Small Business Payment Methods

SMB payment methods to boost sales

Throughout the past decade, the different payment methods in which customers have been able to use with their favorite small businesses have evolved at an unprecedented pace. As a small business owner, it can be a complicated and costly experience to keep up with all changes happening in the world of payment solutions. This especially rang true during the pandemic, where most small business owners began accepting online payments and embracing digital transformation. In today’s world, if you don’t accept card or online payments, it may be difficult for your SMB to compete. With all the different payment methods out there, which ones should your small business adopt? Let’s explore the different payment methods and payment processing tools available, so that you can make an educated decision.

Choosing the Right Payment Methods & Processors

Every small business owner should wade through the different methods and decide which payment options are right for their customers. Several factors come into play such as the industry, customer demographic, common practices, location and business-specific considerations. You also need to consider what your payment needs are, what software you are using to run your business (if any), and then identify who offers the payment tools to meet those needs. These aren’t decisions you will want to take lightly. There are a ton of things to consider and to weigh in before taking your first step. Let’s discover the different payment methods available to you today.

Small Business Payment Methods

1. Cash & Cheques

We’ve all heard of the old saying that cash is king, but does it still deserve its spot on the throne? Most people would argue that it’s a thing of the past. But studies may show otherwise. Most Canadians value cash as easy to use, quick, great for low-value transactions, secure and universally accepted. In fact, in August of 2021, 61% of consumers in Canada reported having made a cash purchase with a business in the last seven days. Plus, 15% of Canadians reported using cash for more than half of their transactions, and prefer it to electronic payment methods. For small business owners, cash and cheques offer the benefit of being extremely cost-effective. They’re a secure, immediate method of payment that requires very little overhead to conduct business. For those reasons, until Canadians completely stop using cash, it should remain on your list of available payment methods. For the time being, physical cash and cheques still deserve their spot on the throne.

2. Card Payments

In the past decade, credit cards have gained momentum. Up to 80% of consumers prefer credit cards over any other type of payment. What’s not to love? They offer convenience, quick checkouts, and facilitate large purchases for consumers. Small business owners love them too. Cards broaden their customer base and legitimize their business. And just like cash, card payments deposit quickly into your business bank account, helping improve cash flow and reducing account receivable risk. Not everything is sunshine and roses, though. Card payments can incur considerable fees to your small business such as interchange fees, assessment fees, markup fees – the list goes on. But while there is a cost to accepting credit cards, usually the benefits outweigh the cons. That will depend on your business model and target audience. If you do end up deciding to accept cards, determine ‘how’ you will accept those payments. Do you have an online store? Or just a physical store? Both? For example, if you’re a takeout restaurant, you will most likely need to accept both online and in-person card payments. You know your business best, and only you can decide if card payments are worthwhile.

3. Online Payments

Most modern online payment services today offer easy-to-use, fast and secure ways to pay. Online options like internet transfers, credit cards, e-wallets, buy now pay later and even cryptocurrencies have made financial management significantly more flexible.

One example which fits the bill is Interac e-Transfer for businesses. This payment method recently increased its payment limit to $25,000, making it convenient for small and big transactions. It’s the perfect replacement for paper checks. With its low cost and speed of transaction, it’s a great way to accept payments from clients. Better yet, it’s mobile friendly and easy to use. Also, there’s less fraud risks than traditional credit cards because it’s a direct banking payment method without exposing card numbers.

Another example is e-wallets. These include PayPal, Apple Pay, Google Pay and Amazon Pay, offering customers the option to pay online using information already stored on those wallets. These digital payment processing services allow for quick and seamless payments. And with Canadians having so much trust in these companies, e-wallets offer a sense of security to your customers when purchasing online.

In the end, your customers should be able to pay for your products and services in the method they feel most comfortable with. So, study your target audience and know what they want.

4. Mobile Payments

If someone doesn’t have cash or their wallet on hand, they mostly likely have their phone. In recent years, mobile payments have become popular as a quick and easy way to pay without card or cash. They allow small businesses to take in-person digital payments rather than cash, card, and cheque transactions, typically via an app downloaded to a customer’s phone. Mobile payments can be done in three distinct ways.

