For retailers, it’s common to accept cash and credit card payments from customers. But if those are the only payment options you accept, you could be turning away new customers and missing out on opportunities to deepen relationships with existing ones.
According to CustomerThink, nearly 50% of customers who can’t use their preferred method of payment will abandon a purchase. And the other 50% who end up buying from you? They aren’t seeing the best customer experience you can offer.
That’s a lot of avoidable revenue left unrealized simply because you don’t accept as many payment methods as you could.
In other words, the best option for retailers is to accept as many payment methods as possible. And the good news is that accepting additional payment methods isn’t a huge hurdle if you have a flexible point-of-sale (POS) system in place.
By understanding the benefits of the many payment options available, you can decide which make sense for your store and your customers. Then, with the help of a flexible retail POS system like Shopify POS, you can begin accepting most payment options with ease, creating better customer experiences and nurturing repeat business.
Cash is, of course, the most basic payment method you can accept. Cash also doesn’t require you to research payment processors or worry about fees.
Despite the huge growth in credit card and mobile payments, approximately 14% of Americans still prefer to pay with cash. That number is even higher outside of North America, where there is sometimes less trust placed in banks or credit cards. Japan, for example, sees about 25% of online shoppers pay in cash so that they may pick up their online purchases at convenience stores.
While there are some intricacies to handling and accounting for cash transactions, there are very few downsides to letting your customers pay with cash. On the flip side, there are quite a few benefits for both you and your customers:
- Cash is easy and convenient: Especially for those customers who prefer and carry it regularly.
- Speed: When customers pay with cash, their payment is in your hands (albeit not your bank account) immediately.
- No transaction fees: When you accept cash payments, you keep more of the actual money because you don’t have to carve out payment processing and other fees that credit cards and other payment types usually incur.
In short, accepting cash payments is still expected as table stakes in retail, and there are almost no drawbacks to it.
Credit and debit card payments
Credit and debit (bank-issued) cards have been around for a while, but their use is far from plateauing. In fact, research from BAI Research and Hitachi Consulting shows that 41% of consumers are using cash less often, and 97% of survey respondents are turning to credit and debit payments instead.
In part because of numbers like that, accepting credit/debit cards has become the norm. It’s the bare minimum retailers need to do to keep pace with consumers and competitors.
That said, that’s actually good news for consumers and retailers alike, because there are a lot of pros to credit and debit card payments. Data shows that consumers spend more when paying with a credit card versus cash. That’s something the Girls Scouts of America learned when they quadrupled annual cookie sales over the prior year simply by implementing mobile credit card swipers.
In addition, credit and bank cards:
- Lend stores some authenticity: Accepting credit cards (specifically Visa, Mastercard, Discover, and American Express) is so common that stores without the ability to accept card payments may be seen as “behind the times.”
- Increase sales overall: With more and more consumers forgoing cash entirely, allowing credit card payments means you can avoid losing out on sales when customers just don’t carry cash.
- Have cash flow benefits: Credit card payments, unlike cash, are often deposited into your bank account automatically. While the exact timing can vary from one payment processor to another, you can typically expect the money to hit your account soon after a sale is completed.
The one caveat to all of those benefits? Fees. Processing credit cards means you’ll have to accept the associated transaction fees that payment processors charge. While these fees can vary, they average between 1.5% and 3% of the total sale.
Mobile and smartphone payments
There’s another payment method experiencing rapid growth over the last few years: mobile and smartphone payments. These include common smartphone payment options like Apple Pay, Google Pay, and Samsung Pay and are also known as contactless payments or mPOS.
Data from Business Insider’s Mobile Payments Report shows the number of U.S-based consumers who use in-store mobile payments is expected to hit 150 million by the end of 2020. That number, if hit, will mean that 56% of U.S. consumers are using mobile payments for in-store retail purchases. There are a lot of reasons for that growth, but chief among them: mobile payments are faster and easier for consumers who typically have their phones out anyway.
In addition, there are some choice benefits for retailers who accept mobile and smartphone payments, too:
- Customer convenience: As mentioned, it’s easier and faster for customers to pay you this way.
- There are cash flow benefits: Mobile payments, similar to credit and debit cards, typically hit your bank account less than 3 days after the sale.
- Data availability: When customers pay with their smartphones, you can potentially receive and track customer data, including how frequently they shop with you and how much they spend, and you can engage with customers throughout the in-store journey (by sending location-based updates on sales, discounts, and more).
Gift cards, store credit, and discounts
Gift cards and store credit are one payment method that you may not hear about very often, but they’re one of a retailer’s most powerful tools in building long-term, loyal customer relationships. In a nutshell, store credit enables retailers to deepen and continue existing customer relationships, while gift cards help introduce new people to your store in a low-risk way.
Gift cards, store credit, and discounts are all levers you can pull to create better customer retention and loyalty. Plus, there are several other key benefits for retailers:
- For one, gift cards and store credit encourage customers to spend more because they’re likely to spend more than the gift card or credit is worth. Plus, customers feel more comfortable spending more money with your store when they know you offer a great return policy—it’s like a safety net.
- When it comes to returns and exchanges, issuing gift cards or store credit in lieu of refunds enables you to be more flexible and creative. For example, marketer Kaleigh Moore shared about an interesting experience she had with a retail return: a company offered to credit her 120% of the original purchase price if she opted for store credit over a cash refund.
FURTHER READING: Learn how to reduce returns and sell more with store credit.
Overarching all of the benefits, store credit and gift cards enable you to keep money in your ecosystem. Even if the gift card never gets spent or an item gets returned/exchanged, that sale stays with your business.
As we mentioned before, a good POS system offers you the flexibility to accept as many—and varied—payment methods as you and your customers need, and that includes custom payments such as the following:
- Split payments: The classic example here is when a group wants to split their restaurant bill among multiple credit cards. In a retail environment, this may look like two shoppers jointly purchasing a gift with two credit/debit cards.
- Split tender: For flexibility, shoppers may prefer to pay for part of their order in cash and put the rest on a credit card.
- Partial payments: For some retailers, it makes sense to accept a partial payment upfront and offer credit or payment plans (like layaway) to collect the rest. Alternatively, retailers can accept an initial payment in-store, and have the customer pay the rest of the bill online, which can increase average order size.
- Zero payments or IOU: Similarly, some retailers may offer layaway or other payment plans without any up-front payment; your POS needs to be able to account for these transactions.
The chief benefit of customer payments like those above is that they enable retailers to be more flexible, often to the benefit of both the store and the customer.
For some brick-and-mortar retailers, custom payments like split payments and split tender are a necessity in order to cater to customer preferences and keep up with competitors. However, split payments between multiple credit cards may mean that your store incurs higher credit card processing fees, so it’s important that you take the costs of offering these custom payment options into consideration.
Payment options that work for you and your customers
When you have a POS system that makes it effortless for you to accept varied payment options, there are really no drawbacks to accepting all of the payment types your customers want to use.
Offering customers the payment flexibility they’re looking for means they spend more, enjoy a better customer experience, and open up the opportunity for you to deepen and sustain long-term, loyal customer relationships.