Paying Options Expansion Benefits Small Business Competitiveness Enhancement

In the ever-evolving world of commerce, the preference for payment methods is undergoing a significant transformation. This transformation is particularly evident in the UK, where the government, businesses, and consumers are embracing digital payments.

Almost one in three small businesses globally cite security as a top barrier to offering new payment methods to their customers. However, initiatives like open banking, supported by the Financial Conduct Authority and the Competition and Markets Authority, are strengthening protections for businesses and consumers, while fostering financial innovation. Prioritising strong security measures, such as two-factor authentication, verifying customer identities during transactions, and using tokenisation services, can alleviate concerns about digital payment security.

For smaller everyday purchases, debit or credit cards are the preferred payment option, while for larger transactions, consumers prefer direct debit or bank transfers. This shift towards digital payment methods can help ensure timely payments and quicker access to funds. The UK government introduced legislation through the Financial Services and Markets Act 2023 to safeguard access to cash, acknowledging that cash still matters to many. However, consumers are increasingly using digital payment methods like Tap to Pay and mobile wallets. In 2023, card payments accounted for 61% of all UK transactions, while cash use was at 12%.

The UK government is actively working with industry to improve payment security, and one such collaboration is with Xero, a leading accounting software provider. Xero's 'I want to pay that way' report shows that consumer payment habits are changing rapidly. Xero customers using Stripe can offer payment via credit cards, debit cards, Apple Pay, Google Pay, and Tap to Pay. Offering a variety of payment options can increase the likelihood of purchase completion, and 'reduced time to be paid' was reported as the top benefit by small business leaders in the UK who have adopted new payment methods in the last 6-12 months.

Not having the preferred payment option available can be a top frustration for UK consumers when making or managing payments. To address this issue, it's crucial for businesses to stay competitive and meet the needs of a wider range of customers over time by broadening their payment options, particularly to include digital methods.

While most major banks in the UK currently accept cash as a form of payment and withdrawal, maintaining cash services for customers, some banks and branches have reduced cash handling services or are encouraging digital payments. There is currently no legal requirement in the UK for businesses to accept cash as a form of payment.

In conclusion, the UK is leading the way in the transition towards digital payments, with businesses like Xero and the UK government working together to improve payment security and foster financial innovation. As consumer preferences continue to evolve, it's essential for businesses to adapt and offer a variety of payment options to maintain customer satisfaction and stay competitive in the digital age.