Without payments, no company can exist. Payments are the backbone of every enterprise, irrespective of size, industry, or influence.
Payments drive business growth and play a pivotal role in streamlining operational costs. With a challenging macroeconomic environment, re-examining your payment strategy and all that comes with it (including methods, timelines and costs) is vital.
Every business’ lifeblood
Yes, payments are all about getting money in the till – but if used to their full potential, they’re also a powerful growth driver. On the other hand, if payer expectations are not met, businesses can quickly find themselves struggling. According to a 2023 GoCardless study, seven in ten Australian consumers (70%) would abandon their purchase if their preferred payment methods were not offered. The solution is clear: By understanding and accommodating customers’ payment preferences, you will help remove this friction.
However, this is easier said than done while customers continue to feel the squeeze of the cost of living crisis – causing ongoing concerns for businesses. According to GoCardless’ 2024 Pursuing Payments Report, over half of Aussie business owners surveyed are concerned the number of late payments will rise in 2024. To maintain a healthy balance sheet, we recommend leaning on your payment strategy. Take Direct Debit, for example, which allows you to easily ‘pull’ a payment from your customer’s bank account. Your money will be collected on the due date — without anyone lifting a finger. This will also help you avoid the high payment failure risk associated with cards (at around 10-15% compared to the 3% for bank payment methods) Unlike cards, bank accounts don’t get lost or expire.
The price we pay
Payment methods each carry distinct costs that may or may not be worth investing in, depending on your business. Unfortunately, many business owners tend to underestimate their true payment expenses. They tend to focus on direct costs associated with collecting payments, like transaction fees. However, these fees represent only a fraction of the total cost of ownership for payments. There are also indirect costs associated with the ongoing management of payments. Let’s not forget operational expenses tied to human resources, including recruitment, training, manual reconciliation and customer reminders. Businesses that feel swamped by the cost of payment admin should look to automation. It can be tempting to de-prioritise the investment in new processes. But it’s well worth the time, energy and cost savings once you’re up and running.
Payment fraud is an ever-evolving threat and appears in many forms: fraudulent chargebacks, card-not-present fraud, skimming and more. Despite this concern, more than half of businesses continue to provide goods or services before verifying the authenticity of a customer’s banking information. This is a huge risk for companies, especially since the increased struggle consumers face has likely increased the potential for fraudulent chargebacks and related tactics.
Fighting fraud
Companies face the challenge of providing customers with secure payment processes that deter fraud while also trying to maintain a convenient, seamless checkout experience. Our Pursuing Payments report found that more than eight in 10 (84%) SMB leaders say their top ‘payment nightmare’ is losing a significant amount of money to scams.
Fortunately, payment service providers are creating innovative solutions all the time. For instance, we’ve introduced a product that combines machine learning with data from millions of payments to help identify and prevent fraud. These algorithms can also be customised to work within the risk appetite of each company so that businesses can choose their level of security. PayTo is helping to insulate payments against fraud. It’s Australia’s system that lets customers give permission exclusively to ACCC-accredited third parties to access their banking data. Starting directly from the customer’s bank account, PayTo payments require the payer to undergo security measures to authorise a payment, often involving methods such as biometrics or two-factor authentication (2FA). The PayTo process enables merchants to validate the authenticity of a potential customer’s bank account. It’s good news for Aussie businesses, given that 30% would be willing to pay more for anti-fraud solutions.
With inflation biting, no business can afford to neglect its payment stack. Whether it’s boosting conversion, reducing the impact of payment expenses or busting fraud, payment technology is moving fast, and it’s up to businesses to keep pace or risk losing long-term. Spend the time now to straighten out your payment backbone, so you aren’t scrambling to catch-up with the competition (and win back customers) down the line.
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