Payments keep your business humming. But given how much you have to think about in your business, who has time to follow the news on payments – from Apple Pay and Amex to Bitcoin and Facebook Payments?
Here are five things worth spending valuable time thinking about, and one you should be watching.
1. Friction is costing you money
Did you know 20% of bills are paid late simply because people forget to pay? A "pay now" button makes things easier for your customer and gets you paid earlier.
Apps and retail websites now routinely have "buy now" buttons. This takes the customer from the 'discovery' of something they want to buy to the 'purchase' with an absolute minimum of friction. It works beautifully and applies just as well to any business with something to sell.
The key is to "tokenise" your customer's payment details – that’s tech speak for remembering the card number or account number in a secure way. If you can do that, your customer can pay you with one touch when they read the invoice on the bus.
Better cashflow for you. Better experience for your customer.
2. Your customers want mobile payments
Over 85% of Australians own a smartphone. These people should be considered on your radar.
41% of Australians either use their phone as a credit card or want to.
Apple, Samsung, Google and others have launched mobile payments solutions to fill this latent desire. Facebook has launched social payments to cater for the need it was seeing amongst its 1 billion strong user community. Amazon is making its payment service available to third party websites like golfnow.com.
When big tech companies get into payments acceptance, it’s a great thing for businesses. They do innovation and customer experience better than anyone.
But which should you accept? The answer is all of them.
3. Payments platforms do the hard work for you
Behind us are the days of filling in one application form for a merchant terminal, going to a gateway for online card acceptance, filling in another application form for a direct debit facility, and then getting a BPAY® facility later on.
With a payments platform your businesses has a one-stop shop for all payments from phone to online, and can add new payment types as they emerge. Platforms integrate with your business software via APIs so that you can reconcile seamlessly. Macquarie’s DEFT is one example, with over 120 integrations.
The idea of the payments platform is to take care of all the security, fraud management, billing and customer experience issues, leaving you to focus on your business and your customers.
4. Fast payments are coming, but data is critical
You may have heard about the upcoming ‘New Payments Platform’. Australia is one of about 30 countries around the world that is moving to real-time payments. That means you will be able to transfer funds from your bank account to any other account instantly.
However, most business payments are scheduled. You can already send out payroll and bill payments on the day they are due, so there is no cash flow advantage in real time payments. And you are unlikely to get paid much more quickly. Mind you, fast payments are irrevocable so once you're paid the money is yours – which is a good innovation but not world-changing for business owners.
The real business advantage of fast payments is that you will get more data about who paid you and why.
You want to be able to accept fast payments, but you really want to control how your customers use the 'overlay services' or apps to make those payments. If you're smart, you’ll make sure customer numbers, invoice identifiers, loyalty information and partial payment details are included with the payment. If you’re very smart, you will pass that data straight through to your back office systems to reconcile, order inventory and produce management reports.
5. Your payments data is valuable
Your customer list is probably one of your biggest financial assets and it definitely underpins the value of your business. One thing you know about your customers is how they pay you, when they pay you and what they are buying. That information is useful to you, but it may well be worth money to someone else.
Properly managed for privacy and security, customer payment data can help to target advertisements and even support lending to you or your customers. Companies like Amazon and Facebook aren't in payments for a fee margin – they are experts at collecting and monetising data. The traditional banking fee model is being disrupted beyond recognition by the value of data.
So don't give away your data for nothing. Platforms that are able to use your data will offer you services at low cost or no cost (like Facebook). And if the platform controls your customer's payment 'tokens', they control a valuable piece of data that makes it easy for your customer to pay. The lesson is clear: know who is managing your tokens.
Blockchain is cool but there is more work to be done
Bitcoin has made a lot of headlines, using a very clever cryptographic tool called the blockchain to move virtual currency around the world.
You can pay with Bitcoin cheaply and instantly. Unfortunately it is also plagued by exchange rate volatility, mysterious coin disappearances and implication in criminal activity. So for now, there is reason to be sceptical about Bitcoin until more work is done.
However, the underlying idea of a distributed ledger that is transparent and secure, and powered by blockchain technology, has real power. Central banks and financial exchanges like NASDAQ are already looking at how blockchain could be used to settle trades.
At some stage, blockchain could be the technology that changes the payments world in the same way that the internet changed mail.
While banks and payment providers figure this out, its not something business owners need to focus on just yet.