Why Accepting Digital Payments Is Critical To Every Organization’s Survival

Digital Commerce Is Expanding Rapidly, Which Means Any Serious Business Needs To Use a Sound Payment Strategy To Stay Competitive.

What’s the most important function of any business? Creating innovative products or services? Maybe providing stellar customer service? How about connecting with an audience and delivering a unique experience.

Those are all good points, but at the end of the day if a business doesn’t get paid it’s game over. Think about it. If no one pays you then payroll doesn’t happen. No money and the rent can’t be paid. No money and the ability to deliver an innovative anything goes straight out the window.

It’s this small fact that should pique most business owners’ interests, but surprisingly, “getting paid” is one of the most overlooked parts of an organization. People take it for granted, sometimes at their own peril. It’s been said that the number one reason businesses fail is under-capitalization. In other words, they run out of money.

Now, many companies fail because of things like not having a viable product or service. Others may have the best product but never launch it, or market it to the right audience, so they fail. There are a number of reasons companies tank, but one of them shouldn’t be because they had a weak payment strategy. That’s what we’re here to talk about today.

Also, for the sake of being on the same page, let’s say that a payment strategy is simply the ways you have available for customers to get money into your business’ bank account.

What’s A Good Payment Strategy Look Like?

Ok, so now that we’ve laid the foundation for what a payment strategy is and why it’s important, we next have to ask…

“What’s the right strategy for your business?”

It depends.

Payment strategies should always be specific to your particular business model, offer, target audience, locale, and several other factors.

What do I mean? Well, if you’re selling a $5 cup of coffee in the U.S., then offering a payment plan probably isn’t necessary. However, payment plans are incredibly popular in Latin America, even on $5 coffees.

Payment strategies need to be as unique to your offer as the offer itself. Moreover, since the lockdowns of 2020, consumers across the globe have become increasingly demanding of being able to pay electronically, and I don’t just mean paying with a credit card anymore.

Take a look at your offer, the price points, what are the upsells, downsells, etc., then plan out the different ways you can come up with to allow ideal customers to pay for it.

Some Popular Digital Payment Options

Here is a list of just some of the most popular payment options and strategies to consider:

• Credit cards (Visa, MasterCard, Discover, American Express, JP)
• Check-by-Mail
• Electronic Check (eCheck, ACH)
• Crypto
• Cash
• Peer-to-Peer Services (Venmo, Zelle, Stripe Cash, etc.)
• Financing, payment or installment plans
• Buy Now Pay Later (BNPL)
• Pricing tiers

A Post-Pandemic World of Payments

The pandemic shifted consumer behavior in many ways, and we’re just now beginning to see those affects. Two of the biggest winners in the world of digital payments during the lockdowns were:

1. Buying things online (eCommerce).
2. The option to Buy-Now-Pay-Later (BNPL)

eCommerce Shines Bright

In 2020, the rates of people buying goods, groceries aside, rose 61% compared to 2019 numbers. Not a surprise considering the fact that the entire human race was forced to stay in their homes. Either way, that is an incredible shift in the way people shop.

Companies like Amazon, Walmart, and other online retailers saw record profits, while retail shops and shopping malls across the country closed their doors. Many permanently.

This shift towards online business continued into 2021 where eCommerce saw another 11% growth Year-Over-Year. Those numbers are staggering. Over 70% growth in one type of buying model in only 24 months.

These numbers also reveal what smart businesses can do to continue to adapt to the new marketplace landscape as a whole: Adopt a well-rounded digital payment strategy today to help ensure success tomorrow.

The Buy Now Pay Later (BNPL) Revolution

As mentioned above, the other winner of lockdowns was the option to Buy Now Pay Later (BNPL). For those of us (like me), who are old enough to remember, and weren’t rich , BNPL plans are like a reverse “layaway” plan.

Before the days of credit cards, “layaway” plans helped the less well-to-do families like mine pay for higher priced items in a few installments. After the entire item was paid for, we got to take it home. This was the go-to method during the pricey holiday season and birthdays.

Today, instead of paying the store a little each week until the items was paid for, BNPL plans allow consumers the instant gratification of taking the item home today, if they pay a small, fixed-fee each month.

During the height of the pandemic, and now during the “Great Resignation“, consumers have been urged to stay at home, rather than resume their normal lives and jobs. This has lowered their ability to earn a living, or make as much as they used to.

