As COVID-19 continues to stress businesses financially and operationally, small business owners across North America are turning to digital services to improve cash flow and modernise their payments ecosystems. Citing speed, security and transparency, more than half (57%) of small businesses say they’ve increased their use of digital services for business-to-business (B2B) payments since the start of the pandemic.
According to a study by Mastercard, over one- third (38%) of small business owners in the US and Canada say they’re experiencing cash flow issues associated with late payments and slow processing times for cash and cheques. While the challenges of traditional, physical payments existed before the pandemic, these pain points were magnified by widespread lockdowns and social distancing measures. Now, nearly half (48%) of small business owners say their business is one missed payment away from going under.
To address these challenges, nearly two-thirds (64%) of small businesses say they are actively trying to steer clients away from using cash and cheques. Three key findings from the study highlight the following:
Shift to digital business payments
With the majority of small businesses citing speed and security (91%) and transparency (87%) as top priorities, 82% say they’ve changed how their business sends and receives payments with 51% transitioning their clients to digital methods. Online card payments saw the greatest increase at 60%, while the use of cash (34%) and cheques (24%) decreased more than any other payment types during the pandemic.
Over two-thirds (67%) of small business owners agree that one upside to the pandemic is that it prompted them to upgrade their digital/e-pay solutions, which 81% say has improved customer satisfaction levels.
Digital is the new normal
Positive sentiment, increased customer satisfaction and continued exploration suggest small businesses plan to stick with digital business payments, even as the pandemic subsides. 70% say they are willing to invest in the technology required to advance their payment systems and 73% say digital payments are the new normal for their business going forward.
“The pandemic has made it painfully clear how labor intensive current business payment processes are, especially for small and medium-sized businesses,” said Ron Shultz, executive vice president, New Payments Business, North America at Mastercard. “With cash flow more critical than ever, we’re seeing an accelerated shift to digital B2B payments as businesses of all sizes look to safeguard their operations today and prepare for the future.”
Trend is also seen in larger businesses
While the Mastercard study focused on changing behaviours of small business owners, the trend towards digital business payments is being observed across all business types, including large organisations.
“IDC research shows that consumers have reduced their use of physical currency to half of what it was before the pandemic, as they increasingly look towards contactless forms of commerce, whether e-commerce, local delivery, and/or 'buy online and pickup in-store' (BOPIS),” said Nigel Wallis, IDC research vice president. “At the same time, the business world is jumping into the Next Normal by embracing digital payments and e-commerce in their existing B2B workflows, as well as expanding into direct to consumer (D2C) channels. In IDC’s view, these aren’t temporary changes, this is the evolution of business going forward.”
A paradigm shift in the B2B payments landscape
As we reported on CTMfile, Mastercard launched its Track Business Payment Service (BPS) earlier this year. The open-loop network modernises business payments and provides choice of payment types between suppliers and buyers. The service is designed to give businesses a way to maintain control, better manage cash flow and be more operationally efficient, while also connecting businesses across the globe, regardless of currency or payment type, to drive efficiencies across the business payment ecosystem.
Now, as businesses seek to improve cash flow by digitising payments traditionally dominated by manual processes, Mastercard survey data shows a majority (77%) of small business have adopted a digital service such as payment collection (50%) and electronic invoicing (26%) to modernise business payments. Expressing a desire to consolidate digital service providers, one in two small business owners say they would ideally manage payment-related services through their bank.
Online interviews were conducted with 1000 small business owners in the US and Canada, with 500 respondents per country. Small businesses with fewer than 100 employees and annual revenue between US$50,000 to US$1m were surveyed, and the research was conducted between July 13 to 17, 2020.
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