jagadish said.
Here are some ways businesses are using payment data:
- Customers who pay by credit or debit can receive customized offers based on where they live or what they’ve bought, improving the buying experience and increasing brand loyalty.
- Digital payment systems allow businesses to track sales dynamically, using analytics to spot patterns, make forecasts and benchmark against competitors.
- With point-of-sale loans, customers can enter into payment plans within seconds at checkout, whether they’re buying online or in a store. Businesses that offer installment options can facilitate larger purchases from customers who are wary of credit card debt.
- It’s easier to audit digital transactions for fraud than cash or check transactions because businesses can use procedures and technology to avoid becoming victims. Check fraud, the most common type of payment fraud, has been attempted or successfully committed at 66% of organizations, according to new survey data.
Learn More
How can your company make the most of your payment transactions?
To find solutions that are right for your Small Business, click here.
To find solutions that are right for your Commercial Business, click here.