Governments stepped in and offered billions of dollars in assistance so struggling companies could still make payroll. However, once the election cycle dried up, so did the “free” government handouts.

All in all, the last 24+ months have been tough on millions of people and their pocketbooks, but that hasn’t completely stalled the country’s thirst for buying goods. It’s simply shifted what they’re buying, when, where, and how they’re paying for it – including buying something now, paying for it later.

Using BNPL vs. A Credit Card

How is BNPL different than paying for something with, say, a credit card? Well, the biggest difference is terms of the BNPL agreement, including the fees/interest rates charged, and the time to pay in full.

Credit card payments can also go on nearly forever. When someone pays only the monthly minimum on their credit card, the amount of time and interest fees it takes to pay off the bill is actually worse than a 30-year mortgage. The interest rates cards charge are also based on outside variables in the market, like credit scores and rates set by the Fed.

By contrast, BNPL payments are a for a fixed amount with a set fee included, and go on for only an exact number of days, weeks, or months. In a world of so much uncertainty, it’s becoming clear why consumers are gravitating towards these more precise ways of handling their finances.

BNPL, payment plans, installments, credit card financing. All of these terms are similar in that they increase people’s buying capabilities. Most importantly though, when presented at the right time, it can mean the difference between securing a customer’s business or not.

Acting On What We Know Now

Ok, so we know that getting paid is critical for your business, and that offering the right kinds of payment methods is important. Now what?

Well, my suggestion is to first take an honest look at how customers pay you now and what other options you may want to add or modify.

If your target audience is better off financially then make sure that you can accept all types of credit cards, including American Express (Amex) cards. Your business will be charged higher transaction costs to accept Amex, but losing 4% of a sale is better than losing 100% of one.

The rich are smart with money, and know the value of using a card to earn points. Just check out this story of how Chinese billionaire Liu Yiqian used his Amex Black Card to pay for a $170M piece of art. Why? He earned massive rewards.

Credit card rewards in the U.S. are getting more and more competitive, and being able to accept cards, in-person, online, in-app, and on a mobile device is imperative to tailoring your business to consumer demands.

To cover your bases it might also be good to work with a 3rd party vendor who specializes in accepting digital payments. The world of payments, credit cards, electronic checks (eChecks), Peer-to-Peer (P2P), crypto, and other forms of moving money is very complicated and shifting every year.

Which Payment Platform Is Best Though?

Well, again, that depends.

Start-up companies that have a smaller transaction volume might benefit from working with the big two in payments – 1) PayPal, or 2) Stripe.

I only mention them because they’re are the most widely known and make it easy to do business on a very small scale. The reason I’d steer you away from them as quickly as possible though is they are really “Payment Processors”. They are what’s known as “Payment Facilitators” (Pay Facs).

Payment Processors move money from a customer’s account directly into your bank account. Pay Facs, like PayPal and Stripe move money from a customer’s account directly into THEIR account, then, if they agree with the transaction, into your account.

When you allow PayPal, or Stripe, or another PayFac take your money you give up total control over those funds for the convenience of using their service. That’s fine with moving only a few thousand per month. However, when your business does real money, the PayFac reserves the right to review that business model at anytime and SHUT IT DOWN if they want more information on its legitimacy.

What’s the alternative? Contact the bank you run your business checking account through and see what they have to offer in terms of “merchant processing”.

I also currently work for a company called Systems East, Inc., that offers a digital payment service called Xpress-pay. It’s an incredible toolbox of payment processing solutions that can help any business take control of their transaction needs, without having to get mired in the depths of creating a payment tool of their own, or worrying about the typical costs involved.

Xpress-pay allows you, the business owner, to decide how much, or little, your business pays in transaction fees. Try calling PayPal or Stripe to have a conversation about their rates. Not going to happen. I tell everyone about this system because it truly provides more flexibility in every way for savvy businesses.

Final Thoughts

Setting up a digital payment strategy may seem like it’s more work than it’s worth, but trust me, it’s worth the small investment of time up front, especially as the digital economy expands rapidly.

Giving greater flexibility to the customers who want to give you money will also translate into a better night’s sleep for everyone involved.

What’s more competitive than keeping your customers happier, longer than the other guy? (Hint: Nothing)

What digital payment options are you using now, or want more information about? Hit me up in the comments below!

Talk soon!

Sincerely,
Thomas Buttino – Digital Payments Specialist