If you’re setting up an online business, you really don’t have much choice because almost all of your customers will want and expect to pay online. You’ll be hard pushed to find many people who are willing to send a cheque (if they even still have a chequebook) or transfer funds from their bank account to yours. It’s inconvenient and doesn’t give the impression of a credible business.
Even if you’re not selling your products or services online, card payments can be hugely beneficial for a number of reasons. If you want to maximise sales and profits, broaden your consumer base and legitimise your business, accepting credit and debit cards is essential. Compared to ten years ago, twice as many card payments are being made by UK consumers. By 2024, we could be looking at a further 66% increase.
Businesses that accept card transactions are viewed as more legitimate than those that don’t. Displaying credit and debit card symbols at your point of sale or on your website will create a positive image and build a trustworthy relationship with your customers.
Accepting card payments can increase the volume and value of sales. Around 91% of adults in the UK have a debit card. That’s approximately 48.5 million people. 75% of all sales spent at UK retailers in 2014 were paid by debit or credit card. Online shopping, for which a card is almost always essential, represents 21% of all sales.
By accepting cards as one of your payment options, consumers are more likely to buy your products. It can even encourage higher value purchases because paying by card is often more convenient and secure, and most of us don’t carry wads of cash in our wallet. Furthermore, your customers will have the option to pay by credit card when they don’t have sufficient funds in their current account at that time, or they want to build up their loyalty points or air miles.
You need to compete on a level playing field. If your competitors take card payments, you’ll put yourself at an unnecessary disadvantage by not offering the same. Consumers may choose to purchase goods or services from your competitors, even if they’re not as good, simply because they provide the option to pay by card.
If your competitors don’t accept cards, take advantage of the situation and set yourself apart from your business rivals.
If you offer more payment options, you’ll attract more customers and generate more income. Taking card payments will enplane you to accept payments face-to-face, online, by post and via the telephone. This will enable you to can generate business from further afield (perhaps even overseas), increase your brand awareness and grow your customer base.
Encourage impulse purchases
Most of us have likely made impulse purchases, and perhaps regretted it not long afterward. But that’s by-the-by. For many people, if they’ve got available funds in their current account or on their credit card, they’re more likely to buy something on impulse.
However, if the potential customer has to go away to think about it, or take cash out of an ATM, they will have time to reflect and weigh up their decision. Another factor is that many people don’t think of it like spending money. When you hand over the plastic, it feels like you’re getting something for free. Maximise this psychological mindset.
For most of us, paying by debit or credit card is more convenient. It’s quick and easy to use, especially since the introduction of contactless. A lot of people don’t carry cash anymore, and you never know when you’ll see something you want to buy on the spot. Even if there’s a cash machine nearby, customers don’t always come back once they’ve left your premises. When someone is in a position to buy, you need to be ready to sell and take the payment without delay.
It can also be more convenient and efficient for you business because transactions can be completed in a matter of seconds, you’ll need less change for your till and fewer trips to the bank, you won’t have to waste time on mental arithmetic and counting out someone’s change, and the cashing-up process will be quicker and more streamlined.
Card payments offer security against fraud and theft. There’s fewer opportunities to make mistakes, such as taking the wrong amount of money or short-changing a customer (or being tricked into thinking you have). It’s also safer than keeping large sums of money on the premises or transporting your takings to the bank.
Card payments are authorised instantly so there’s no risk of accepting counterfeit notes or bounced cheques. You can be confident that you’ve been paid what you are owed and that they money is safe in the bank.
Easier Administration and Accounting
Card transactions and reports are easier to calculate, track, trace and manage than cash. If you use a card machine, your end-of-day sales will be added up automatically and recoded in one receipt. If any anomalies crop up, or you’re getting audited, it’s much easier to find information about card payments in your transaction reports.
Most consumers expect to be able to pay by card, especially if you’re an online business or sell expensive goods. They’ll be surprised, and most likely disappointed, if you don’t accept card payments. Meet their expectations and offer them a variety of convenient options to suit their needs and wants.
Disadvantages of accepting card payments
There are a few disadvantages, of course. But these pale in comparison to the benefits for the majority of businesses:
You’ll have set up an account with a payment provider and install a payment gateway and/or card terminal. You will be charged for this service but most providers offer a number of plans depending on your needs and frequency of sales. In most cases, there will be a monthly fee and a small percentage charge per transaction. Weigh this up against the potential increase in sales and it may not be a disadvantage.
If you have to refund money to a customer, you may have to pay an administrative fee to the processor. You’ll also be subject to chargeback fees on credit card payments up to 6 months after a sale if a customer is unhappy with their purchase.
Finally, although cards are the most secure form of payment, there’s still the danger of fraudulent activity taking place if credit or debit card information is stolen. Card companies tend to absorb the costs but your business may have to pay fees to refund the money. There’s also no chance you’ll get the goods back from the card thief so you’ll be out of pocket for that.
Source of statistics: http://www.theukcardsassociation.org.uk/news/UKCardpayments2015news.asp
Rachel Craig is a content writer for Quality Formations, the UK’s leading company formation agency. She specialises in private limited company formation, statutory compliance and corporate taxation