  • Near-field communication payments (NFC): uses radio-frequency identification and a phones NFC chip to exchange encrypted date to complete a transaction. This method is commonly used when a customer has their bank details stored on a mobile wallet in their phone
  • Quick Response (QR): just like any other QR code, the customer can scan a code with their phone camera to bring up a browser prompting them to accept a transaction.
  • Magnetic Secure Transmission payments (MST): this method uses magnetic signals to generate a connection between a mobile device and POS system, similar to swiping a credit card.

As a small business owner, you should keep a keen eye on this growing industry. Mobile payments are only getting more and more popular with time and are estimated to bring in 6317.5 billion, yes billion, by the year 2028. That said, utilizing this new technology doesn’t come without a cost, as you will require the proper features and hardware from a POS system. Read on to discover which payment providers could allow you to begin accepting mobile payments.

Best Small Business Payment Providers

As complicated as it may be to choose different payment solutions, finding a payment provider which makes sense for your SMB is no different. There are a ton of things to consider such as pricing, features, flexibility, functionality, security and, of course, your business model.

For a Retail Environment:

For this context, a great option is Square. They have been in the payment solution business for years and have dominated the market. They offer fully functional POS systems, inventory systems, card readers, and many more hardware. Square can help small businesses track their inventory and cashflow, manage their employees, and most importantly, accept payments such as credit cards, Apple Pay, Android Pay, and many more forms of payment. Not only can Square be used in retail, but online as well. It’s an all-in-one package for small business owners and a great choice if you’re on a budget.

For an ECommerce Environment:

If your small business relies heavily on eCommerce, then PayPal may be the answer you’re looking for. PayPal remains as one of the biggest names in online payments, with over 346 million customers. They offer a fast and simple checkout process. PayPal allows users to pay online with their bank account while keeping their information hidden, and in most cases doesn’t charge fees. They also accept cross-border transactions, allowing your SMB to broaden its consumer base. PayPal can be a great option for most small businesses, but make sure your shopping cart provider or eCommerce platform is compatible first. Alternatively, Shopify is a great option. With the ability to fully build and customize your own online store, Shopify unifies all your eCommerce needs onto a single platform and accept all the popular payment methods mentioned in this blog.

More Traditional Options:

Most banks offer merchant services to small businesses. If you’re a relatively new small business and looking to hit the ground running, then opening a merchant account with a bank may be your best option. It can be convenient to have all your financial needs under one roof. Banks offer all the same services and products that third parties do; namely POS systems, loyalty programs, customer service, etc. If you trust your bank and have already developed a relationship with them, then seeking their services may be the best option going forward.

Global Payments is another excellent choice for any small business wanting to offer payment options both in-person and online. They provide payment technology and services to merchants, issuers and consumers. As a major competitor in the payment processor space, they accept credit cards, debit cards and digital and contactless payments. Supporting millions of SMBs worldwide, you can’t go wrong with Global Payments in terms of simple, secure, and innovative payment solutions for your business.

At the end of the day, every small business is unique, and no payment provider offers a one-size-fits-all offering. Do your research and read online reviews to see what existing customers have to say about their experience. The key things to consider are costs, how fast payments are processed and the customer service you can expect to receive should you run into technical difficulties.

What the Future Holds

New technologies are surfacing every year and causing disruptions in the world of payment solutions. One payment option that small business owners should keep an eye on is cryptocurrency. Recently, the Bank of Canada has held a series of meetings to gauge the implications of adopting its own digital currency. With its ability to be decentralized, cryptocurrencies could overtake other payment methods in the future. That said, it has a long road ahead. One major roadblock is how cumbersome the process can be in getting consumer crypto wallets to pay small transaction amounts efficiently when shopping with small businesses. There is a tremendous amount of innovation happening in this industry to make processing transactions more efficient, but it’s not there yet. For the time being, keep offering payment solutions that your customers have come to know and love.