US SME payments woes continue to grow

For years now, the challenges small and medium enterprises (SMEs) face in payments have not been getting easier.

      US SME payments woes continue to grow

As long ago as 2019, banking infrastructure firm Banking Circle told us almost half of small businesses in Europe planned to switch away from banks, frustrated by high fees, slow settlement times and “vanilla” services.

“Fewer than half of in-store transactions complete without manual action in the US.”

A new study of US small businesses by J.D. Power shows this problem is not confined to the old world.

While laying the blame mainly on the growing cost of payments acceptance, J.D. Power’s work also outlines some striking declines in consumer satisfaction with payments both in-store and online.

For instance, fewer than half (43 percent) of transactions completed without assistance when customers use their credit or debit cards to pay in-store.

The situation online is little better, with 47 percent of transactions are completed without some type of retail customer assistance.

The most frequently cited problems include card declines, issues with contactless payments and receipt malfunctions.

Restaurants and very small businesses are the worst hit in the US.

In some ways, this is unsurprising as they face many of the same fee structures as bigger firms, but often have less than $1 million in annual revenue to meet those costs.

Restaurants and bars say they receive less support from their merchant services provider when it comes to understanding payment processing and fee structure.

They also have lower satisfaction with cost of service for in-person payment methods than with takeout/delivery e-commerce platforms.

SME – Cell more

On a brighter note, businesses using in-person mobile devices such as cellphones for payments record significantly higher satisfaction overall than those using older static POS devices.

“Mobile devices result in more completed transactions – and are preferred for customer service.”

Small businesses also say they have higher levels of customer satisfaction and faster problem resolution when using mobile apps to resolve customer payment problems compared to email, call centres or chatbots of various kinds.

PCM SAYS:

Subject to confirmation by other studies, the news that fewer than half of in-person transactions cannot complete without manual input of some kind is not great.

While this might be as inconsequential as failed NFC transactions requiring a PIN, it will still affect the bottom line for merchants already seeing their margins eroded by rocketing inflation and costs.

Small and micro-merchants are those most likely to adopt so-called “soft POS” systems on their mobile devices, very often to avoid the cost of investing in a static POS system.

If the results of this study are accurate, this is good news indeed for tech companies selling these devices – and for the mobile generation born after 1990.

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